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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   October 2017

Cut Through the Mortgage Matrix

Technology has made it easier and faster for brokers to deal with paperwork

Cut Through the Mortgage Matrix

For the company that originates a commercial mortgage loan, the process is very document-driven. Between the promissory note, lender documents and third-party documents, there are a lot of pages that — traditionally — have been transferred between the lender, borrower and other parties involved, trying to create a valuation that hopefully results in a successful origination. 

For mortgage brokers participating in the new age of internet connectivity, digitized documents and e-mails can be sent within seconds from coast to coast, forever changing the lending landscape.

As the mortgage business further migrates into the world of technology, it’s clear the process has streamlined and is creating a better borrower experience. Documentation made the process very lengthy as parties filled out the pages, searched for forms and then faxed them between each other in an effort to get the lending package together. This added weeks to the process, lengthening the closing time between a “hello” letter and a fully executed loan agreement.

Streamlined solutions

Documents such as tax returns, proof of funds and personal-account activity are now at a mortgage broker’s fingertips and can be generated at a moment’s notice. Rent rolls, operating statements, budgets and other financial information are input into reporting software that is typically kept in a digital format.

These reports can be created at the touch of a button and sent to a lender in less than 24 hours. If the information needs to be in a different format, no problem — it’s that simple in today’s world.

These days, it’s not uncommon to see, for example, a loan request originate on the East Coast in which a lender requested documents on a Monday and the term sheet was in front of the borrower on a Thursday. The broker that originated the loan could have been in Texas and never had a face-to-face meeting with the borrower — if it was all done digitally.

Electronic-modeling software takes the guesswork out of the approval process.

Document collecting, sizing the loan and a review by a credit committee can happen fast because there are no delays in the loan process. Everyone can collaborate electronically and, although there could be a possible site visit and appraisal, the rest could be handled within a digital document-handling environment.

Third-party reports

Not only has the lending process become streamlined, but third-party reporting has changed because of technology. Inspectors now commonly use online platforms, and site inspectors in the field have thrown away pens, paper and even digital cameras, replacing them with tablets or computers.

Inspectors gather all their information on a mobile device through a custom app, and that information can be seen and archived through a web-based portal, giving lenders and mortgage brokers real-time information without ever leaving their desks. The process of inspecting a roof, which required insurance for the inspectors and permission from the property owner, changed with the introduction of drone technology. Now, an investor can hire a third-party roof inspector and, through the use of a drone, receive digital-video footage of a roof without setting foot on a ladder or having to fly to a city hundreds of miles away. Everything is reported electronically and can be accessed from the comfort of your office.

The application of this technology has made the costs of appraisals and inspections decrease over the years and, combined with the electronic transfer of data via the internet, the lenders requesting this information have it in record time. This is another reason why lending packages can be processed and loans can be closed in half the time they were in the past.

The internet itself has made the process easier for lenders and brokers, simply because you can search a borrower’s name or company online to find out if there are any issues that might cause problems in closing the loan. These problems may include fraud, past or pending lawsuits, or tenants departing the property.  These issues may not be disclosed initially by a prospective borrower, but a quick check on the internet will bring a lot to the surface. So, just as quickly as a lender can approve a loan, they also can reject it, saving them time and money.

The internet creates a layer of transparency that wasn’t available in the past. Within the past 10 years, search engines have improved and news agencies have become more consistent in their online reporting. Finding out that a retailer is declaring bankruptcy while you, the broker, are reviewing a rent roll that states their lease is good for 10 more years, is an important part of the puzzle.

Site inspectors in the field have thrown away pens, paper and even digital cameras.

Lenders and commercial mortgage brokers also can use online platforms to track market outlooks, comparable properties and property histories, giving them a better look at the deal itself. This helps expedite the lending process, because lenders can feel comfortable with a market they know little or nothing about without leaving the comfort of their office. 

Underwriting and analysis

Once information is gathered and loan documents are populated into a digital folder in the cloud, electronic-modeling software takes the guesswork out of the approval process. Today’s electronic underwriting models allow you to input the financial information needed for a valuation and, with a few tweaks, you can tell whether a deal will size up to the requested loan amount. A lender or broker may then be able to resize a deal in hours, not days. Not only is this method quicker, but it is more accurate, and different criteria can be introduced into the model so that the lender can make an on-the-fly determination of risk from different perspectives.

All of this technology would not be useful if there wasn’t someone to input the data, evaluate it and create a conclusion, so that a decision can be made on the loan itself. This is where technology really pays for itself. Before the birth of technology, lending shops were filled with a handful of originators, and each of them had two to three analysts, cranking out reports and inputting data while the originator was flying out to inspect properties and meet with borrowers. This can become a costly process.

Don’t forget the outdated methods of storing paper documents, hiring shredding companies, making administrative assistants create files on each loan and needing the guy in the mailroom to make copies of every document that came through. Today, this same process can be handled by a small group of people and there are no documents to store in file cabinets — it’s all electronic. One loan originator and one analyst can evaluate more properties today than an entire company did in the past. 

• • •

Technology has made the mortgage world a streamlined machine where borrowers and lenders can be transparent and efficient. In turn, this helps brokers to create more opportunities, close more loans and accurately understand each deal, making it more profitable as all sides capitalize on the evolving technological landscape.


 
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