CFI: News Review


Commercial lenders must pick up the IT baton by


Rob Lankey, managing director, Commercial Mortgages, Aldermore


those brokers who deal with both residential and com- mercial mortgages will know that the service offered and approach taken by lenders in these two markets can be completely different. i’m not referring to the


obvious points of difference, such as first-time buyers bor- rowing for a home of their own and limited companies borrowing for a factory. i’m referring more specifically to the way in which loans are processed and completed. in the residential mortgage


market innovations in tech- nology have in recent times led to many of the processes becoming highly automated. Brokers can submit applica- tions online and receive in- stant decisions in principle. documents can be uploaded via web-portals; credit refer- ences are automatically re- quested and returned; solici- tors and valuers are instructed electronically and brokers can track progress online and be sent updates by e-mail and text.


Lagging behind to a large extent, commercial lenders are miles behind their residential cousins. Some im- provements have been made in recent years but i’m sure most brokers would agree that there’s an awful lot of catch- ing-up to do, if commercial mortgage lenders want to be able to offer the same speed and efficiency of service as


their residential counterparts. there are reasons for com- mercial lending being further behind on the development curve. residential mortgages are typically simpler trans- actions which involve one type of borrower (consum- ers) and one type of property (houses). commercial mort- gage borrowers, on the other hand, come in a multitude of different guises. most are businesses, with some being large corporations or limited companies and others being partnerships or sole traders. the types of properties they want to acquire also vary dra- matically from offices to ware- houses and shops to rental ac- commodation....the list goes on. and commercial mortgage underwriting doesn’t just in- volve assessing the borrower and the property, but also the


trading performance of the business.


Jumping hurdles the transactions, therefore, add a layer of complexity to the challenge of automat- ing processes. However, that doesn’t mean it’s impossible and it’s without doubt the next big challenge facing the commercial mortgage indus- try. For most intermediar- ies, submitting a commercial mortgage application is still a black box affair; once the case is submitted to a lender the broker has little knowledge of what’s happening until an of- fer is issued - and there are no guarantees how long that will take. most of the service en- hancements that have ben- efited the industry have been based on manual solutions,


A Euro spanner in the works


Nearly all commercial mortgage brokers make their living from UK based clients and what’s happening beyond our shores is therefore only of passing interest. However, it’s not been easy to ignore the ongoing traumas taking place in the Eurozone and wonder what the knock-on effects could be for the UK if European ministers are unable to resolve the issues.


Greece is in serious danger of defaulting on its debts and there is also a danger that Portugal, Ireland, Spain and Italy may also follow suit. If the debts are written-off, it will primarily be European banks that have to pick-up the tab, with German and French banks being amongst the hardest hit.


Which is precisely why the German chancellor, Angela Merkel, has been desperately trying to restore confidence in the Euro by reassuring the markets that Germany is not going to let the Euro collapse. The reality is that it isn’t just German banks that Angela is concerned about. The German economy has prospered because strong exports have driven a weaker, more competitive


such as giving brokers access to decision makers and pro- viding brokers with updates sent out by case managers. the quality of service brokers receive can be variable and brokers are dependent on lender goodwill and commit- ment to make things happen. there is no cradle to grave processing - yet.


On track But it will happen. although it’s a tough nut to crack it can be done and the benefits to be gained, for brokers, borrowers and lenders, will be enormous. at aldermore, we’re placing a huge emphasis on service and are determined to lead the way in commercial mortgage system innovation. We’ll let you know how we’re getting on and keep you posted with developments.


exchange rate that resulted from sharing a currency with southern European countries such as Greece, Spain and Italy. But Germany needs the southern countries to get their borrowing back under control by using a range of severe austerity measures. And, as you’ve probably seen on the TV, the people of Greece are not that keen on tax and pay cuts. Could Greece default and pull out of the Euro? Yes it could and some economists are suggesting that it will. In fact, the consequences of defaulting and starting afresh may be more palatable to Greece than having to suffer years of spending cuts and high taxes.


Argentina went through a similar scenario in the 1990 when the country defaulted on $100bn of foreign debts. Although the peso collapsed and inflation went up as a result, their goods also became cheaper and since then the Argentinian economy has grown by 8% per year and tourism has boomed. So, not so painful after all. As tempting as it may be for the people of Greece to pull the plug and start afresh, it will leave the northern European banks with a bad hangover, which will inevitably mean less lending and tighter credit controls.


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