Loan management software can help stakeholders capitalize on construction recovery

This blog recently looked at the latest data from the Federal Deposit Insurance Corporation (FDIC), which found that a year-long recovery in construction lending gained momentum during the second quarter, with outstanding construction loans rising 4 percent to reach $223.2 billion.

As we discussed, these figures are encouraging, but must be viewed in context. After the end of a five-year decline that resulted from the 2008 financial crisis, the construction lending market remains far below its pre-recession peak of $600 billion. However, things do seem to be moving in the right direction. The 4 percent increase in the second quarter was the largest since the beginning of the recovery in Q1 2013.

These developments fit in a broader trend of expanding credit. The FDIC reported that overall bank lending rose 2.3 percent during Q2, pushing the total amount of U.S. banks' loans and leases above $8 trillion for the first time in history.

"Lenders are growing more comfortable extending credit, and demand for credit is improving," said Moody's Analytics chief economist Mark Zandi.

Despite increasing confidence in the economic recovery, lenders need to be mindful of the consequences of extending credit without accounting for risk. This is an especially salient concern for smaller lenders that don't have the resources to absorb significant losses on loans.

As this blog has discussed previously, credit unions and other nonbank firms have been steadily increasing their involvement in real estate loans. As lenders of all types and sizes seek to make the most of current conditions, they will need professional-grade loan management software to ensure that workable payment plans are created during each transaction.