Interviews September 30, 2016

Elizabeth Murphy Previews Her Panel for the 7th Annual Servicing Symposium

Elizabeth Murphy discussed how commercial mortgage servicers are increasingly turning to technology for competitive advantage.

What benefits does technology bring to the servicing space?

Servicers are inundated with data. They are tasked with absorbing financial statements, economic reports, local market conditions, rent rolls, tenant closures and bankruptcies and the list goes on. Servicers are finding that investing in data technology is not only essential for maintaining efficiencies and keeping up with their portfolios, but it is also, arguably, required in order for a servicer to comply with the Servicing Standard.

What efforts is the commercial real estate market making to standardize data across servicing platforms?

The Commercial Real Estate Finance Council developed an Investor Reporting Package (CREFC IRP), a standardized set of bond, loan and property-level information provided for all CMBS securitizations. Initially developed in 1997, the CREFC IRP sets the standard for what information and data will and will not be disclosed to the trustees on any CMBS deal. It helps servicers focus on what data regarding any particular loan or property is important, and what data is not. However, the IRP is a CMBS-only standard. There is no standard for non-CMBS lenders, which does pose problems. In an unpredictable market, loans can be sold, transferred, assigned or pledged in all sorts of ways, and each time a loan is transferred, the data on the loan must also be transferred and reinterpreted. Without standardization, any future purchasers or investors of a loan have to start at square one, sometimes when evaluating the quality of any particular asset and translating the data the current servicer has about the loan into their own data language.

What does the future of data and technology look like for servicers?

There are several software systems out there that servicers can invest in to simplify and analyze the data affecting any portfolio of loans. And though those systems are, without a doubt, a significant financial investment, there really is no viable alternative. With servicing fees being squeezed, servicers are looking to become leaner and more efficient, and these systems give them the flexibility to do that. Market experts are also predicting that these systems will soon all be on the cloud and easily downloadable and transferrable by small and large servicing shops alike. Many believe a cloud-based system would actually lead to lower costs for these software systems – another positive for servicers looking to cut unnecessary costs.

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