The "Death of the Penny" and Why Precision Still Matters for Construction Lenders

Key Takeaways

• The loan budget must remain “in balance” to the cent.
• The biggest risk for lenders is with lien waivers and title insurance.

The Treasury’s new guidance on ending penny production has made headlines, but for construction loan administrators, the rule remains the same: every cent counts.

By now, you’ve likely heard the news. As of December 2025, the U.S. Treasury has announced the cessation of penny production and issued new guidance on rounding for cash transactions.

For retailers and consumers, this is a significant shift. For construction lenders, however, the headlines are misleading. If you administer construction loans, the “death of the penny” does not mean the birth of rounding.

In fact, misinterpreting this guidance could introduce significant operational risks into your draw process, lien waiver tracking, and final title clearance. Here is a breakdown of the Treasury’s guidance and exactly what it means for construction lending.

The Core Guidance: Cash vs. Non-Cash

The most critical element of the Treasury’s announcement is the distinction between physical currency and electronic transactions.

The new rules state that cash transactions (using physical coins and bills) should be rounded to the nearest nickel if pennies are unavailable. However, the guidance explicitly states that non-cash transactions — including checks, wire transfers, ACH, and credit/debit transactions — must continue to settle to the exact cent.

The Takeaway: Construction lending is almost entirely a “non-cash” business. Therefore, the Treasury’s rounding rules do not apply to your core operations.

Impact on Construction Loan Administration

Because construction loans rely on electronic transfers and precise budget balancing, lenders must maintain a “business as usual” approach regarding penny-perfect accuracy.

Draw Disbursements

Construction draws are typically funded via wire transfer or checks. These are non-cash transactions.

You must continue to disburse funds to the exact penny. If a General Contractor (GC) submits a draw request for $154,203.37, the wire must be for exactly that amount.

The Risk: GCs or borrowers may hear the news and attempt to round up their draw requests for simplicity. Lenders must reject rounded requests that do not match the underlying request. The loan budget must remain “in balance” to the cent.

Interest Accrual and Payments

Interest accrual is a mathematical calculation, not a physical exchange of currency. You should continue to use standard accrual methods (e.g., Actual/360 or 365), carrying the calculation to the necessary decimal places and rounding the final monthly charge to the nearest cent ($0.01).

When collecting interest payments via Auto-Debit (ACH) or Interest Reserves (IR), you must collect the exact amount owed.

A note on branch operations: In the rare event a borrower enters a retail branch to pay construction interest in physical cash, the teller will round the transaction for the cash drawer. However, your back-office loan servicing operations must adjust the GL so the loan itself is credited for the exact penny amount, accounting for the rounding difference separately.

The Major Risks: Lien Waivers and Title Insurance

Where the “penny guidance” creates the most danger for lenders is in the critical realm of lien waivers and title insurance.

Construction lending relies on the principle that the amount paid equals the amount waived. The elimination of the physical penny does not eliminate the “accounting penny.”

The Lien Waiver Mismatch

Lien waivers are legal receipts. If your institution rounds a payment due to misinterpreting the guidance, but the subcontractor issues a lien waiver for the exact amount, you create a discrepancy.

• Strict Compliance States (for example, but not limited to CA, TX, NV): In states with statutorily mandated waiver forms, courts often require strict adherence. If a waiver states $10,000.02 was received, but a rounded wire of $10,000.00 was sent, the waiver could potentially be deemed invalid because the consideration recited does not match the actual payment. Although this has not be challenged and evidenced with case law, it will currently be considered a best practice for the near future.
• “Extent of Payment” States (for example, but not limited to FL): In other states, a waiver is only valid to the extent of payment received. If you underpay by $0.02 due to rounding, the subcontractor technically retains a $0.02 lien right.

Title Insurance Headaches

While a two-cent lien right won’t lead to foreclosure, it spells trouble for title companies. When it’s time to convert the construction loan to permanent financing or sell the property, the title officer may need a perfectly clean slate.

If total disbursements and total lien releases do not match exactly — even by a few cents — it creates an “open lien” issue that must be reconciled before a clear title policy can be issued, causing unnecessary delays at closing.

Action Steps for Lenders

To ensure your portfolio remains compliant and balanced, take these steps immediately:

1. Hold the Line: Reiterate to your draw administrators and loan officers that all budgets, requests, lien waivers, and fundings must remain exact to the penny.
2. Audit Systems: Ensure no automated “rounding” rules are accidentally applied to your wire transfer or loan servicing software.
3. Communicating with Title: Confirm with your title partners that they also expect exact-cent balancing for all disbursements handled through them.

Conclusion

The physical penny may be retiring, but its role in construction accounting is as vital as ever. By understanding the distinction between cash rounding and electronic precision, lenders can avoid unnecessary risks and keep their projects moving smoothly toward completion.