Or. Admin. Code § 123-021-3300 - Construction Loan Insurance Program
(1) Under Construction Loan Insurance, the
Department may insure:
(a) Up to 80 percent
of the original principal amount of a construction loan, provided that the
Department's maximum liability for any Deficiency due to a Material Adverse
Change under the Construction Loan Insurance is the lesser of $6,000,000 or the
product of the Authorized Loan Amount multiplied by the insured
percentage.
(b) A term of one year
unless otherwise approved by the Department. Terms greater than one year may be
granted at the sole discretion of the Department. Terms that exceed one year
shall be subject to an additional premium based upon the maximum construction
loan insurance exposure for each additional year approved. Terms of the
Construction Loan Insurance shall be approved based upon the proposed
construction schedule accepted by the Financial Institution which may be for
less than a full year, provided that the Construction Loan Insurance premium
shall not be pro-rated for a portion of a year.
(c) Owner-occupied commercial projects as
determined by a minimum of 60 percent occupancy by the Borrower or affiliate of
the Borrower.
(2) A
maximum loan to value of 90 percent shall be allowed for commercial or
industrial-use properties based upon the lesser of the actual project cost or
as-complete appraised value. For single and limited-use properties, or if
significant site development is required, a lower advance rate may apply as
determined at the sole discretion of the Department.
(3) The following projects and activities are
ineligible for Construction Loan Insurance:
(a) Single-family, multi-family, mixed-use
and all other forms of non-commercial or non-industrial real estate;
(b) Speculative commercial or industrial real
estate developments; and
(c)
Reimbursements to any owner, including any equity investment or investment of
capital for the business' continuance.
(4) To issue Construction Loan Insurance, the
Department must determine that the Financial Institution is sufficiently
experienced and capable of monitoring the construction loan process
effectively. To be considered for approval, in addition to requirements for
Conventional Insurance, a complete construction loan application and the
Financial Institution's approved credit display must include or demonstrate, as
applicable, the following:
(a) A signed copy
of the fixed price construction contract and budget. Loans financing time and
materials contracts are ineligible for insurance;
(b) An arm's length relationship between the
Borrower and general contractor;
(c) Construction to be performed by a general
contractor that is licensed, adequately bonded and in good standing with the
Oregon Construction Contractor's Board. For general contractors with less than
three years of comparable commercial or industrial contracting experience, a
payment and performance bond shall be required;
(d) At least five percent retainage to be
withheld from the general contractor out of each draw until
completion;
(e) Soft costs that are
incurred by the Borrower more than one year before the Financial Institution's
credit approval date are excluded from the total construction project
amount;
(f) A minimum construction
contingency commensurate with the type of project, and acceptable to the
Department;
(g) Borrower's equity
in the project prior to origination of the construction loan;
(h) If land is acquired as part of the loan,
that construction will commence within 9 months of acquisition; and
(i) An executed, binding loan commitment for
permanent financing, as a separate credit facility, from the Financial
Institution seeking Construction Loan Insurance.
(5) In addition to requirements for loans
insured with Conventional Insurance, loans insured with Construction Loan
Insurance will be subject to periodic reporting on the construction project and
interim financial statements for the Borrower(s) and guarantors.
Notes
Statutory/Other Authority: ORS 285A.075 & ORS 285B.200 - ORS 285B.218
Statutes/Other Implemented: ORS 285B.200 - ORS 285B.218
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