Heads the developer wins; tails the bank (and non-developer equity investors) loses.
1) Why doesn't the bank ask for a personal guarantee?
2) Are there usually loan requirements such as pre-construction sales targets, and periodic principal paydown, that, if not met, would allow the bank to call the loan.
3) What are the criteria for lending to the local developers? Reputation? Net-worth of the principal? I heard that, in Florida, one developer borrowered several hundred million dollars and failed without building much. He had limited experience but was a good talker.