What are the supervisory LTV limits for residential tract developments?
An institution may lend up to 65 percent of the value for raw land, 75 percent for land development or finished lots, 80 percent for multifamily residential construction, and 85 percent for 1- to 4-family residential construction.3 If a loan funds both land development and home construction, the applicable supervisory LTV limit is 85 percent, which corresponds to the limit for the final phase of the project. However, loan disbursements should not exceed actual development or construction costs, and the institution should ensure that the borrower maintains appropriate levels of hard equity throughout the term of the loan.
