Internal Control Questionnaires and Verification Procedures

Take-out Commitments

1. Are take-out agreements reviewed for acceptability by counsel?

2. Are financial statements obtained and reviewed to determine the financial responsibility of permanent lenders?

3. Is a tri-party buy and sell agreement signed before the construction loan is closed?

4. Does the bank require take-out agreements to include an act of God clause, which provides for an automatic extension of the completion date in the event that construction delays occur for reasons beyond the builder’s control?

5. Does the bank accept stand-by commitments for “gap financing” of limited take-out commitments

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