Removing Barriers

Episode 44 | The Construction Lending Podcast

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John McMullen, from the Mortgage Bankers Association, unpacks the recent policy shifts achieved through targeted industry advocacy. John details the MBA’s direct influence on Fannie Mae and Freddie Mac, leading to immediate changes that will reshape the construction lending landscape. We cover the recent policy change of extending construction loan documentation to 18 months, the effort to secure upfront securitization for single-close construction-to-perm loans , and the exciting proposal to lower the completion threshold for HomeStyle renovation loans to 50% to spur more renovation activity.

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Questions Answered

• What was the central focus of the MBA’s advocacy letter to Fannie Mae and Freddie Mac?
• What major policy change did the MBA advocate for regarding construction loan delivery/liquidity?
• Why is now the time for change in construction lending policy?
• What is the idea behind securitization of a single-close construction-to-perm loan, and how would it impact lenders?
• What does the extension of the permitted age of documentation to 18 months mean for lenders and borrowers?
• What is the reasoning and potential impact behind lowering the completion threshold for HomeStyle renovation loans from 90% to 50%?
• How can construction lenders get involved in the advocacy and working groups at MBA?

Episode Recap

The Construction Lending Revolution: Inside the Policy Push that’s Shaping the Future

In this episode of The Construction Lending Podcast, we sit down with John McMullen, Senior Policy Specialist at the Mortgage Bankers Association (MBA), to discuss a game-changing advocacy effort for the construction lending industry. Let’s unpack what was discussed, why it matters, and how these shifts could reshape the possibilities for lenders, builders, and families across the country.

Setting the Stage

We open teeing up the central topic: a letter from the MBA to Fannie Mae and Freddie Mac (the GSEs) packed with policy recommendations aimed at overhauling the construction loan process. McMullen describes the genesis of the letter being a targeted effort born out of real industry pain points shared by leaders deep in the trenches of construction lending.

Lenders have been grappling with operational bottlenecks—such as construction delays, qualification hurdles, and warehouse line issues—that have been stifling both scale and innovation. “[We] convened leaders who’ve been actively originating construction loans and had been facing some severe operational friction,” McMullen shares. These weren’t hypothetical, academic exercises; this was advocacy rooted in the everyday realities of the industry.

Advocacy Meets Opportunity

One of the most fascinating parts of the episode is the backstory on timing. The MBA didn’t simply blast the letter out during a period of political transition. Instead, there was a deliberate pause to wait for new leadership—specifically referencing William “Bill” Pulte at FHFA—which created “a unique opportunity to elevate these issues and have them taken seriously by both the GSEs.”

The strategy worked. The letter landed, it got read, and it kicked off “multiple conversations with the GSEs to point out clarification.” Lenders were looped in for real-time examples, and policy discussions gained traction. The advocacy wasn’t done in isolation. It was transparent, iterative, and deeply collaborative with the agencies that shape housing finance in America.

Breaking Down the Three Policy Pillars

The MBA’s letter focused on three vital recommendations:

1. A Pilot for Upfront Securitization of Single-Close Construction-to-Perm Loans

   Today, lenders face a daunting warehouse line risk. Construction loans sit on these lines far longer than traditional mortgages, tying up capital and deterring participation, especially among smaller and mid-sized lenders. “[A] GSE-endorsed secured-size single close product would de-risk delivery and streamline the borrower experience,” McMullen explains.

   The ask? Allow these loans to be securitized right after closing—mirroring USDA’s well-regarded approach. This change would mean lenders could “get it off your warehouse line really quick.” The result? More lenders able to originate construction loans, expanded access to new home construction, and a streamlined experience for borrowers who could also lock in their permanent mortgage terms upfront.

2. Extending Age of Documentation Requirements to 18 Months

   Documentation timelines have historically caused friction in construction lending. Previously, documentation—especially appraisals—had to be updated every four to twelve months, sometimes derailing delivery of completed construction loans to investors.

   Thanks to the MBA’s advocacy, Fannie Mae recently announced an extension to 18 months, “effective immediately.” This is a huge operational win, especially as construction timelines extend due to supply chain and labor issues. As McMullen puts it, “This is a direct result of MBA’s advocacy. It aligns credit policy with real-world timelines of today’s construction.”

3. Lowering the Completion Threshold for HomeStyle Renovation Loans from 90% to 50%

   This one is initially puzzling: why does it matter if renovation loans can be used on homes that are only half-finished (instead of almost done)? The answer: authentic renovation activity, especially for older homes or those damaged in disasters, needs this flexibility. “[A] 50% threshold will open the door to more authentic renovation activity, especially for older homes or disaster-damaged properties,” McMullen explains.

   Lowering the threshold unlocks a whole new array of financing options. Lenders could help borrowers salvage and complete challenging projects that fall short of the previous 90% rule, with safeguards like inspections and draw schedules to manage risk.

Why These Changes Matter

These policy moves are far more than symbolic. Streamlining construction and renovation finance doesn’t just help the lending industry—it kickstarts economic activity across neighborhoods, creates jobs in local markets, and opens real pathways to homeownership for families who want a new or revitalized place to call home. McMullen underscores the point: “The benefits are immense … you have more homes completed, you have an opportunity to revitalize some distressed properties, you broaden the access to finance and both for builders and borrowers.”

These aren’t minor tweaks; they’re structural improvements to the way America finances its built environment.

How Lenders Can Get Involved

For lenders, builders, or advocates who want to shape the next round of changes, McMullen extends an open invitation to join the MBA’s working group. Anyone with expertise—or simply a vested interest in making construction lending work better—can reach him directly.

What’s Next?

This episode demonstrates the real-world impact of targeted industry advocacy. Policy change is possible when industry leaders take the time to gather real experiences, package them thoughtfully, and engage the right stakeholders at the right moment. The recent Fannie Mae doc-age change is a perfect example: a persistent, data-driven push led to a major win for everyone.

Social Links

John’s LinkedIn Page: John McMullen, MPS, AMP | LinkedIn
MBA Newslink Article: Fannie Mae’s Construction Lending Updates Signal Strategic Progress for Lenders and Borrowers – MBA Newslink
MBA Website: Home | MBA