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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, the California fair housing law known as the
Holden Act, the new Section 1071 small business lending data collection rule issued by the Consumer Financial Protection Bureau, and others.
- 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.
- Prohibition against providing correspondent accounts to foreign shell banks.
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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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internal cross-references and web-based sources, as well as samples of dozens of forms, disclosures and notices.
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info@bankerscompliancegroup.com or call 949-553-0909.
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