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.