What is a construction loan?
A construction loan is a short term loan that funds the construction of improvements to real property and is secured by a mortgage. Unlike a loan that finances the acquisition of property and is funded in its entirety at the time of closing, a construction loan is usually funded in stages, called “draws”. The builder will draw funds from the construction loan as he needs them to complete the project.
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Even though my construction loan is current, the lender has stopped funding due to “increased risk”. What are my rights?
Depending on the exact circumstances of your transaction, and the language of the loan documents at issue, you may have a cause of action for “Lender Liability”. Lender Liability is a doctrine of liability pursuant to which commercial borrowers may initiate suit against their lender on several different theories for purported lender misconduct. Theories for liability may include interference with corporate governance, fraud, duress, misrepresentation, negligence, failure to fund or breach of good faith.
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