Construction Lending Portfolio Management: Responding to COVID-19

Spencer Hart
PUBLISHED: 04/17/2020

In the face of COVID-19, construction lenders are rightly concerned about how their loan portfolios will be affected and the still-uncertain risks that lie ahead. Suddenly, executive officers and risk management teams are racing to evaluate exposures and adjust loan loss provisions while implementing work-from-home (“WFH”) and business continuity procedures. Built is actively assisting lenders to help stabilize their organizations in this crisis while at the same time finding opportunities to deliver critical services amid difficult constraints. Built enables lenders’ remote workforce to continue business operations and avoid significant disruptions, maintaining customer service levels. Built’s Insight reporting solutions help manage risks associated with construction loan portfolios and provide site monitoring capabilities for up-to-date condition assessments.

What We Are Seeing: Five Themes

At Built, we recognize that construction lenders are in different phases of managing through the COVID-19 pandemic. The impacts vary by geography and construction-type. Likewise, SBA programs have shifted lenders’ priorities and efforts to implement the CARES Act stimulus programs. Regardless of the depth and breadth of the impact on a lending organization, we believe there are five fundamental construction lending themes that have developed while navigating the COVID-19 crisis:

  • Construction Lenders need improved portfolio monitoring

With the potential for delays and cost overruns, lenders are implementing site observation programs to establish a baseline for on-going portfolio monitoring. 

  • Construction Lenders must ensure policies and procedures are correctly followed

Built’s lender clients want to ensure they have the proper risk controls in place and that all operating standards are being followed.

  • Construction Lenders want access to real-time risk reporting

Lenders are trying to forecast and stress test their portfolios – as well as prepare for possible loan modifications, extensions and forbearances.

  • Inspection demand is increasing while key resources are limited

Construction Lenders are wanting more access to Inspection Consultants outside of their current vendor base to account for overflow and demand.

  • Construction Lenders are worried about the ability to run remote operations with proper oversight

Connecting the workforce to keep team members online and operating efficiently is a challenge.

How Can Built Help Today?

Respond. Monitor. Manage.

Built’s management team is leveraging experiences learned in the 2008 Financial Crisis to implement mission critical portfolio management solutions and provide a framework for action  over three periods: respond, in which lenders will triage to manage within the current situation; monitor, when the lender can consistently and reliably review individual loan and portfolio conditions to support key decisions and financial reporting; and manage, where the lender shapes its new “normal” operating procedures as the US economy and real estate markets migrate through the post-Covid-19 realities. Today, Built is uniquely positioned to help construction lenders take specific tactical steps to mitigate the impacts of the COVID-19 crisis and favorably position organizations during the revival period.

  • Quickly digitize lenders’ portfolios.
    Gain improved oversight, real-time reporting, and business continuity planning – portfolio health monitoring.
  • Provide an ability to enable a true work-from-home solution.
    Information is shared and work queues can be completed off-site. Work with oversight across teams – performance and experience is critical to stay ahead of issues.
  • Accelerate a lender’s digital banking offering. Through a digital interface, help alleviate customer pain because of limited branch operations.
  • Open doors to an expanded Inspection Marketplace. Expand optionality via Built’s Integrated national network
  • Ability to manage lien waivers electronically. Implementation of Built’s digital lien waiver and payments solution.

“Now, more than ever, having Built as a resource makes a difference to us.” -Existing Built client in response to remote operations

We are in uncharted territory. Construction Lenders are facing a period of volatility that requires unique and specialized tools to evaluate asset quality and meet customer needs. We believe providing immediate value backed by subject matter expertise will help lenders through today’s hardships. This means giving low-cost, simple to implement, and abbreviated technical support to our clients.  Built offers a light-touch implementation focused on getting lenders up and running on best-in-class systems. This enables lender resources to remain focused on operational tasks and not system implementation activities.

The necessity of operating differently gives lenders the opportunity to realize what can be done with a digital solution. Built’s platform helps lenders communicate, collaborate, and coordinate business continuity – and sets them up to thrive in the future.