Commercial Construction Lending

Date:

Mar 16, 2020

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Construction loans for commercial real estate (CRE) remain a major part of commercial bank lending. Many community banks attempt to use versions of their residential formats and policies to administer commercial construction loans; however, this generally does not adequately control the situation due to several important differences between residential and commercial projects.

This program provides an overview of the key steps involved in effectively administering commercial construction loans.

Topics
  • What is construction risk and how is it mitigated?
  • Differences between residential and commercial construction loans
  • What is High Volatility CRE (HVCRE)?
  • Issues with contractor qualifications, construction contracts and budgets
  • Seven items that determine how you handle a specific loan
    • The overall degree of risk and key issues driving risk
    • The type of project (full construction vs. renovation, etc.)
    • The loan approval and related conditions or contingencies
    • The term sheet or commitment letter written to the customer
    • Your bank’s policies and procedures
    • The construction loan agreement
    • The events and issues that arise, including results of inspections
  • Other key documentation
    • Title insurance
    • Survey
    • Bonding
  • Funding and draw controls
    • Inspections
    • Lien waivers and lien updates
    • Disbursement methods
    • Monitoring usage of budget contingency
    • Line item transfers
  • Completion of the project and (if applicable) stabilization
Additional Information

Who Should Attend?

Commercial lenders, credit analysts and support staff that deal directly with commercial construction loans; mortgage bankers, private bankers, small business lenders, loan review specialists, special assets officers, lending managers and credit officers indirectly involved in the construction lending process