What Happens After I Say Yes? A Behind-the-Scenes Look at a Funding Committee Decision
- Jul 23
- 9 min read
Welcome to Naomi's Notebook #004
Welcome to Naomi's Notebooks... where I take real deals, real numbers, and real lending decisions and show you exactly how I think as a lender. Sometimes I say yes. Sometimes I don't. Either way, there's always a lesson.
One thing I hear all the time is, "Did my loan get approved?"
What most borrowers don't realize is that my job doesn't always end when I finish analyzing a file. Like many private lenders, I don't fund loans on my own. Every deal I originate is presented to a funding committee that makes the final lending decision. My responsibility is to understand the risk, analyze the market, and present the strongest case I can for my borrower.
Sometimes that's easy. Sometimes it requires a much deeper conversation. This was one of those loans.
Funding Committee Review: A Construction Loan Request in Lee County, Florida
This case involved a repeat borrower I had worked with for several years. Together, we had successfully completed numerous ground-up construction loans, so I wasn't evaluating a first-time borrower or an unknown investor. I already understood how he operated, how he managed his projects, and how he adapted when market conditions changed.
When he came to me for a construction loan at 65% loan-to-value (LTV) on a ground-up project in Lee County, I already knew he qualified based on his experience, performance, and completed loan history. The borrower and the project were not the problem. The challenge wasn't underwriting. The challenge was getting one of our funding partners comfortable with the request after a recent change in guidelines.
Like many private lending companies, I don't make the final funding decision on my own. Every loan I originate is presented to a funding committee. My role is to analyze the deal, evaluate the risk, and make my recommendation. The funding committee's role is to review the opportunity and make the final lending decision while protecting investor capital. It's a process I respect because it ensures every loan receives another level of review.
What caught my attention was that this particular funding partner had recently introduced a new policy limiting cash-out refinances in Lee County to 60% loan-to-value. This restriction had never existed before. In fact, it wasn't implemented until mid-2026, well after the Lee County market had already gone through its correction and stabilized.
That immediately made me stop and ask one question: Why now?
My First Thought
I don't know exactly why this funding partner decided to implement a lower loan-to-value limit for cash-out refinances in Lee County, but I do have my own opinion.
Construction lending has a built-in delay. A loan originated in 2024 may not pay off until 2025 or even 2026, which means funding partners are often evaluating today's performance based on projects that were started in a completely different market. If they're now seeing loans that originated during the peak of the market reaching maturity, they're also seeing the effects of the correction that followed. If that's what's driving this new policy, I understand the concern.
Many lenders became more conservative during that period, and rightfully so. Some reduced leverage in Cape Coral to as low as 55% loan-to-value because home values had appreciated so rapidly that they no longer reflected long-term market fundamentals. Those were prudent decisions given the uncertainty at the time.
The challenge is that the market we're lending in today isn't the same market those loans were originated in. Construction lending is, by nature, always looking in the rearview mirror. By the time a project is completed and the loan is repaid, the market has often shifted.
In my opinion, that's what we're seeing here. The funding committee isn't evaluating the market as it exists today; they're reviewing loans that were originated during one of the strongest real estate markets Lee County has ever experienced and matured after the correction had already taken place.
The question I wanted to answer wasn't whether the market corrected: we already know it did. The real question was whether today's market still justified treating Lee County as though that correction was ongoing.
To answer that, I stopped relying on assumptions and started digging into the data.
Digging Deeper
I wasn't interested in arguing against the guideline. I wanted to determine whether it still reflected the market we have today. Lee County experienced one of the fastest periods of home appreciation I've ever seen between 2022 and early 2024. Inventory was scarce, buyers routinely paid above asking price, and home values climbed at a pace that simply wasn't sustainable. As a result, many lenders became more conservative. Builder Finance, for example, reduced leverage in Cape Coral to approximately 55% loan-to-value because valuations had moved well beyond long-term market fundamentals. Other lenders across Southwest Florida made similar adjustments, and at the time, I agreed with those decisions.
What interested me wasn't what lenders did during the peak of the market. It was whether those same restrictions still made sense in mid-2026. By then, the market had already corrected. 1,700sqft homes that commonly appraised around $440,000 during the height of the market were selling for approximately $340,000 to $345,000 by late 2024 and into 2025, a correction of roughly 22%. While that's a meaningful adjustment, I don't view it as a failing market, I view it as a healthy return to more sustainable pricing after an extraordinary period of appreciation.
Today, inventory has normalized, buyers and sellers have adjusted their expectations, and values have remained relatively stable for about the past year. As both a lender and a Cape Coral resident originating loans in this market every day, I believe today's pricing is considerably more reliable than it was during the appreciation cycle.
That brought me back to the question I couldn't ignore.
Was this guideline protecting against today's market... or reacting to yesterday's?
To answer that, I needed more than market reports. I needed to look at real loan performance.
The Borrower's Track Record
At this point, I felt like I had a good understanding of the market. The next step was determining whether this borrower's performance supported requesting an exception. This wasn't a new client or a first-time builder. I'd worked with him on multiple construction projects over the years, and because I originated each of those loans, I didn't have to rely on assumptions or third-party reports. I had the loan files, the appraisals, the payoff history, and the final sales prices.
I went back and reviewed every construction loan he had PAID OFF over the 12 months. What I wanted to know was simple: How did he actually perform during one of the most significant market corrections Lee County has experienced?
Over the previous twelve months, he sold 13 construction projects with an average original loan amount of $241,762, an average payoff period of 10.4 months, and a 100% payoff rate. More importantly, the numbers showed a borrower who adjusted as the market changed.
He wasn't holding completed homes waiting for prices to return to their peak. He priced them based on current market conditions, sold them, and paid off every construction loan. That's exactly what I want to see from an experienced builder. Markets change, and successful investors adjust with them.
Table 2. Completed Construction Loan History (Lee County)
Property | Original Loan | Appraised | Closed | Sold For | Paid Off | Time Outstanding |
Lehigh Acres – Property 1 | $200,850 | $315,000 | 1/31/2025 | $289,999 | 2/6/2026 | 12.2 Months |
Lehigh Acres – Property 2 | $204,000 | $315,000 | 1/28/2025 | $300,000 | 9/16/2025 | 7.6 Months |
Lehigh Acres – Property 3 | $204,850 | $315,000 | 1/28/2025 | $280,000 | 11/12/2025 | 9.5 Months |
Cape Coral – Property 1 | $257,975 | $380,000 | 3/24/2025 | $340,000 | 12/2/2025 | 8.3 Months |
Lehigh Acres – Property 4 | $209,100 | $318,000 | 3/24/2025 | $300,000 | 1/30/2026 | 10.2 Months |
Cape Coral – Property 2 | $257,975 | $380,000 | 3/24/2025 | $335,000 | 12/3/2025 | 8.3 Months |
Lehigh Acres – Property 5 | $207,400 | $320,000 | 3/24/2025 | $289,999 | 1/22/2026 | 10.0 Months |
Lehigh Acres – Property 6 | $206,550 | $318,000 | 3/24/2025 | $289,999 | 11/19/2025 | 7.9 Months |
Cape Coral – Property 3 | $391,884 | $592,000 | 12/18/2024 | $535,000 | 5/18/2026 | 17.0 Months* |
Lehigh Acres – Property 7 | $203,794 | $310,000 | 12/18/2024 | $290,000 | 8/15/2025 | 7.9 Months |
Cape Coral – Property 4 | $264,532 | $400,000 | 12/18/2024 | $370,000 | 12/10/2025 | 11.7 Months |
Cape Coral – Property 5 | $335,523 | $521,000 | 2/2/2024 | $525,000 | 3/5/2025 | 13.0 Months* |
Cape Coral – Property 6 | $198,475 | $305,000 | 10/31/2024 | $280,000 | 10/31/2025 | 12.0 Months |
* A quick note about the two longer payoff periods: These weren't market-related delays. Both projects experienced delays because the City of Cape Coral had not yet expanded municipal water infrastructure to those areas. Certificates of Occupancy couldn't be issued until utilities were available, which delayed the sales. Those delays had nothing to do with borrower performance or market conditions.
Borrower's Portfolio Summary
What These Results Mean
Every loan in this sample was repaid in full, despite many properties selling for less than their original appraised value. More importantly, these sale prices were sufficient to cover the land acquisition, construction budget, financing costs, interest, lender fees, closing costs, commissions, and the borrower's profit. In other words, even after the Lee County market corrected from its 2022–2024 peak, these projects still produced enough value to successfully exit. This completed loan history suggests that current underwriting already contains a substantial equity cushion and supports reconsidering the more restrictive Lee County loan-to-value limits.
Where I Landed
After reviewing the market data, the borrower's performance, and every loan I'd previously closed with him, I put together a detailed analysis and requested an exception to increase the maximum cash-out refinance from 60% to 65% loan-to-value. I wasn't suggesting we disregard the new policy. Rather, I recommended evaluating this borrower based on current market conditions, his proven track record, and the strong performance of the loans I'd already originated for him.
The exception was ultimately approved, but only for this specific borrower. The file had been submitted before the new policy was implemented, and there was a compelling argument that applying the change retroactively wasn't equitable. That said, this particular funding partner is standing firm on its new 60% maximum LTV for Lee County in an effort to reduce loan volume from the area.
Naomi's Take
Lending isn't simply a matter of checking boxes. Every guideline exists for a reason, and I respect that. Funding partners have a responsibility to protect investor capital, especially during uncertain markets. But markets don't stand still, and neither should our analysis.
One of the most rewarding parts of my job is taking the time to understand the complete picture. Sometimes that means agreeing with a guideline. Other times, it means presenting the facts and asking whether today's market still supports yesterday's decision.
In this case, I believed it was worth pushing back on. Whether the committee ultimately agrees isn't the point. My responsibility is to make sure they're making that decision with the best information available.
Until Next Time
I hope this notebook gave you a better understanding of what happens behind the scenes after a loan is analyzed.
Every deal is different, and sometimes the most important part of the process is taking the time to understand the complete picture before a decision is made.
Thanks for reading, and I'll see you in the next Naomi's Notebook.
What is a funding committee in private lending?
A funding committee is a group responsible for reviewing loan requests before capital is committed. While a loan officer or lender may analyze the file and present their findings, the funding committee makes the final lending decision to help protect investor capital and ensure each loan meets the lender's risk standards.
Why would a funding committee request an exception to its lending guidelines?
Case by case. Lending guidelines are designed to manage risk, but every loan is unique. In some cases, additional factors—such as a borrower's proven track record, current market conditions, or exceptional collateral—may justify asking the funding committee to consider an exception.
What is a cash-out refinance?
A cash-out refinance allows a property owner to refinance an existing mortgage for more than the current loan balance and receive the difference in cash. Investors often use the proceeds to purchase additional properties, fund renovations, or improve liquidity.
Why does a borrower's track record matter?
Past performance helps lenders understand how a borrower manages projects through different market conditions. A consistent history of completing projects, repaying loans on time, and adapting to changing market conditions can reduce risk when evaluating future financing requests.
Why are appraised values sometimes higher than final sales prices in construction?
Appraisals reflect a property's estimated market value at a specific point in time. If market conditions change before a property is sold, the final sales price may differ from the original appraisal. Experienced investors adjust their pricing to reflect current market conditions rather than relying solely on past valuations.
Does a repeat borrower automatically receive better loan terms?
No. While a positive lending history provides valuable context, every loan is evaluated on its own merits. Borrower experience, financial strength, collateral, current market conditions, and the specific loan request all play an important role in the underwriting process.
