Building a Niche in Construction Lending

Episode 25 | The Construction Lending Podcast

Guest, David Willoughby, Vice President and Director of Construction Lending at Stockton Mortgage discusses their successful foray into the niche market of construction-to-permanent (C2P) lending for manufactured housing. Willoughby explains the benefits of C2P loans for builders, borrowers, and lenders. The conversation explores the training and support for loan officers to ensure they are knowledgeable and confident in structuring and securing these specialized loans. Also covered is the importance of relationship-building with builders and dealers, particularly in the context of manufactured housing.

Episode Recap

Building a Successful Construction-to-Permanent Loan Program: Insights from Stockton Mortgage
A look into how Stockton Mortgage carved its niche in the C2P lending market, focusing on manufactured housing.

Introduction
The construction-to-permanent (C2P) loan market presents unique opportunities, especially in the realm of manufactured housing. This episode explores the journey and insights of Stockton Mortgage, a company that has found success in this niche. Drawing on a conversation with David Willoughby, Vice President and Director of Construction Lending at Stockton Mortgage, we’ll uncover the strategies and best practices they have employed.

Identifying a Niche and Understanding the Market
Stockton Mortgage’s journey into the C2P lending market began with a keen understanding of the manufactured housing market. Having established a strong track record in providing end loans for manufactured homes, the company recognized the potential of offering a C2P program to mitigate risks associated with the traditional lending approach.

The decision to focus on manufactured housing stemmed from the company’s existing expertise and established network of builders and dealers in this sector. Recognizing manufactured housing as a distinct market within the broader housing sector, Stockton Mortgage leveraged its knowledge to target this specific customer base.

The Benefits of a C2P Program for Builders, Borrowers, and Lenders

Builders: C2P loans offer builders several advantages, including:

• • Reduced financial burden: Builders can avoid tying up their credit lines or using their own cash to finance construction.
  • Predictable cash flow: By not having to cover construction interest expenses upfront, builders benefit from a more predictable cash flow.
  • Reduced risk: C2P loans eliminate the risk of borrowers not qualifying for a loan upon completion of the house.

Borrowers: One of the most significant advantages for borrowers, particularly in the manufactured housing sector, is the accessibility of low to no down payment options through government-backed C2P loans. This feature expands access to homeownership for those who might not have the upfront cash required by traditional lenders.

Lenders:

• • Streamlined processing: While C2P loans require more initial effort, they streamline the process by eliminating the need to re-qualify borrowers and re-process paperwork upon completion of the house.
  • Recruitment and retention: Offering a comprehensive suite of loan products, including C2P options, can be a significant draw for experienced loan officers, improving both recruitment and retention efforts.

Training and Empowering Loan Officers
Stockton Mortgage recognizes that C2P loans require a higher level of detail orientation, hands-on involvement, and a commitment to seeing projects throught to completion. To ensure loan officer success with this program, Stockton Mortgage prioritize extensive training focused on:

• Structuring deals: The company emphasizes the importance of meticulous deal structuring to ensure all costs are accounted for and to avoid financial shortfalls during construction.
• Understanding program guidelines: Training covers a wide range of topics, from navigating flood plain regulations and gift of equity scenarios to understanding homeowner insurance requirements for various loan types.
• Identifying and building relationships with referral partners: Loan officers are encouraged to develop relationships with builders, dealers, and real estate professionals experienced in the manufactured housing market.

Stockton Mortgage empowers its loan officers to focus on their strengths. Loan officers who excel at marketing and relationship building can partner with colleagues who are more comfortable with the intricacies of C2P loans. This collaborative approach ensures a seamless experience for both borrowers and builders.

The Future of C2P Lending and Affordable Housing

Stockton Mortgage is optimistic about the future of C2P lending, particularly in the context of the ongoing need for affordable housing. The increasing recognition of manufactured housing as a viable and necessary part of the solution to the housing shortage, from both the private and public sectors, bodes well for the continued growth of C2P programs.

Stockton Mortgage’s success in the C2P lending market highlights the importance of specialization, thorough training, and a commitment to understanding the specific needs of a niche market. As the demand for affordable housing continues to grow, C2P programs, particularly those focused on manufactured housing, are likely to play an increasingly vital role in expanding homeownership opportunities.

Stockton Mortgage Corporation is an Equal Housing Lender, NMLS ID# 8259 (www.nmlsconsumeraccess.org). David Willoughby; NMLS ID# 42071. This is not a commitment to lend. THE CONTENT ON The Construction Lending Podcast by Land Gorilla IS INTENDED TO BE EDUCATIONAL. CONSULT WITH A FINANCIAL, LEGAL OR OTHER LICENSED PROFESSIONAL BEFORE ACTING ON ANYTHING YOU HEAR OR SEE FROM THE CONTENT IN THIS SHOW OR BLOG POSTS. THE INFORMATION WE SHARE ON The Construction Lending Podcast by Land GorillaIS GENERAL IN NATURE AND EXAMPLES ARE MERELY ILLUSTRATIVE. FINANCING TERMS AND SCENARIOS SHARED ON The Construction Lending Podcast by Land Gorilla MAY NOT BE CURRENTLY AVAILABLE. ALL RIGHTS RESERVED.

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