Scaling Construction Lending

Episode 42 | The Construction Lending Podcast

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Navigating today’s lending landscape is challenging, but what if you could take your construction program from regional to national? In this episode, we’re joined by Cory Bearden, SVP of the construction division at Luminate Bank, who shares his journey and insights on scaling a construction lending program. Cory highlights what it takes to build the right team, manage risk, and leverage technology for success. He also provides a clear look at how his team has created a buffet of options for borrowers, making new construction and affordable housing more accessible for everyone.

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Questions Answered

• How do you successfully transition a construction lending program from regional to national?
• What are the main challenges of scaling a construction lending program?
• What is the revenue impact (both direct and indirect) of having a construction lending program for a bank? What is the impact if you do not offer construction loans?
• What are the benefits of having a strong construction lending division?
• Which loan features are most popular among borrowers, and how are contingency funds managed?
• What are the main affordability challenges in today’s homebuilding market?
• How can technology support expansion of construction lending?

Episode Recap

Inside Luminate Bank’s National Expansion

From Regional to National: The Launch of a New Program
Cory Bearden, SVP of the construction division at Luminate Bank, shares the story of how his team transformed their construction lending program from a regional focus in just four states to a national model operating in over 46 states in a few short months. He emphasizes the importance of defining what kind of lender you want to be, putting the right people in the right seats, and building a solid foundation of policies, procedures, and technology.

The Lessons Learned from the Pandemic
Cory explains how the pandemic served as a pivotal learning experience, particularly concerning builder and borrower challenges. The average time for construction went from 275 days to 540 days during COVID, forcing the team to develop contingency plans for situations where a builder or borrower may fail. This experience highlighted the need for transparency, education on the front end, and a dedicated team that listens intently for “shiny things that pop up,” which can signal a problem before it’s too late.

The Indirect Benefits of Construction Lending
The conversation dives into the significant indirect benefits that a construction lending program can bring to a bank. Cory refers to it as “another leg on the stool,” emphasizing how it acts as a recruiting opportunity for loan officers and fosters symbiotic relationships that grow other revenue centers, such as deposits and lines of credit. He explains that exiting construction lending can have a far greater negative impact on a bank’s business than what is reflected in direct revenue numbers alone.

The “Buffet” of Options for Today’s Borrower
Cory shares how Luminate Bank has created a flexible and borrower-centric approach by offering a “buffet of items” for construction loans. These options include:

• Interest Reserve Accounts: Allowing borrowers to build in an interest reserve so they don’t have to make payments during the construction phase.
• Contingency Accounts: Permitting a small contingency fund for upgrades or unexpected expenses.
• Loan Fees: Giving borrowers the ability to include loan fees in the overall cost of construction, reducing out-of-pocket funds at closing.

Cory notes that these features have been highly popular, with about 90% of customers utilizing them. He also highlights the rise of manufactured and modular homes as an affordable option for first-time homebuyers who are looking for a new home with warranties, instead of an older home that may require expensive renovations.

Connect with Luminate Bank

Website: luminate.bank

Luminate Bank LinkedIn: https://www.linkedin.com/company/luminate-bank/

Cory’s LinkedIn: https://www.linkedin.com/in/cory-bearden-0b341315/