Learn More About The Construction Lending Market With CEO Brian Mingham

The CEO of a national end-to-end risk mitigation company says their platform opens doors to lenders that want to enter the construction market.

Leaders at CFSI Loan Management in Colorado say that at most lending institutions, construction loans make up less than 10% of originations due to the challenges and complexities of managing these transactions.

The company has completed more than 150,000 project inspections, 50,000 funding draws, and 25,000 project feasibility reviews. More than $15 billion in construction projects are being managed through CFSI’s construction lending platform, according to a press release.

Brian Mingham, founder and CEO of the company, was working in the mortgage business when the idea for CFSI was conceived. He says he saw the value in providing a platform that enables lenders to manage the completion of new or unfinished construction projects.

Mingham recently sat down with Editor Kimberley Haas to talk more about what they do. 

Haas: Maybe we can have you start by having you tell us a little bit about your company. I understand it’s your 10-year anniversary this year.

Mingham: Well, thank you for your time today, Kim. As you said, CFSI just turned 10 years old.

A traditional mortgage lender or a bank does residential, Fannie, Freddie, FHA, VA, and jumbo loans, right? But construction is always one of those loan programs. It takes a different skill set.

The underwriting process is exactly the same. Kimberley Haas makes money. She has income and assets and the credit score and everything else. The traditional underwriting is exactly the same. The difference comes in the underwriting of the project itself and traditional underwriters aren’t necessarily trained about what it costs in New York City for lumber and labor and roofing versus Oklahoma City versus Miami, Florida.

Underwriting the project and the budget and the contractor is very different than underwriting income and assets. And that’s where CFSI comes in.

CFSI doesn’t get into the borrower. We have no idea how much money a borrower makes, or income or assets. We really just look at underwriting a project, making sure that the contractor is licensed, insured, and has built that type of project.

The budget incorporates all of the aspects of construction. It gives the lender comfort that the project is good. Because if you tell me you’re going to build a house in New York City for a million dollars, and it’s 10,000 square feet and has gold toilets and, you know, marble everywhere, we would say, “No, that’s a little under budget.”

If a lender didn’t check that and just took the builder’s information, they would start the project. They would close the loan. The borrower would have confidence that the builder they chose gave them the right information.

Then a lender ends up with a project that’s underfunded. A borrower doesn’t have the money to complete it. A lender ends up with a project that’s half-built and not worth the money they’ve dispersed.

That’s on the front-end origination side where we really add value to lenders, making sure they close good loans.

Then on the back end, after they make a good business decision, we do what they call fund control. We go out, we inspect the property, we make sure the foundation is in, and we make sure that the permits are signed off.

We make sure that the inspector’s been out to the property and we validate what the contractor’s asking for. That way when the lender funds the draw for a hundred thousand dollars, they can have confidence that the work is done and move along.

So that’s what we do across residential, commercial, and multi-family, in all 50 states.

Haas: Where are you headquartered? How many employees do you have?

Mingham: We are in a suburb of Denver in Greenwood Village, Colorado. We have 45 people in our office in three different groups. We have groups on the front end that do contractor and project feasibility reports. We have fund control groups, and we have an inspections group.

Haas: Where is most of this activity taking place with loan originations for construction? Is it in commercial? Is it in multi-family? I know there’s such a housing crunch in the country right now.

Mingham: So you’re exactly right, we’re short, depending on who you ask, four to five million units. Multi-family has been on a tear for the past several years.

Industrial has been very large for us.

It’s a great mix of construction going on nationally. It’s definitely down from last year because people are more nervous. Banks have pulled in their guidelines. People have to come up with more cash for a down payment.

Haas: If an organization wanted to expand its commercial lending side, what do you recommend from your perspective, Brian?

Mingham: On the residential side, the first thing that people have to do is talk to their warehouse lenders. They end up having to have construction policies and procedures. We help lenders write those policies and procedures to make them compliant with their warehouse lending facilities.

Once you have your money set up, we can manage the back-end process.

They don’t need an entire staff. If you do eight or 10 construction loans, you don’t have the ability to hire five or six people to manage that for you because the math doesn’t work.

It’s the same for a commercial bank. Banks are slightly different because they have balance sheets and stuff like that. They don’t have the same thing as a mortgage company might have. But they still do this and are expanding their footprint.

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