MBA NewsLink Q&A: Land Gorilla’s Sean Faries on Construction Lending, Housing Supply

Sean Faries, CEO of Land Gorilla, is a leader in mortgage technology innovations, making faster, safer, more profitable and compliant construction loans for lenders.

MBA NewsLink: What is driving renewed lender interest in construction lending? What’s changed?

Sean Faries: The primary driver is the undeniable, structural housing deficit in the U.S. For the past few years, the lock-in effect has severely constrained existing home inventory. If buyers can’t find existing homes, we have to build them.

What has changed is that lenders are recognizing construction lending is no longer just a niche product or an accommodation for high-net-worth clients; it’s a vital strategic pillar for growth. With traditional purchase and refinance volumes stabilizing into a new normal, lenders are looking for higher-yield products to diversify their portfolios.

Additionally, we are seeing a significant rise in renovation HELOCs for homeowners looking to improve their property with additions or major remodels. While lenders want to capture this HELOC volume, however, many are realizing they need the right infrastructure to manage the associated draw and inspection processes profitably.

MBA NewsLink: How are affordability pressures influencing the way construction loans are structured today?

Sean Faries: Affordability is the biggest headwind facing borrowers today, due to higher interest rates and elevated costs for materials and labor. As a result, we are seeing a strong shift toward single-close (or construction-to-permanent) loan structures. These allow the borrower to lock in their interest rate upfront and avoid paying a second set of closing costs when the home is finished, which provides more financial certainty.

We are also seeing structural changes in what is being constructed. Because of affordability constraints, borrowers and builders are opting for smaller footprints, modular or manufactured housing, and Accessory Dwelling Units (ADUs) to help offset mortgage costs through rental income. Lenders are having to adapt their loan products and underwriting guidelines to accommodate these alternative construction types and structures to keep the dream of homeownership accessible.

MBA NewsLink: What parts of the construction loan process create the most operational friction?

Sean Faries: There are two main areas that create the most friction: pre-close and post-close.

On the pre-close side, the dreaded “time to close” differs dramatically for a construction loan compared to a traditional mortgage. Traditionally, construction lenders have had trouble allocating the necessary resources to adequately analyze project and builder risk before a loan can close, which adds a significant amount of time to the cycle. This is an area where technology is making a huge impact. For instance, we use AI with our X-Ray reports to help lenders get an immediate grasp around both project and builder risk, which drives down costs and drastically shortens the time to close.

The second major area of friction happens post-close, specifically in draw management. When lenders rely on manual processes–like tracking budgets in massive Excel spreadsheets, managing inspection photos via email, and passing PDFs of lien waivers back and forth–it creates incredible bottlenecks.

The back-and-forth communication required to verify work, ensure clear title, collect the right documents and disburse funds is highly fragmented. When this process stalls, builders don’t get paid on time. And when builders don’t get paid on time, construction stops, timelines extend and the risk to the lender increases exponentially. The friction directly impacts the borrower experience as well.

MBA NewsLink: How do differences in state and local construction regulations affect lenders that operate in more than one market?

Sean Faries: Operating across multiple jurisdictions is a massive compliance hurdle. Mechanics lien laws, statutory waiver requirements and notice regulations vary drastically from state to state–sometimes even from county to county. For example, the way a lender protects their lien priority in Texas is entirely different from the process in California or Florida.

For lenders trying to scale regionally or nationally, this creates a dangerous risk environment. If a lender uses a one-size-fits-all approach to lien waivers or fails to collect the specific statutory forms required in a certain state, they can easily lose their lien position. Managing this through manual oversight usually requires hiring highly specialized local experts, but this destroys scalability. Lenders quickly realize that to expand geographically, they need systems that can automatically apply localized rules and documentation requirements to each specific project.

MBA NewsLink: For lenders looking to expand construction loan programs, what should they be thinking about heading into the next market cycle? What distinguishes lenders that are able to scale these programs successfully?

Sean Faries: The next market cycle will reward institutions that can execute efficiently and provide a seamless experience for both the borrower and the builder. For this reason, lenders need to think about building their infrastructure before the volume hits. The defining characteristic of lenders that scale successfully is treating construction lending as a distinct discipline, not just a traditional mortgage with a few extra steps. They’ve moved away from spreadsheets and have digitized the entire post-close lifecycle. By automating budget tracking, standardizing inspection workflows, and accelerating builder payments, they have lower per-loan operational costs and are able to significantly mitigate risk. Ultimately, the lenders who win will be the ones who become the easiest to work with–because top-tier builders will always steer their buyers toward lenders who pay them reliably and on time.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)