Insights Dec 21, 2020

Catch-22 in CRE lending or How to Stop Worrying and Start Closing More Deals

One of the hardest roles in CRE, as in residential real estate, is that of the loan officer. Caught between brokers consumed with arranging deals and the borrowers who shop for them, the loan officer is constantly vying to stay top of mind and visible to their most important client—the brokers who bring them business.

At the same time, today’s lenders face another challenge—volume. Technology and growing borrower demand is increasing both the pace and the volume of deals in the lender pipeline. That might seem like a great problem to have, but there’s a catch—time. Simply put, there’s only so many transactions a lender can handle and still be able to focus on their bread and butter—the all-important broker relationships that fuel the industry.

So what’s a lender to do? 

Let’s take a look at CRE’s more advanced cousin, residential real estate. Always a step ahead of CRE, residential real estate was the first to adopt a host of tech solutions, from Salesforce in the nineties to loan origination platforms almost a decade ago.

Case in point? Blend.com was launched back in 2012 to help lenders and large banks process mortgages faster (the company’s pitch is literally “minutes not weeks”). Eight years ago, the idea of dispensing with traditional paperwork and manual processing might have been seen as disruptive by lenders who relied on tried and true methods to get the job done. But, eight years later, lenders and borrowers alike see using what is essentially a system of record as indispensable. Borrowers are already used to using tech platforms to collaborate and communicate for everything from the workplace (Slack) to hailing a cab (Uber, Lyft and more). Banks use Blend as a universal intake system to help their loan officers keep up with the pace and volume of today’s deals. In the residential mortgage space, customers use Roostify’s platform to apply for home loans. The list goes on.

Now let’s take a look at commercial real estate. Have we caught up yet? In a word, no. 

How can it be that we’re so far behind, still stuck in the world of Gmail, Outlook, and Excel? The answer is a catch-22. And it’s the reason that no proptech company (besides RealAtom) dared venture forth with a solution. The catch-22? The two parties critical to the loan processing equation—the lenders and brokers—each claimed the other wasn’t ready to move to a single system of record. 

Before we launched RealAtom, we did our  homework and surveyed mortgage brokers, asking them if they would use a loan intake platform. Their response? Of course we would, they said. But then they countered that they were pretty sure their lenders wouldn’t use it.

And yet, we know that lenders do want to use an organized intake system. As a matter of fact, some have already built proprietary application portals. For example, a life insurance executive recently told me, “It [their proprietary intake system] has been a game changer for us in terms of our ability to really process as many loans as we do. And our corresponding brokers love to have all loan-related records in one place. We’ve got an appetite for growth. So that efficiency is a critical part of what we do.”

Other lenders told us that they, too, would welcome a standard system of records, but then they countered that they were pretty sure their brokers wouldn’t use it.

So guess what? We built it anyway. And guess what else? Lenders are using it, as are a good chunk of the country’s largest brokerages. That trend continues to point up. Because all brokers want to stay competitive with their peers, every day more and more brokerages are inviting their lenders to use the system to track their loan transactions. To date, we have almost a thousand lenders using the system. Not bad for a product that so many wanted but claimed no one else would use, right?

Why is the adoption of a common system of record gaining traction? Simply put, because it’s not disrupting anything. It’s not competing with anything. It’s simply saving time and making the work easier for everyone. This is why VTS platform is so popular with leasing brokers and landlords.

At the end of the day, brokers still need to be able to submit loan inquiries, track the status of their loans, and post and review important due diligence documents. The difference today? Now they can do it all in one place, more efficiently.

That said, a broker with two decades in the business is still picking up the phone to call their favorite, trusted lender to discuss the nuances of a deal. Those two critical parties still have that conversation—the valuable one-on-one relationship stays intact. But the difference is that now, the time-consuming mechanics of the relationship—and the myriad transactions and documents that result—are simply conducted and tracked in a single, shared space that all parties involved in a loan process can use.

Lenders “touch” thousands of deals in a single year. The amount of work is staggering, and they know it. Having all that documented in a trusted system of record provides validation of their work, both in terms of volume and quality. Brokers want to stay competitive with their peers. And both need a frictionless system that “feels” like the tools they use in other parts of their lives. Our hope for the new year is that the industry continues to recognize opportunity and capitalize on it. For CRE lending, it’s long past due.

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