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Compliance Companion®
Standard Procedures Manuals (SPM)

Construction Lending September 2021

This Manual is designed for both the construction lending specialist and those new to construction lending as a comprehensive resource regarding the broad range of issues presented by this complex field of lending. SPM #11 discusses the following topics.

  • Due Diligence – such as verifying borrowers and guarantors (including the proper documentation to obtain for each type of borrowing entity), CIP requirements, beneficial ownership and customer due diligence, evaluating a construction project and the real estate collateral, environmental due diligence, and tax and judgment liens
  • Regulatory Issues – including real estate lending standards, HVCRE capital rule, lending limits, credit union member business loan requirements, appraisal regulations, flood insurance regulations, ECOA & Regulation B matters, Truth in Lending and Regulation Z requirements, IRS reporting requirements, and the California fair housing law known as the Holden Act.
  • Construction Loan Documentation – how to structure and document a construction loan, including the terms of a letter of intent, construction loan agreement, promissory note, construction deed of trust, assignment of rents, authorization to borrow, guaranties, and subordination agreements.
  • Related Issues – mechanics liens and stop notices, credit enhancements (such as letters of credit), title insurance and endorsements appropriate for construction loans, other types of insurance and how to protect a lender’s interest in those policies.

The text of this Manual is 644 pages, plus 64 pages of appendices.


Compliance Companion

Compliance Companion® is a one-stop regulatory compliance resource for financial institutions. This online compilation of 19 industry-leading compliance manuals, including this SPM #11, Construction Lending, takes the legalese out of federal and California laws and regulations, making it easier to understand and keep up with ongoing compliance developments.

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SPM 11
* Janet Bonnefin is retired from the practice of law with the firm.
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