Construction Lending Review and Implementation

Many community banks and credit unions participate in construction lending only selectively — or avoid it altogether — due to perceived complexity, staffing constraints, or risk concerns. Others offer construction loans but recognize opportunities to improve structure, consistency, or risk management.

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For institutions not currently offering construction loans, I help design and implement prudent, best-practice construction lending programs aligned with the institution’s risk appetite, staffing model, and market. This includes policy development, underwriting standards, draw administration, and system alignment — enabling institutions to enter construction lending thoughtfully rather than reactively.

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For institutions with existing construction activity, Mallioux Consulting provides targeted review and refinement of underwriting, documentation, and operational controls to promote consistent, conservative execution and strong coordination with the mortgage team for permanent financing prequalification.

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Areas of Focus Include:

• Design of single-family construction loan programs using industry best practices

• Conservative underwriting standards for borrowers and projects

• Prequalification for permanent (“take-out”) financing at origination

• Construction-specific appraisal, budget, and cost-to-complete analysis

• Draw schedules, inspection controls, and disbursement governance

• Interest reserve and interest-only period structuring

• Alignment of loan policy, procedures, and day-to-day execution​

 

Encompass® Configuration for Construction Lending

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Some institutions use Encompass® for construction lending, while others do not — often due to configuration challenges.

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While Encompass can support construction loans, improper setup can create downstream issues with disclosures, reporting, servicing, and loan conversion. Where Encompass is part of the construction strategy, close work with our experienced Encompass partner ensures proper product setup, accurate handling of construction-specific terms and disclosures, effective draw tracking and workflow alignment, and clean data transition into closing, conversion, and servicing.

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A critical — and often overlooked — element of construction lending is proper prequalification for permanent financing. Establishing realistic, well-documented take-out eligibility at origination protects both the institution and the borrower, reduces conversion risk, and helps prevent construction loans from becoming long-term credit exceptions.  Ensure the take-out is clearly in view from day one!