Banks Turn Patient, Conservative with Construction Lending

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July 28, 2015

Since the financial crisis at the end of the last decade, banks no longer expect high demand and automatic profits from construction lending.

With many banks no longer offering acquisition, development, and construction loans anymore, institutions are now dealing with a new type of market.

Despite a slight rise from 2013, this year home builders and other land developers were lent significantly less than what they were lent in 2008 and the pre-crisis years.

To achieve successful lending operations, banks are taking actions like requiring more equity from builders and developers, financing smaller developments, and offering terms that help stop builders from abandoning deals.

Banks have also begun to ease loan pricing on pre-sold homes and make more spec loans.

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