Many home builders are in thesame dire financial straits as many other Americans today.

Where the downtrodden American consumer may be ducking automated messages from credit card companies, builders are being asked to meet with banks’ special assets departments. Special assets is the bank’s collections arm, the people who will come after—and get­—your land and assets. After making their acquaintance, builders may also get to meet the banks’ real estate–owned (REO) division, those in charge of selling off assets the bank acquires via foreclosure.

Banks, says Chuck Shinn, president of Shinn Consulting in Littleton, Colo., spent 2007 worrying about the subprime mortgage meltdown and are just now looking at their land loans. Those loans, many of them taken out to buy land during the height of the boom, are often of greater value than the land is now worth. Banks want adjustments, and they want builders to pay the difference between the land’s current value and the value of the loan. Shinn has seen a builder asked to pay over $11 million in cash as a result of this kind of value adjustment.

Jason Betsill, vice president of Betsill Homes in Brooks, Ga., shared a memo with Builder that he received from his bank. In the letter, Betsill’s banker lays out just such a scenario and informs Betsill Homes that the bank, “suffering from the real estate market,” is increasing the builders’ lending rates.

“Think of it this way, the Fed giveth and THE BANK taketh away,” the lender wrote.

The bank is still in the real estate business, the banker explained. “We just need to be paid fairly and create a loan structure commensurate to the risk.”

As banks assess the risk in their loan portfolios, home builders should expect more and more contact with their bankers, says former banker and Lee Evans Group banking expert Jim Weigel.

“Right now, they’re just getting organized,” he says.

Though special assets departments can be a builder’s worst nightmare, they also offer a money-making source for the opportunistic builder, Weigel says.

Special assets and REO divisions often need people to manage the assets they’ve acquired. If a builder has a good relationship with the bank, the builder may get asked, for a fee, to manage, fix, or sell the acquired assets. Usually to get such a deal, a builder would need to be in good standing with its bank, but in rare cases, the builder may even get asked to manage the assets the bank forced it to give up.

While such work may not be the most desirable, making friends with the bank’s collections and liquidation arms, getting on their good side, and making some money for the effort, could be a way to generate cash, Weigel says.—E.B.