Differentiate Yourself Within Competitive Construction Lending

Construction lending is a growing sector of the mortgage industry, and one that has traditionally been dominated by big banks. Recently however, these big banks are taking a more conservative approach on construction loans, creating opportunities for smaller, community-focused banks to seize the steady flow of capital.

While big banks are choosing to limit exposure by focusing more on existing customers, other financial institutions can jump in to fill the void. Of course, this means that the competition between small and mid-level banks focused on construction lending is reaching an all-time high.

So, how can a financial institution differentiate itself in such a competitive market? The answer is by offering solutions that automate the entire construction loan process, making life easier for all parties involved.

The first part of the construction lending process that must be automated is the post-close administration of construction loans. Innovative lenders are now offering technology that is accessible from any phone, tablet or computer, eliminating the need for paper files and spreadsheets. This allows the borrower to check on the status from any device and improves the experience for everyone. People are making better business decisions enabled by real-time text messages showing draw availability and areas of risk.

Featured Sponsors:

 

 
Ideally, the best solutions for this process reduce loan administration time by 50 percent or more, lower inspection costs, identify and mitigate potential risks and enhance working relationships through mobile access. But what about the other side of the construction loan process? While lenders and borrowers are being offered innovative technology to help automate their business, contractors are often left behind.

For instance, the majority of builders and general contractors are still paying their contractors via paper checks, after collecting paper invoices and paper lien waivers. The contractor must then drive to pick up the check, deposit it and wait for funds availability. In addition, builders and general contractors are completing 1099 tax forms and other important reporting material by hand, which can be difficult and time-consuming.

To truly remain competitive in the construction lending market, lenders must not only use technology to automate the post-close administration of loans, but also understand that the entire payment process must be automated in order to be most effective.

Featured Sponsors:

 
Competitive lenders are typically the community-focused banks that have implemented new technology to complement the automation tools they are already using. This new solution looks like a mobile and web-based service that automates the construction payment stream with electronic submittal of lien waivers and invoices from contractors to the builder, as well as electronic payments to replace checks.

In short, borrowers are able to pay their contractors instantly, allowing them to focus on the project at hand and saving the contractors significant amounts of time and frustration. Borrowers are always going to choose to work with lenders with a more efficient payment process so that they can concentrate solely on ensuring the job is completed properly.

Technology such as this also increases transparency in the payment stream process and reduces unnecessary friction between borrowers, builders and contractors. With mobile access, it is easy to log into the system on-the-go to check for any errors and assess the status of the project. Contractors have all of their payment questions answered simply by checking their phone.

Featured Sponsors:

 
While this kind of automation is new to the industry, two forward-thinking lenders have already adopted it and have collectively processed over 126 million in construction payments in just four months. As a lender in the construction loan industry, it is critical to automate both the post-close administration of construction loans as well as the payment stream. This ensures the lender faster cycle times and payments, improved communication and of course, a competitive advantage.

About The Author

Matt Johnner

Matt Johnner is president and co-founder of BankLabs, a national provider of community-oriented technologies that reimagine banking to generate new fee income, attract deposits, expand loan opportunities and differentiate the financial institution from competitors. BankLabs believes that community banking is a way of doing business, not a size or location. For more information, visit www.banklabs.com.

Title: Technology For All, No Really

Amazon opens a grocery store where you do not need to check out. Banks let you transfer money to your friends via your cell phone. You use an app to track everything from your health, to your child’s grades, to the news from around the world. Yet, in the tax service business, we still use fax machines.

So, why hasn’t the tax service industry kept pace with technological development? It’s a simple question with a multitude of complex answers. The foremost reason is the sheer variation from collecting agency to collecting agency across the country. Variations on how the data is consumed play a role as well. Add to that the fact that property tax collection, generally governed by state law, must work within the framework of lending laws, where federal legislation and oversight play a key role.

Featured Sponsors:

 

 
In states such as Pennsylvania and New York where taxes are collected at the local level, lack of standardized data collection practices is a big hurdle. Smaller collectors prefer doing things the old-fashioned way with paper bills, single checks for each payment and often fulfilling requests for information through phone contact and yes, sometimes a facsimile. The requirements for how tax information must be requested vary by method, frequency, authorization, timing and cost. For some agencies, when the request for tax payment is scheduled, the data is provided either through an automated email or tax roll at no charge, and the process can be completely automated through file exchange. In other jurisdictions, a requester is only able to supply a list of properties they service as opposed to receiving a full file of the tax roll. Having access to the full tax roll permits the tax service provider to provide data to clients on properties added throughout the tax cycle. Some of these requirements vary due to local practices and some are governed by state or local statute.

The requester only has access to the specific parcels the company intends to pay as opposed to receiving a full file of the tax roll. Some of these requirements vary due to local practices and some are governed by state or local statute.

Featured Sponsors:

 
The availability of tax billing data via file exchange for the procurement of property tax data needed for payment continues to increase across the country. The cost of data storage, at one time a major barrier for agencies and tax service providers, has decreased at a rapid rate. This builds the foundation for the further use of automation to disseminate tax payment information.

As more and more collecting agencies open their files, industry players must use technology with the ability to receive data in a multitude of formats. That data needs to be stored and be accessible in order to customize output as needed to meet lender requirements satisfying their processes for compliant payment and remittance.

Featured Sponsors:

 
Despite all the variations, there are new ways to maximize the use of automation to reduce errors and improve availability. First, it is necessary to build the foundation to automate the steps traditionally used by tax service providers to report tax information. Technology available today can mimic those steps once the data is available to remove the elements of manual data entry and the accompanying delivery of reporting. The implementation of optical character recognition technology may help convert the information that is still received by paper to electronic data.

The second and perhaps more challenging step is increasing the availability of data from the agencies. The industry must step up ways to address the remaining agencies that operate using 20th century practices. Some strategies that should be aggressively pursued include: 1.) lobbying more to remove legislative barriers to providing data to service providers, 2.) increasing direct partnerships with the collecting agencies to find solutions toward automation that benefit the collector and the payer, and 3.) establishing strategic alliances with data providers that service the collecting agencies. By building alliances with third-party providers that already have access to the data, the tax service industry can increase electronic data availability without burden to the collectors. Taking these steps may someday help the industry bid adieu to that dusty old fax machine.

About The Author

Jim McGurer

Jim McGurer is a first vice president at LERETA, LLC and is responsible for general oversight on data acquisition and property Search operations. McGurer has 25 years of experience in the mortgage servicing/tax servicing industries.

A Time To Listen

Many times we think we have all the answers, or at least that we know what we’re doing. However, it always helps to get some outside advice. In the article “The Power of an Outside Voice” by Jon Gordon, he shares a story about an interaction that he had with a top CEO.

The CEO said, “We brought you here to reinforce our message. Our folks get tired of hearing us say it but when it comes from an outside voice it’s new, fresh and exciting.”

Jon knew exactly what that CEO was talking about.

Featured Sponsors:

 

 
Even though he is brought in to speak to some of the biggest names in sports and business his kids have little interest in hearing what he has to say.

Besides having his kids read his books and writing inspirational messages on whiteboards in their rooms, Jon resorted to outside voices to reinforce the message and principles he want to share with them.

Jon has found coaches, tutors, mentors, experts, etc. to encourage, coach, teach, push and bring out the best in his children.

Featured Sponsors:

 
Jon also give his children books to read and shared inspiring YouTube videos and messages from role models such as Mo Isom, Daniel Rodriguez, Erwin McManus, Alexis Jones, Eric Thomas, Bailey Obrien and other inspirational people.

There’s something about the power of an outside voice and I want to encourage you to use outside voices to share and reinforce important principles and messages with your team at work and at home.

I will do all I can do to support you by continuing to write articles, give talks and provide even more free resources to be an outside voice for you and others. I know it’s my purpose and I’m glad to be of help.

NexLevel Advisors is a strategic business advisory firm that assists companies in growing their businesses more quickly and strategically than they could by themselves. We are passionate about taking your business and people to the next level by differentiating your company and its unique offerings.

Featured Sponsors:

 
Our customized solutions help you to sell more, more frequently, to more people by clearly establishing your specific value propositions. This is where real world experience, strategy and execution deliver measurable results for your organization.

In the end, there are many outside voices out there and I encourage you to find the right people and resources to share with your work team and ask family members, neighbors, friends, teachers and mentors to encourage and teach your children and team at home. This philosophy is so great that it will help you with your work life and your home life.

There’s the power of an outside voice and you can start tapping into one today!

About The Author

Michael Hammond

Michael Hammond is chief strategy officer at PROGRESS in Lending Association and is the founder and president of NexLevel Advisors. They provide solutions in business development, strategic selling, marketing, public relations and social media. He has close to two decades of leadership, management, marketing, sales and technical product experience. Michael held prior executive positions such as CEO, CMO, VP of Business Strategy, Director of Sales and Marketing and Director of Marketing for a number of leading companies. He is also only one of about 60 individuals to earn the Certified Mortgage Technologist (CMT) designation. Michael can be contacted via e-mail at mhammond@nexleveladvisors.com.

Most Home Prices Are Now Above Pre-Recession Peaks

Data from ATTOM Data Solutions shows that median home prices in 57 of 105 metropolitan statistical areas analyzed in the report (54 percent) were above their pre-recession home price peaks in the first quarter.

Nationwide the median home price of $240,000 in Q1 2018 was less than 1 percent below its pre-recession peak of $241,500 in Q3 2005, but still up 9.1 percent from a year ago. Metro areas with Q1 2018 median home prices the furthest above their pre-recession peaks were Houston, Texas (69 percent above); Dallas-Fort Worth, Texas (67 percent above); Denver, Colorado (62 percent above); San Jose, California (60 percent above); and San Antonio, Texas (57 percent above).

Featured Sponsors:

 

Other major metros with at least 1 million people and with Q1 2018 median home prices at least 30 percent above pre-recession peaks were Nashville, Tennessee (46 percent above); Austin, Texas (45 percent above); Salt Lake City, Utah (42 percent above); Raleigh, North Carolina (35 percent above); Indianapolis, Indiana (31 percent above); and Oklahoma City, Oklahoma (30 percent above).

Featured Sponsors:

“Rising interest rates and recently enacted tax reform that removed some tax incentives for homeownership were not enough to cool off red-hot home price appreciation in many parts of the country, with 30 of the 105 local markets analyzed posting double-digit gains in median home prices in the first quarter,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Home prices are still below pre-recession peaks in 46 percent of local markets, but nearly one-third of even those markets posted double-digit home price appreciation in the first quarter.”

Featured Sponsors:

Median home prices in 48 of the 105 metro areas analyzed in the report (46 percent) were still below pre-recession peaks in Q1 2018, led by Bridgeport-Stamford-Norwalk, Connecticut (25 percent below); New Haven, Connecticut (22 percent below); Allentown, Pennsylvania (21 percent below); Philadelphia, Pennsylvania (20 percent below); and Hartford, Connecticut (19 percent below).

Along with Philadelphia and Hartford, other major metros with at least 1 million people and with Q1 2018 median home prices at least 15 percent below pre-recession peaks were Chicago, Illinois (19 percent below); Baltimore, Maryland (17 percent below); Tucson, Arizona (16 percent below); Las Vegas, Nevada (16 percent below); and New York-Newark-Jersey City (15 percent below).

How Digital Can Drive Down Costs

In this era where smartphone and tablet usage permeates nearly all of life, it only seems logical that the purchase of a home would eventually move in the digital direction as well. This certainly creates a situation where the loan package can be digitally moved with minimal cost rather than printed (multiple times, most likely) and physically moved between geographies. Therefore, processing delays associated with in-transit time and cost can be reduced, improving the overall process for both lender and borrower.

However, while borrowers may be able to upload copies of their paystubs and bank statements for example, the data must still be gleaned from those documents as part of the underwriting process. Without the aid of sophisticated OCR, that gleaning process remains a manual process, even though the mortgage is “digital”.

Featured Sponsors:

 

 
With the costs to process each mortgage continuing to rise, lenders must leverage automation to improve profitability and consistency in their business processes. With advanced mortgage OCR solutions, mortgage companies will reduce their level of manual document indexing and data entry activity, enabling them to process more loans per day at a lower cost per loan – yielding a leaner process and increased profit margins.

Paradatec’s Advanced Mortgage OCR solution does more than just convert document images to text. Once converted, that text is then processed by our artificial intelligence (“AI”) rules engine in the same way a human being would process the content. Based on these rules, documents are automatically indexed and relevant data points are extracted. This information is then passed to downstream applications for appropriate routing, decisioning, and archival.

Featured Sponsors:

 
Our process begins with a full-page OCR scan of each image, typically completed in less than one second per page. This high-speed performance allows every word on the page to be included in the scope of the AI rules engine analysis, just as a human being would interpret the content. This content evaluation process is unique to Paradatec in terms of the combination of speed and ability to include all page content in the evaluation scope, thereby making it extremely flexible with documents of varying layout (for example, bank statements).

Other OCR solutions typically expect relevant data points to consistently appear in the same locations (or ‘zones’) on a document. If the data shifts due to changes in layout (again, think of bank statements), the zone-based approach will fail unless another layout template is created, making for a greater administrative burden with these solutions.

Featured Sponsors:

 
A high volume, scalable OCR automation initiative requires the flexibility of Paradatec’s Advanced Mortgage OCR solution to process an unlimited number of document layouts without needing to develop specific templates for each layout variation. This capability is unique to Paradatec and a vital feature for creating an effective unstructured document classification and data capture solution.

Applying the right technology in the digital lending world can drive down cost providing lenders with a significant competitive advantage.

About The Author

Mark Tinkham

Mark Tinkham is Director of Business Alliances at Paradatec, Inc. Over the past twenty-five plus years, Mark has worked for technology companies that deliver innovative solutions to the financial services industry. For the past ten years, his primary focus has been bringing efficiencies to the mortgage market through industry leading Optical Character Recognition (OCR).

The Digital POS Movement

The digital mortgage revolution resulted in a mad rush to mortgage websites and online 1003 applications. But lenders struggled to turn their new website visitors into borrowers. That’s where a digital POS factors in: A POS makes buying a mortgage like ordering a product off an ecommerce platform, at least the good ones do. With a digital POS application, mortgage companies can close more loans faster at a lower cost than traditional loan origination.

E-commerce volume increased nearly 12% y/o/y from 2016 to 2017. Expect for that same trend to follow people shopping for mortgages. According to a study by the National Association of Realtors, 44% of all homebuyers began their search online. 95% went online to gather information at some point, including 99% of Millennials and 77% of Silent Generationers. Digital home searching generated tangible results, spurring 76% of Millennials to drive by a home because they saw an online advertisement. Although the data indicates that digital is vital to capturing homebuyers of all ages, the data also demonstrates that capturing the Millennial buyer provides the most robust and lucrative opportunity for lenders.

Featured Sponsors:

 

 
Millennials make up about one-fourth of the US population, signifying a 77-million-person opportunity for the mortgage industry. According to Inc. Magazine, Millennials make up 66% of first-time homebuyers and 66% of them plan to buy a home in the next 5 years. As of 2017, Nielsen estimated that Millennials wield more than $1 trillion in annual buying power. The October 2017 composite forecast of Fannie Mae, Freddie Mac, and the Mortgage Bankers Association for 2017 mortgage origination volume reaches approximately $1.8 trillion. If Millennials compose 50% of this mortgage volume, and two-thirds of them apply online via digital applications, that represents $600 billion in digital mortgage origination. This number is massive. Better yet, it’s conservative.

Featured Sponsors:

 
Digital POS’s further impacts lenders by streamlining the loan origination process and mitigating the slowing effect of regulatory compliance. The loan origination process always stood as a long, arduous, drawn-out series of sending documents for verification, waiting to receive them back, and then reeling in borrowers to sign and approve each step of the process. Then came 2008. When the mortgage market collapsed, lawmakers dropped a bomb packed with regulations and compliance standards like Dodd-Frank, RESPA, TILA, and CFPB. According to the Mortgage Bankers Association, between 2010 and 2017, mortgages took 70% longer to close and origination costs skyrocketed 80% as the burden of regulatory compliance grew.

Featured Sponsors:

 
But technology is turning the tides. According to a November 2017 article in The Mortgage Reports, mortgage closures averaged 43 days, down from 51 days earlier in the year — a near 16% decrease with no help from decreased regulation. With today’s most advanced digital POS, lenders need not send documents to various verifiers and wait days on end to receive confirmation. Seamless data integrations and automations engineered into digital POS’s shave days off of loan origination timeframes. As integrations and automation speed up loan processes, it also cuts costs and leads to more closed loans.

About The Author

Kelcey T. Brown

Kelcey T. Brown is Chief Strategy Officer & Executive Vice President at WebMax, LLC. Brown is responsible for developing, communicating, executing, and sustaining strategic initiatives. He acts as a key advisor to the company’s president on critical changes in the competitive landscape, internal employee development and the external business environment. Brown has worked for nine years in the Real Estate and Mortgage Technology Industry.

Elevating The Lending Experience

Total Expert, the provider of an enterprise-grade marketing operating system specifically for regulated financial institutions, has partnered with Blend, a provider of digital mortgage workflows that improves the loan application process for loan officers and consumers.

Featured Sponsors:

 

 
The partnership enables data integration between Total Expert and Blend, allowing loan officers to originate mortgage loans more efficiently and transparently while building stronger relationships with customers.

Featured Sponsors:

 
“Partnering with Total Expert is an exciting opportunity for us, as they are clearly a leader when it comes to marketing operating systems built specifically for the unique needs of the financial services industry,” said Blend Head of Business Development, Brian Martin. “The Total Expert team has very high standards for their solutions. We are both constantly innovating, and we at Blend are excited for what this partnership with Total Expert will mean for the future of lending.”

Featured Sponsors:

 
Loan officers using both Total Expert and Blend can now provide their prospects and borrowers within the Total Expert application a seamless, branded, and fully trackable experience through Blend when applying for a loan. Data coming from any source can be passed into Total Expert, and now, directly back into Blend to give customers a transparent view into their lending experience.

“We are proud to partner with another technology leader that continues to push the boundaries,” said Joe Welu, founder and CEO of Total Expert. “Blend is a best-of-breed technology solution that is laser focused on improving the consumer loan process. We are excited about how our integration will position loan officers for future growth and help everyday Americans accomplish their American dream.”

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.