How the traditional approach can lead to more distractions than deals.
As Blooma’s Director of Customer Experience, I work a lot with lenders and brokers, especially their commercial real estate underwriting teams. I’d like to think I’m familiar with the motivations and struggles of our clients, since in a former life I used to be a CRE underwriter as well. The truth is, CRE underwriting and analysis processes are very fragmented, which leads to inefficiency.
Much of my job as an underwriter involved the management of many disparate data sources. For as large and mature as the CRE lending and investment space is, underwriting processes and innovation have not evolved or kept pace.
Got a new deal coming in? You’ll start by pulling up a model you used on a prior like-kind deal, and then overwriting the data. You then begin searching for sales and lease comparables on multiple sites, speaking with brokers about transactions and trends in the area, reviewing maps and street views to analyze the area surrounding the property, rounding up and reviewing title data, creating proforma cashflow models, the list goes on. Not to mention requesting and analyzing borrower financials, all in different mediums. You become a data aggregator, pulling in files, documents, and data from numerous sources and saving them all into a shared folder, drive, or system where they come together and start to make some sense. All of this work ultimately culminates in a final Excel model and a credit report/memo drafted in Microsoft Word. This is a painful process, and no matter how good you are at it, by its nature it is prone to errors.
“You become a data aggregator, pulling in files, documents, and data from numerous sources and saving them all into a shared folder, drive, or system where they come together and start to make some sense.”
An underwriter’s true job is to come to a binary decision as accurately as possible. Are we funding or passing on this? That’s it. But don’t get me wrong. Underwriters do not have a simple job even if their end goal is to make a decision one way or the other. And the “noise” of the process described above doesn’t help to get there – in fact I think it can mostly distract from this goal.
I think technologically we’re at a bit of a crossroads. Advancements in artificial intelligence have made it possible to take the more monotonous and time-consuming parts of the job of a CRE underwriter and hand a lot of this to computers. Tasks like parsing through borrower, financial spreading, searching for comps, etc. This allows underwriters to be much more efficient, and frankly frees them up to review each deal more analytically. To use their vast experience to engage in a strategic conversation about a deal and whether it should happen, which is what they do best.
If we hadn’t developed this approach at Blooma, someone else would have because its time has come. The only question now is how quickly lenders and brokers will embrace it. I’m excited working with all of the lenders and brokers that already have. It feels good to make the jobs of CRE professionals a little more enjoyable, by helping transition them to a newer way of doing things. It wasn’t that long ago that I was one of them.