Construction Loan Exit Strategies in California
How to transition from construction loan to permanent financing.
Since 2020, California construction and renovation lending has experienced significant disruption. First Republic Bank (failed May 2023) was a major construction lender whose programs were NOT continued by acquirer JPMorgan Chase. BBVA USA's construction programs DID survive under PNC Bank. Wells Fargo dramatically shrunk its mortgage business in January 2023, effectively restricting residential construction lending though no formal construction-specific halt was announced. PacWest Bancorp sold $2.6B in construction loans and its Civic Financial hard money division before being acquired by Banc of California in late 2023 — arguably the largest California-specific construction lending exit. TD Bank and Citizens Bank never offered construction loans in California due to geographic limitations. The broader market saw 41% of banks tighten CRE lending standards in 2023, but banks began returning to construction lending with competitive terms in 2025.
Key Facts
- First Republic Bank failed on May 1, 2023 (not March 2023), and was acquired by JPMorgan Chase for $10.6B. JPMorgan explicitly does NOT offer residential construction loans to consumers.
- BBVA USA was acquired by PNC Bank (closed June 1, 2021; conversion October 12, 2021 for $11.6B). PNC DOES actively offer construction-to-permanent loans in California across conventional, jumbo, FHA, VA, and USDA varieties.
- Wells Fargo announced a massive mortgage business restructuring on January 10, 2023 — exiting correspondent lending, restricting new lending to existing customers only. No formal 'construction loan halt' announcement was found, but no active consumer construction-to-permanent loan product exists on their website.
- PacWest Bancorp (Beverly Hills, $41B assets) sold its $2.6B construction loan portfolio to Kennedy-Wilson at a $200M discount in May 2023, sold Civic Financial Services to Roc360, and was acquired by Banc of California in November 2023. This was the largest California-specific construction lending exit.
- TD Bank operates exclusively in 15 East Coast states plus DC. It has never offered loans in California. This is a geographic limitation, not a recent exit.
- Citizens Bank offers standard mortgages in California (~48 states) but its Construction-to-Permanent program is limited to 23 states. California is NOT included due to lack of local branch infrastructure for construction oversight.
- BuildBuyRefi.com (division of The Federal Savings Bank) has suspended USDA construction loans and VA OTC construction loans (the latter industry-wide since May 2025), but FHA, conventional, and jumbo construction programs remain active in California.
- Seattle Funding Group's California lending status is ambiguous: their website lists CA but with no assigned underwriters (unlike all other states), and their Yelp listing omits California from their service states.
- 41% of banks tightened CRE lending standards in Q1 2023 per the Federal Reserve Senior Loan Officer Survey. LTV ratios dropped from 75% to as low as 45-50% LTC. Banks began returning to construction lending in 2025 with competitive terms.
- FHA 203(k) loan volume dropped to just 299 loans/month in January 2023 (from 1,330/month average in 2015-2017). HUD modernized the program effective November 4, 2024, increasing the Limited 203(k) cap from $35,000 to $75,000.
- VA One-Time Close construction loans have been suspended industry-wide by the majority of investors and lenders as of May 2025.
- California's hard money lending market has grown over 30% since 2020, with 1,224+ active lenders and bridge loan rates averaging 10.14% as of September 2025.
- The 'First National Bank' referenced in the query cannot be identified with confidence. Major entities (FNB Corp of PA, FNBO of NE) have never operated in California.
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California-Specific
- California's DFPI (Department of Financial Protection and Innovation) licensing requirements create higher compliance barriers for out-of-state and private lenders, which contributes to some lenders avoiding the CA market.
- California transitioned to NMLS-based licensing in 2021, adding regulatory complexity that may have affected some private lenders like Seattle Funding Group.
- The CalHFA ADU Grant Program exhausted all funding on December 28, 2023 — no new ADU grants are available from the state.
- California Bank & Trust (Zions Bancorporation subsidiary) is a strong California-specific option offering one-time close construction loans up to $6M with 24-month construction periods.
- Pacific Premier Bank is another California-headquartered lender actively offering customized construction loan programs.
- California's hard money market is the largest in the country with 1,224+ lenders. Bridge loan rates average 10.14%, below the national average.
- DSCR (Debt Service Coverage Ratio) lending grew 165% year-to-date in California in 2025, indicating strong alternative lending activity.
- PacWest Bancorp's exit was the single largest California-specific construction lending loss — $2.6B in construction loans and the Civic Financial hard money division were sold off in 2023.
Common Misconceptions
Limitations & Gaps
- Seattle Funding Group California status could not be definitively confirmed. Circumstantial evidence (no assigned underwriters, Yelp listing omission) suggests restricted or paused lending, but no official announcement was found. A direct call to 858-751-0556 is needed to verify.
- The specific 'First National Bank' referenced in the query could not be identified. Without additional identifying information (NMLS number, city, URL), this entity cannot be confirmed or researched.
- Wells Fargo's exact policy on residential construction-to-permanent loans is unclear. The company's website does not explicitly offer or disclaim the product for consumers. The practical reality (brokers unable to obtain construction loans) may differ from official policy.
- The VA OTC construction loan suspension source is BuildBuyRefi's website (a lender with marketing interests). While the suspension claim is plausible and consistent with market conditions, independent confirmation from VA or Ginnie Mae would strengthen confidence.
- This research reflects publicly available information as of April 2026. Construction lending policies change frequently and many lenders do not publicly announce program changes. Direct verification calls to specific lenders are recommended before making borrowing decisions.
- Some lenders' construction loan availability may vary by California county or metro area. Statewide availability was researched but sub-state restrictions may exist.
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