Growth Continues for Residential Construction Loans

Posted by Tara McAdams on 9/6/18 10:13 AM

The demand for construction loans has seen a steady growth over the past few years, and recent analysis shows the trend continuing in 2018. According to a study conducted by the National Association of Home Builders, one of the nation’s leading resources for housing and remodeling insights, the volume of residential construction loans has seen an increase of 1.7% in the second quarter of 2018.

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Topics: Construction Loan Management Software, Construction loans

What is a Construction Loan?

Posted by Contract Simply on 7/3/18 3:00 PM

What is a construction loan? That’s a beefy question with lots of variables. In this post, we’ll provide a big picture view of construction lending based on the questions we frequently encounter.

Let’s start with a definition.

Also called a building loan, construction mortgage, or development loan - a construction loan is a short-term (usually less than three years) loan intended for financing the construction of residential or commercial developments. Construction loans cover the cost of land development and building construction.

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Topics: Construction loans

New HVCRE Capital Requirements and the Commercial Real Estate Sector

Posted by Tim Ryan on 6/28/18 11:01 AM

Following the financial and banking crisis from 2008 to 2013, almost 500 banks failed. The cost to the FDIC fund came in around $73 billion including $12 billion from the failure of IndyMac, the most expensive failure in FDIC history. One of the outcomes of the crisis was an overhaul of banking regulations, including higher capital requirements for High Volatility Commercial Real Estate (HVCRE). The regulators deemed certain commercial construction loans to be riskier than others and the new requirements were designed protect financial institutions in the event of a loss from failed construction loans. The 2015 regulations required that HVCRE loans carry a 150% risk weight for loans that finance the acquisition, development or construction of real property. That means covered lending institutions must reserve $1.50 per $1.00 of capital compared to non-HVCRE loans. This, of course, adds costs and limits to credit availability for commercial real estate borrowers.

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Topics: Construction loans

Award-Winning Construction Loan Management Software

Posted by Tim Ryan on 5/7/18 2:56 PM

Contract Simply is thrilled to receive The 2018 Fintech Breakthrough Award for our construction loan management software. The mission of the FinTech Breakthrough Awards is to honor excellence and recognize the creativity, hard work and success of FinTech companies, technologies, and products.

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Topics: Construction Loan Management Software, Construction loans

Top Five Uses of Construction Loan Management Software

Posted by Contract Simply on 4/25/18 4:48 PM

We find that the Fed typically reports about half of the actual lending commitments. So, with U.S. commercial real estate and land development lending volume approaching $660B (add another $200B for residential), one might assume that the amount of work and oversight required to execute a successful construction project in which all parties of the loan process are satisfied, is a tad high. Which is a gross understatement because a single draw request not only has to go through the hands of numerous professionals, but the process of working towards successful completion of a project without any legal disputes such as a mechanic's lien is a slow, time-consuming, and painful process.

With real estate and land development lending volume reaching more than 330 billion dollars in the US - and we find what is on their books is about half of their commitments - one might assume that the amount of work and oversight required to execute a successful construction project in which all parties of the loan process are satisfied, is a tad high. Which is a gross understatement because a single draw request not only has to go through the hands of numerous professionals, but the process of working towards successful completion of a project without any legal disputes such as a mechanic's lien is a slow, time-consuming, and painful process.

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Topics: Construction Loan Management Software, Machine Learning in Banking, Construction loans

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Helpful Resources

Contract Simply Construction Payments Report 2018

Contract Simply Kickstart Guide to Construction Loan Software

White Paper - Future-Proof Your Construction Lending Program from Contract Simply

Contract Simply Infographic on Construction Loan Administration

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