For residential construction loans to meet prudent real estate underwriting standards, Banks should:
•establish appropriate limits on construction starts for speculative homes;
•address any concentration risk to a particular builder or a specific development;
•monitor market conditions and analyze demand and supply for residential housing;
•maintain prudent controls for the advancement of funds for construction costs;
•perform periodic collateral inspections to verify construction progress; and
•confirm compliance with loan to value (LTV) limits.