ECL Software Blog

The Importance of Lenders Protecting Their CTP Loans – And How to Do It

It goes without saying that a lending institution wants to ensure that their investments are protected. The bad news is that this can be complicated when it comes to construction to permanent loans (CTP loans) due to the fact that they are higher risk than other options. This is why most institutions have limits and boundaries set to ensure no single portfolio is too unbalanced toward CTP loans.

In a perfect world, every product portfolio would have its own unique risk management policy that kept everything perfectly on track and in-line with regulation requirements and the larger goals of the company in question. But the question is often asked: Are lenders really doing everything they can or are they missing important aspects that should be part of their risk management policy?

It does not matter how experienced a construction lender is – they are never free from risk. A lender who has been originating construction loans for years is still capable of making mistakes that could have disastrous results. Today at ECL Software we are going to look at a few typical risks lenders should be on the lookout for. Read on to learn all about them, check out our fund control software, and then contact us at 800-625-5972 for more information.

Risk: The contractor of the borrower

The bottom line is that how successful a construction project is often comes down to the general contractor. This is the person that a lender is going to rely on to coordinate the actual construction and keep them updated as timelines and budgets change. This is why every lending institution should have a consistent contractor acceptance process that can flag high-risk signs and help protect the investment.

When doing a background check on a contractor, red flags include not having completed any new builds in the previous year, no history of working on and completing the specific type of project that is being proposed, many business or name changes, numerous customers with complaints, subcontractors who will not provide a good review, and low credit scores. None of these are necessarily facts that will stop construction altogether but they should be considered in context.

Risk: Missing paperwork

You are doing everything you need to ensure that all the required paperwork is completed but can you be sure that everyone else is? Can you be sure that everything is being logged and saved correctly? If you are using JDIO then you can trust that it is. This unique product makes it easy for everyone on a project to communicate with one another, to track and any all changes, and to set must-do tasks and reminders.

These are just a few of the collaborative services available on the JDIO software. If you are ready to learn more and move forward with the streamlining, efficiency-increasing process of using our products, contact ECL Software at 800-625-5972.