We are looking at a loan on bare land. There's nothing on it; was tilled last year until it went up for sale. It is on a "block" in town with streets, curbs, and infrastructure surrounding it. The parcels right next to it have all the usual utilities running.

Somewhere in the recesses of my mind, I thought we could lend on this land at the higher "development" %age as the city water and sewage run right up to the parcel. All our borrower would need to do is connect. But this is not what I would call a "finished" lot ready for the building to go on it. It would need to be graded, connected to those utilities and streets.

I googled and looked through my archives, but nothing. If anyone remembers guidance about utilities coming to the lot line, please let me know. Meanwhile, the lenders are analyzing at the 65%, jic. (Or I guess he could learn to till it and throw some seed down...call it farmland! )

Thanks.

CT, you may be referring to Supervisory LTV
FDIC is https://www.fdic.gov/regulations/laws/rules/2000-8700.html


Supervisory Loan-to-Value Limits
Institutions should establish their own internal loan-to-value limits for real estate loans. These internal limits should not exceed the following supervisory limits:
Loan category Loan-to-value limit (percent)
Raw land 65
Land development 75
Construction:
Commercial, multifamily,1 and other non residential 80
1- to 4-family residential 85
Improved property 85
Owner-occupied 1- to 4-family and home equity 2

1Multifamily construction includes condominiums and cooperatives.
2A loan-to-value limit has not been established for permanent mortgage or home equity loans on owner-occupied, 1- to 4-family residential property. However, for any such loan with a loan-to-value ratio that equals or exceeds 90 percent at origination, an institution should require appropriate credit enhancement in the form of either mortgage insurance or readily marketable collateral.
The supervisory loan-to-value limits should be applied to the underlying property that collateralizes the loan. For loans that fund multiple phases of the same real estate project (e.g., a loan for both land development and construction of an office building), the appropriate loan-to-value limit is the limit applicable to the final phase of the project funded by the loan; however, loan disbursements should not exceed actual development or construction outlays. In situations where a loan is fully cross-collateralized by two or more properties or is secured by a collateral pool of two or more properties, the appropriate maximum loan amount under supervisory loan-to-value limits is the sum of the value of each property, less senior liens, multiplied by the appropriate loan-to-value limit for each property. To ensure that collateral margins remain within the supervisory limits, lenders should redetermine conformity whenever collateral substitutions are made to the collateral pool.
In establishing internal loan-to-value limits, each lender is expected to carefully consider the institution-specific and market factors listed under "Loan Portfolio Management Considerations," as well as any other relevant factors, such as the particular subcategory or type of loan. For any subcategory of loans that exhibits greater credit risk than the overall category, a lender should consider the establishment of an internal loan-to-value limit for that subcategory that is lower than the limit for the overall category.
The loan-to-value ratio is only one of several pertinent credit factors to be considered when underwriting a real estate loan. Other credit factors to be taken into account are highlighted in the "Underwriting Standards" section above. Because of these other factors, the establishment of these supervisory limits should not be interpreted to mean that loans at these levels will automatically be considered sound.

Thanks, Rocky. I found an old FRB SR letter that specifically states "access and connection to water, sewer, ...." so obviously I was imagining this "to the lot line" exemption.

I guess he better lease the land to someone for hay production if he needs more $$$!

Thanks again.