MBA Commercial
NewsLink Thursday, December 21, 2006
Weekly Spotlight
Data Analysis Fills Commercial LOS Space
MBA (12/21/2006)
Murray, Michael
A space once filled with dot-com firms is re-emerging as
commercial mortgage
companies use loan origination software (LOS) systems for
one-time data
entry and asset management.
Unlike the residential mortgage, crowded with LOS systems,
technology was
sparse in the commercial mortgage market following the dot-com
boom. An
April 2004 report by Boston-based Celent Communications, a
research and
consulting firm for the financial services industry, quoted
less than 50
percent of large banks, 20 percent of midsize and 7 percent of
small banks
were using advanced integration and automation capabilities
within their
commercial mortgage origination processes.
However, the report, "Commercial Mortgage Technologies: An
Industry in
Transition," also showed the tide was changing as analysts
forecasted
continuing strength in commercial mortgage originations
despite potential
interest rate increases at the time.
"Continued growth will necessitate new technology and shift
the industry
away from the manual processes, unintegrated systems, and
widespread use of
Excel spreadsheets. While the complexity and often unique
nature of these
transactions limit the perceived potential for high levels of
business
process automation, there are several areas in which
technology can be
better utilized," the report said.
One of those areas that showed record volume in the past few
years was in
commercial mortgage-backed securities (CMBS).
In August 2005, Dallas-based B-piece buyer ARCap REIT Inc.,
announced it
would implement the EnableUs, Horsham, Pa., commercial real
estate
origination solution, DealCentral, to support of its new
commercial mortgage
lending program. Meanwhile, CBRE/Melody, Houston, dispatched
of DealCentral
and adopted ProLink CMO from Analytic Solutions to leverage
data and
analysis. Midland Loan Services/PNC Bank built its Enterprise
LOS system
from within the company.
Following dot-com failures in residential real estate, vendors
started to
look at business processes first before technology
implementation. Industry
experts say some parts of workflow-quotes coming in, pipeline
management-are
the same in commercial mortgage financing, but there are
nuances distinct to
individual loans not found in the residential sphere.
"Commercial real estate is much more bricks and
mortar-properties with a
story," said Will Trepp, managing director of New York
City-based Rockport
System.
The Rockport system uses an Excel-based underwriting model,
and its users
enter into their own password protected fields. The system
uses "a
web-accessed 4,000-field relational database" taking new and
purchased loans
from initial quote through exit strategy, including
securitization,
portfolio and collateralized debt obligations (CDOs).
"By making the system so dynamic and flexible, it is meant to
incorporate
workflow," Trepp said.
Rockport System also works with "one of the nation's foremost
multi-family
lenders," according to the company.
Users enter data once before it populates into the reporting
and analysis
tools at loan, property, borrower/sponsor and portfolio
levels. It can also
include rating agency tapes and firms can use it for pipeline
management,
loan origination, due diligence and asset management.
Herman Bulls, president and CEO of Bulls Capital Partners
LLC, Vienna, Va.,
a Fannie Mae Delegated Underwriting and Servicing (DUS)
lender, said there
is "no doubt" the LOS is expanding into the commercial
mortgage industry.
"If you look at what we do, there are many repetitive
processes in place to
get information. The key is how to analyze the information you
have," Bulls
said. "The information becomes a commodity but those who can
use the
information in a more competitive manner will have an edge."
Bulls envisions his company's future in a "paperless
environment,"
eventually connecting the front end origination to back end
servicing.
Bulls Capital uses a combination of LendingApps, Woodland
Hills, Calif., and
SaleForce, San Francisco, to provide a customer relationship
management
(CRM) system with a system to track pipelines, speed processes
and "the
information is in one central place for asset management,"
according to
Bulls.
