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What Should the Technology That Simplifies Commercial Real Estate Be Doing for Me?

Blog Commerical Lending

There are a number of areas where technology can help lenders close bigger commercial real estate deals in record time.

by Percy G. Johnson, Jr, Vice President Agile Solutions

Commercial real estate is one of the most lucrative, and one of the riskiest, sectors of the industry. Great risk leads to great reward. Simplifying the complex business of commercial real estate goes a long way towards minimizing that risk. 

In the first quarter of 2018, commercial real estate lending was growing at an annual rate of 3.9%, while both commercial and multifamily mortgages were performing “extraordinarily well” at the end of 2017, according to the Mortgage Bankers Association. 

All across the country, commercial development is strengthening local economies and property values are rising, making it an excellent time to be investing in real estate projects. 

Yet it’s important to bear in mind that financing these kind of deals is extremely complex and fraught with challenges, and failures at this scale can take down an entire organization. 

The power of digitization
Historically, many of the lending systems put in place for commercial real estate are paper-driven and rely on back-office business units that are still using old processes to originate and service commercial loans. 

Successful digitization is a hallmark of those companies thriving in commercial real estate, and it works wonders when it comes to the timely collection of many complex financial documents, often involving multiple guarantors, individuals and other corporate entities, which are required for commercial mortgage origination.

“For those institutions that are digitized, automation software can assist in better preparation for compliance exams with easily accessible reports that provide examiners the required information without interrupting the credit management department’s workflow” according to financial consulting service BAI.

As we move into an era characterised by high demand and limited inventory, there is a pressing need for technology that will simplify the lending process for all parties involved. 

What would that technology look like?
Let’s investigate a number of features that any new software should be offering in order to minimize risk and promote efficiency.

  • Timely collection of complex financial documents. This is a massive issue to deal with, as commercial deals often involve multiple guarantors. New practices require new technology that offers more automation, the ability to accept loan file documents from a variety of sources including mobile devices, interactive websites for both customers and operations, and an automated document classification and data extraction capability.
  • Deal with Information silos within the bank. Too often, certain divisions inside a financial organization feel they ‘own’ a particular consumer and as such, they only provide certain information on a client with other divisions, which often leads to missing and redundant data.
  • Automation can identify and rectify the data gaps immediately and elevate accuracy of data-capture to new heights.
  • Establish electronic communication methods between the bank and its borrowers. Poor communication makes it harder to deliver a good experience, and leads to delays which affect costs and morale on a project. Once again, automation and self-service tools are invaluable in gathering contact details and setting up channels of communication.
  • Involve the borrower with Self-Service Portals. The days of excluding users from the content that is collected on them should be over. A younger, mobile-first generation demands processes that are transparent and engaging. Make potential partners willing participants in the gathering and uploading of vital data, as it reduces errors and engages the lender in the process.
  • Strive for a ‘One Office’ solution. Make end-to-end processing and transparency the goals. Too often, a completed application moves the entire process to a back office, increasing delays and complicating status update communication with the borrower.

The presence of large paper-based systems, along with ‘stare-and-compare’ methods of data capture come at a high cost, both financially and in terms of delivering efficiency.

As Scott McCarthy writes for BAI: “Many of these high costs are driven by outdated lending systems that are still paper driven. Much of this paper comes from back-office business units that are still using old processes to originate and service commercial loans. These units are not standardized and so no efficiencies are gained when the business grows. Instead, growth becomes more difficult over time.”

The Cost Of Compliance
One of the trickiest aspects of commercial real estate is dealing with compliance issues, which can often feel like a moving target. The frequency with which regulators write new rules makes compliance a serious challenge for commercial lenders. While the cost of compliance can be rather high, the cost of non-compliance is even higher.

Read this helpful guide on Keeping Compliance Costs In Check

Developing An Agile Solution
The right technology helps lenders tap into the ever-expanding commercial market while minimizing risk.  It generates new and useful insights, while increasing reporting capabilities at the same time.

By simplifying outdated back office loan origination processes, while improving data extraction capabilities from a wide variety of sources, and by connecting the front and back offices in a more transparent, seamless manner, companies like AI Foundry and their Agile Solutions are poised to transform the commercial real estate business and ensure that good data is the driving force behind each and every commercial real estate project. 

AI Foundry leverages the latest artificial intelligence and user-guided machine learning capabilities to help companies maximize the value of their digital data to improve their overall business outcomes.

Read AI Foundry’s in-depth White Paper on Commercial Lenders by following this link.

To find out more about how AI Foundry is helping clients maximize their data, make contact via our website.

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Sources:

https://www.bai.org/banking-strategies/article-detail/why-digitized-portfolios-give-lenders-a-competitive-advantages

http://aifoundry.com/our-company/resources/commercial-lenders-require-agile-solutions/

http://aifoundry.com/agile-solutions/agile-lending/