How do examiners review construction loan monitoring?

What the FDIC procedures cover.

The FDIC's construction and land development core analysis (10/25) lists the steps examiners may use. Examiners choose the steps that fit a bank's activities and risk profile; they are not expected to perform every step at every bank. On monitoring, the procedures look at:

• Inspection quality: whether inspectors are qualified, whether reports are detailed enough to support disbursements, whether inspectors rotate or are independent of the lending function, and whether anyone spot-checks their work.
• Disbursement controls: funds released on a prearranged plan, after management reviews written inspection reports, lien searches and title updates.
• Lien waivers: obtained from subcontractors and suppliers as work is completed and before funds are disbursed.
• Final disbursement: a certificate of occupancy before the last advance.
• Budget sufficiency: whether the undisbursed balance can still complete the project, with front-loaded budgets called out as a risk.

The OCC and the NCUA.

The OCC's Comptroller's Handbook on commercial real estate lending describes effective construction controls as segregation of duties, site inspections, lien searches before disbursement, budget monitoring and dual approval of loan disbursements. The NCUA's examiner's guide covers the same ground for credit unions, including disbursements that track construction progress. Examination procedures are revised over time, so confirm current guidance with compliance counsel.

Why it matters for lenders.

Examiners read the loan file, not only the policy. A written inspection policy is only as strong as the record behind each advance: who inspected, when, what the report showed and what the lender did next. Gaps between the policy and the file are where findings come from. See how often draw inspections are required.

How RAZE handles it.

RAZE is built to support audit and exam review; the lender's controls stay the lender's. Photos carry GPS coordinates and date and time stamps and link to the draw sheet line items they support, every status change stays on the record with who made it, and a rejected inspection keeps the reviewer's reason. Lenders can keep their own inspectors on Direct Request and use the RAZE Marketplace everywhere else, on one report standard. RAZE does not approve or fund draws.