Single-close construction loans a growing business

by Scot Kersgaard09 May 2016
In addition to renovation lending, which they are very well known for, American Financial Resources (AFR) also does construction lending through what they call their Construction to Perm program through both FHA and VA.

“You’ve got nothing but a piece of land. You’re looking at grass but we can go from approval to close in 40 days,” said AFR Chief Operating Officer Laura Brandao. The program is specifically for modular or manufactured homes, and she said it is especially popular in the South and Midwest.

“When I talk to originators, they say the biggest problem is dealing with contractors, but we can handle most of that for them.” She said AFR wants to see very detailed bids, down to the types and brands of flooring and counters. “We actually do phone calls with contractors and borrowers before closing and go though it with them. We say ‘let me tell you what will happen when you close, a week after you close, and when you get your first draw.’ And we walk them through it before they close. By doing that, they know exactly what to expect with no surprises. Because we walk people through it beforehand, we don’t get calls from borrowers saying ‘we thought we were going to get all the money when we closed.’ We added that step and it really makes our backend process very smooth. They know who to call, how to reach us, who to go to if they have questions later.”

She said backend processes are the key to a smooth and easy transaction. “If I was going to say what the key is for lenders to be successful in this, it is the backend. You can originate these, underwrite as many as you like but if you don’t have strong infrastructure on your backend to get the projects completed, you will run into too many issues, you’ll never be able to keep up with it. The reason we have been able to grow this business is because we have a very strong infrastructure on the backend.

“Talking to the borrower and the contractor before the closing is so important. The reason a lot of these blow up is because the originator is confused. They have no idea what happens after closing, or the first time the borrower is looking for money to pay the contractor. Originators just want to say ‘it will be great; you will have granite counters.’ So by letting us taking this over, originators don’t get those calls. We are in control. We get those calls. I never have loan officers calling here saying where is the money? What’s going to happen next? My borrower is confused.


  • by Jerry Sattler | 5/12/2016 6:59:17 PM

    Great article. Couldn't agree more. Strong communication with the borrower & builder upfront and an experienced construction mortgage administration post closing is a critical piece to any successful construction lending program.

    I'll also add that 'knowing your builder' is equally as important to a strong construction mortgage portfolio. A good builder is a wonderful source of referrals. A bad builder, on the other hand, is a wonderful source of troubled assets with mechanic liens & angry homeowners.

    I love that this type of dialog is occurring & construction lending is making a comeback!

    Jerry Sattler


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