Series 6: Construction Lending
The Commercial Real Estate Lending Decision Process and the courses in the curriculum are products of The Risk Management Association.
The purpose of this series is to help the student identify the key types of construction projects and loans. In addition the series explains construction lending underwriting and administration issues and how to recognize the different elements of the construction lending process. Finally the student will identify key elements for successful completion of construction projects and also the special issues involved with homebuilders and subdivision developers.
Duration: Approximately 6 hours.
Audience: Commercial lenders and credit analysts who are not real estate specialists but who need to know more about assessing real estate risk.
Learning Objectives: After completing this course, students will be able to:
- Identify the six general types of construction loans
- Identify the additional risks, considerations, and review needed with construction loans
- Explain the steps in determining the proper administration of a construction loan based on approval conditions, the commitment letter, and loan policies and procedures
- Identify key concerns in reviewing construction contracts, budgets, and site information
- Calculate the adequacy of a construction loan interest reserve requirement
- Identify best practices in construction and loan documentation and administration
- Identify components of construction loan agreements, surety bonds, permits and zoning, and insurance including steps in processing draw requests and analyzing inspection reports
- Identify key elements for successful completion of the project
- Identify acceptance by the customer, punch list items, payment of retainage to the contractor, and the certificate of occupancy
- Recognize various segments in the single-family home markets and their characteristics
- Identify the key issues for administering or monitoring builder construction lines
- Build a timeline of the development process and identify developer attributes needed to achieve each step
- Identify various types of risk inherent in lending to single-family-home developments, risks from both external and internal sources
- Identify the key issues for monitoring homebuilder and subdivision loans
The courses included in Series 6: Construction Lending Curriculum are:
- CRE-LDP 6.1 – Types of Construction Projects and Related Risks
- CRE-LDP 6.2 – The Construction Process, Liens, and Project Completion
- CRE-LDP 6.3 – Homebuilders and Subdivision Developers