After a number of false starts, the trade group representing residential construction to permanent lenders is ready to move ahead with a standardized builder information sheet, a document the group hopes will bring uniformity to what is now a widely divergent segment of the mortgage business.

Beginning this month, several major C2P lenders will use the "Builder/Contractor Information Questionnaire" devised by the National Association of Residential Construction Lenders as their standard form for requesting information and documentation from builders, according to NARCL Executive Vice President Richard Nirk.

Once the lenders -- IndyMac, J.P. Morgan Chase, CitiGroup/CitiBank, Affinity, Washington Mutual and perhaps Wells Fargo -- give it some exposure, NARCL will take the form to its entire membership, Nirk said at a conference on C2P lending in Orlando last month.

"There could be some changes" in the questionnaire, he said. "But once we work the bugs out, which should be in about 90-180 days, we will be asking our entire membership to adopt it."

NARCL has "just over" 100 members, including about 75 financial institutions. "All the large construction lenders are members except Bank of America," Nirk said at the meeting sponsored by Granite Loan Management, a Centennial, Col., company which manages the complicated loan on behalf of lenders.

C2P lending is a big part of the custom home building market. With this type of financing, the customer is the home buyer, not the builder. Yet the lender needs to underwrite the builder as well as the buyer: the buyer to make sure he has the ability to repay and the contractor to be certain he has wherewithal and experience to do the job he is being hired to do.

In that the detailed, four-page form is a compilation that takes the best from the applications used by numerous small as well as large construction-to-perm lenders, the NARCL leadership doesn't believe it will have much trouble persuading lenders to adopt the new standardized questionnaire.

"Lenders want to do a better and faster job at responding to applications for construction funding," Nirk said. "If we can give builders a set of standardized documents so that they know what to expect, we can do that."

The issue will be with builders, who, like almost everyone else, tend to resist change. But since the movement to a single information form that is used by all lenders is being driven by builders who complain that lenders are too inconsistent about the information they need, Nirk believes that they, too, will embrace the document.

"This finally creates a platform to where we can be consistent enough to take standardization down to the community band level, where they are really all over the ballpark in terms of the information and documentation they demand of builders," the NARCL executive said.

The need to be consistent has been an issue plaguing the C2P segment of the mortgage market for years. Almost all lenders have questionnaires of one type or another, but the amount of information and the degree of documentation requested varies so widely that it has become a constant irritant to builders.

"Our objective is simple: Be consistent," Nirk said. "Provide a level platform for the builder when approaching lenders, and the builder will know what to expect and should become more accepting of the process."

Ultimately, NARCL hopes the form will help provide statistical data on what is estimated to be a $272 billion business, and perhaps even lead to the creation of a secondary market for C2P loans.

"If there is going to be a securitized market for construction product," Nirk said, "this consistency will be very important."

The NARCL leadership has been working to create a standardized builder questionnaire for the better part of two years. It heads the list of five goals adopted by the group, which is now turning its attention to the second objective -- creating standards for plans, specifications, contracts and budgets.

"We need a roadmap to what's happening with our collateral," said Nirk.

Published: January 5, 2005

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