Digital lending beyond the status quo

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By Katie Wilson

CMortgage financiers are at a crossroads in modernization. They can stick with their current systems and methods, such as B. the widespread use of Excel and email communication, or they can digitize and automate part (or all) of the lending lifecycle.

The use of spreadsheets to manage and administer construction loans has historically been ubiquitous among lending institutions. Often these spreadsheets are updated manually, reside on a person’s laptop on a combination of local and external networks, and can be emailed back and forth with little or no version control. All of these factors create complex challenges and result in enormous portfolio risk. Additionally, the use of disparate spreadsheets means there is no centralized view of the portfolio, making it difficult to understand the team’s performance and the status of all active projects, and to identify potential project risks.

The home loan industry is finding it increasingly difficult to manage data. Alternatively, a digital transition can result in lower costs, improved quality, accelerated construction times, reduced employee turnover, and higher borrower satisfaction. Because fully traceable access to real-time information around the clock and automated processes play a crucial role in project execution.

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First of all, delays are costly. The faster funds are distributed, the faster general contractors can order materials, complete work, and pay subcontractors. This is also an immense advantage for the lenders, because ultimately the processing of drawings is expensive, especially with many people involved, many points of contact and different systems. Every person and every touch point means increased costs and delays.

When all the data is accumulated and stored in separate spreadsheets or legacy systems, gathering the information needed to review and process each draw and the entire project becomes a costly affair. When credit officers get stuck performing manual, repetitive or inconsistent processes, or when the data they have is not verified, there is an increased risk of errors and project delays. The more accurate the data, processes and reports, the greater the efficiencies and cost savings.

With a digital solution, four cost-saving factors add up.

  1. Accurate reporting. Construction lenders can generate reports with up-to-date data that the lender’s team and regulators trust.
  2. risk management. When this capability is digitized, teams can quickly identify loans that are maturing, overfunded, or obsolete. By ensuring compliance and completion, lenders can reduce what would otherwise be considered a risky loan.
  3. Draw processing times. Eliminating delays can have a significant positive impact on workflows and project schedules
  4. Fast cash flow. Accelerating lending and payments means increased cash flow for lenders and builders, allowing them to earn more interest and move on to other projects faster.

Collaborative and digital

By connecting all key stakeholders involved in the mortgage lending process in real-time, the right partner can help mitigate risk, expedite draws and payments, ensure regulatory compliance, and foster customer loyalty. Additionally, lenders should be able to extract data from any project to gain insights that inform future lending and underwriting decisions.

When lenders, builders and borrowers all work and collaborate in the same system, all parties have visibility into their home loan portfolio. Draws and inspections can be requested electronically, dramatically reducing overall draw processing time while increasing transparency, trust and loyalty.

The modernization efforts should enable your team to quickly manage every aspect of the projects within your commercial portfolio from the highest level down to the smallest detail. The feature set should allow you to centralize the lender’s construction portfolio for full visibility into commercial and consumer projects. These include portfolio visibility, credit management and pipeline tracking, and lien monitoring.

Digitization is helping banks become the lender of choice for home builders, taking their experience to the next level. Multiple spreadsheets and multiple screens can easily be replaced with a comprehensive digital platform. From loan origination to project completion, they find ways to alleviate the pain points that have plagued our industry for decades.

Katie Wilson is Value Realization Principal at Built, powered by ABA for construction management software.

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