Greater use of technology expected for commercial mortgage industryChristine Barrytechnology, Excel
Technology continues to be underutilized in the U.S. commercial
mortgage space, as the industry remains driven by deals, as opposed
to technology. In fact, Aite Group estimates that approximately 65
percent of the industry is currently using loan origination
solutions that they built themselves, and as many as 75 percent of
commercial mortgage lenders perform sophisticated modeling using
Excel spreadsheets. Processes are still largely manual ones.
Lenders are also often forced to re-enter the same information
multiple times due to siloed applications and a lack of a central
repository or database where all deal information is stored and can
easily be retrieved. Much of this can be attributed to the
complexity of these transactions and a lack of standardization,
which make automation difficult. Factors such as the need to
operate more efficiently and quickly produce accurate documents for
the secondary market are driving change within the industry and
creating a greater need for technology.
As commercial mortgage lenders increasingly embrace technology,
they will be looking to it to do the following:
Create a central repository for all deal-related
documents
All deal information should be easily retrieved and queried from a
single location. Also, information shouldn't have to be entered
multiple times. Reports should automatically be generated from a
single location, and all document and deal information should flow
into that single location. Information should be collected once and
dispersed throughout the system to users who need it. It should
then automatically be entered into forms and updated throughout the
system, if changes are made.
Integrate the numerous siloed
applications
Building on the last point, in addition to a central location for
all information, all systems need to be integrated in order to make
a central repository possible. In addition, the loan origination
systems should be integrated with the core banking system so that
customer information can automatically be retrieved and entered
into the necessary documents. Loan information can later be
downloaded to the core. Once a loan is closed, it should
automatically be sent to loan servicing without the need for
re-entry.
More easily generate documents
Smarter solutions are now available that cannot only determine
which documents are necessary for each deal, but can also populate
documents with the necessary information, thereby eliminating the
need to re-key. This ability addresses key challenges faced by many
lenders when keeping up with new rules and regulations and deciding
which documents are necessary for each transaction. Some solutions
also have the capability to encrypt the documents so that they can
be securely sent via e-mail or posted on a Web site, where they can
easily be accessed.
Create images for electronic storage
A lot of providers are investing in imaging technologies for
better storage of electronic images of loan documents in the
central location. This helps to centralize information and
eliminate paper files.
Provide better data management, to ensure the accuracy
of information
As the secondary market increasingly looks to invest in commercial
mortgages, a lot of originators are looking to get aggregated
information more quickly so that they can generate the documents
necessary to sell in the secondary market. Technology not only
enables quicker generation of documents, but also enables greater
accuracy by reducing and eliminating manual entries.
Increase the electronic exchange of data from third
parties
The ordering and receiving of inspections and other necessary
documents is starting to become electronic. The challenge, however,
is when the format of the information received does not fit into
document templates, requiring data to be manipulated and
re-entered. Data interchange with a common language and standards
is needed between parties.
Fierce competition, thinner margins and an attractive secondary
market are forcing U.S. financial institutions, regardless of size,
to begin to consider greater adoption of commercial mortgage
technologies. Although commercial mortgage product areas are likely
to continue receiving a lower percentage of overall technology
spend than other areas, Aite Group forecasts that U.S. lenders will
spend more than $186 million on commercial mortgage technologies by
2008 (not including servicing technologies). More than 70 percent
of the top 100 lenders will invest in new technologies during that
period. For some lenders, greater use of technology will mean the
difference between maintaining a leading role in the industry and
losing it to new players, making it essential that institutions do
not fall victim to maintaining old processes.
Christine Barry is research director of Boston-based Aite Group, a research and
advisory firm focused on business, technology and regulatory issues
and their impact on the financial services industry. She may be
reached at (617) 338-6050.
