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Special Reports
Construction Lending
Funding is Available
Brokers still can find opportunities in the construction lending niche even though
it is a tough market for such financing, speakers from IndyMac told attendees at a session of the National Association
of Mortgage Brokers annual meeting here.
Although starts have slipped about 30% in the past two years and "everything you hear is down, down, down"
there still is a need for financing in areas such as the consumer construction finance sector for example, said
IndyMac executive Paul Hoffman. "Regardless of market conditions, people will continue to build their dream
home," he said, adding, in today's environment, builders want to push risk to the consumer.
Underwriting for construction loans has been tightening. In this environment, IndyMac sees opportunity in what
Mr. Hoffman described as "where it makes sense" business.
He noted that "there is a lot of fallout right now." IndyMac will provide funding in some situations
where others will not and make exceptions, but it does so carefully and draws the line in certain areas.
For example, the company "charges heavily for extensions," Mr. Hoffman said. In addition, for lot loans,
it generally requires that there be infrastructure in place in line with comparable properties in the area.
There are some selective opportunities for brokers in the small builder market, but it is a market that may shrink
20% in the next year, said IndyMac executive Chris Newkirk. IndyMac likes infill product when it comes to this
market, but financing for condominium conversions is "pretty tough to do," he said. "It's a very
tough market for builders out there," he said, noting that they have trouble finding financing as banks tend
to "overreact" in tough credit cycles. As a result, "builders need help now more than ever,"
he said.
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