I’m not sure if the title is accurate, but I was wondering what problems (nightmares) you all have had in the construction loan process including problems with draws and the resultant cost to the borrower.
Thank you for your time! 
Doing several dozen construction loans with National City, not one ever had a problem.
However I imagine when their is a problem, it’s due to the GC underestimating the construction cost of the home. Since National City (and all lenders that I know of) determine the construction cost based on the GC figures. If your GC underestimated, and you can’t complete the home, you are going to have a big problem - the lender will try to help finish the project by putting up their own funds or something, might even take the property from you to do it… and you’d probably would want to seek legal advice what to do with the GC in that situation.
For National City’s ARM’s, do they use 11th district? Which Index?
Thank you.
I believe it’s either the 1-yr LIBOR index for their “Deluxe” program ARMs. For their “Expanded” ARMs it’s the 6-mo LIBOR.
Would you recommend the client transitioning over to an ARM or a fixed considering today’s climate? Or, is each situation too unique to comment in a blanket way?
National City’s CTP rates aren’t as competitive as normal perm. financing rates… so since I don’t see a whole lot of data to suggest a big upturn in rates in the next 6 months, I’d recommend a short term ARM, then considering a refinance afterwards… unless you have the option to get a pretty good rate now (not sure what National City retail offers), then I’d choose a fixed (I believe I’m a bit more conservative than most loan officers though).
Thank you very much for your timely reply!