Digitally Transforming Commercial Servicing Operations

Michael Tucker mtucker@mba.org

May 22, 2019


LOS ANGELES--Integrating business operations, customer and employee experience and technology can digitally transform the commercial/multifamily mortgage servicing business, PwC Partner Steve Robertson said here at the MBA Commercial/Multifamily Servicing & Technology Conference.

"New business models, emerging technologies and evolving expectations have led to a digital transformation across lending," Robertson said. "Even today's experienced lenders have significant opportunities for future growth, and emerging capabilities create opportunities to quickly ‘leapfrog' today's cutting edge."

A digital transformation happens when a firm adapts its operations to enhance the experience of its customers and employees, Robertson said. And as technology continues to evolve and become more accessible, "I see that trend continuing," he said. "Similar technology is used in other industries, maybe even by your investors such as life companies. For instance, drones and so forth ultimately may become part of your servicing operations."

The most ambitious companies see digital transformation as a way to disrupt the industry as a whole, Robertson said. Firms ask themselves how to deploy technology to provide a new service that might generate revenue. He said new business tools help with data visualization and better analytics, for example. "I talked about this last year at this conference; robotic process automation and intelligent automation is being tested and deployed in some cases," he said. "This has a long runway in terms of the opportunity to transform operations. There is also artificial intelligence, especially on the front end of the business when it comes to underwriting. From a commercial and multifamily lending standpoint, AI helps with the selection of comparables during underwriting and helps with the valuation of properties."

Robertson cited several challenges to deploying digital technology in commercial and multifamily real estate. "First, there is the ‘customized' nature of commercial-multifamily lending," he said. "And many CRE transactions are relationship-driven. There are also diverse sources of capital in the sector. Finally, the industry seems to be performing well, which leads some people to ask, ‘why change'?"

Because of these sector-specific challenges, commercial real estate firms need a different digital strategy than other sectors, including residential real estate, Robertson noted. "It won't be like [Quicken Loans'] Rocket Mortgage; that model will not work [in commercial real estate lending and servicing]," he said. "But some elements can transform your company if you want to go down that path."

Robertson called digital transformation a journey, not a destination. "It doesn't end," he said. "You're constantly figuring out how to tweak your transformation strategy. Like any journey you need to take certain steps. Take a strategy and convert it to an action plan. Ensure there is buy in among executives. Write down your objectives and how you will measure success, then convert that into actionable steps."

Focus on what you can get done during a three-month "sprint," Robertson said. Then figure out a longer-term plan. "So, you build a road map, you prioritize it, you execute it, you have frequent ‘tollgates' along the way to ensure it is still aligned with your original objectives," he said. "Then figure out the next initiative that will help you achieve this transformation."

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