The Keys to Successful Loan Management Software Implementation

Alternative Lending

Keys to Successful Implementation of Your Loan Servicing Software

As lending businesses grow and expand, their offerings for loan products increase naturally followed by much-needed evolution in their regulations and policies. These changes often lead to an unavoidable need to root out their existing, straggling system and replace it with agile software. 

That said, however necessary that replacement may be, it is never an easy decision to make and accept (at least initially). However, it is essential to not let fears get in the way of moving on to better things for enabling your business to climb the ladder of success, and when you’re in the lending business you are well aware of the core importance of a loan servicing software. 

Loan servicing software is what keeps tabs on all your details such as your policies, loan terms, interest rates, loan payments, and collections. This makes it all the tougher to choose the best loan management system, and once you’ve made your decision, it’s important to be aware of the key factors that enable smooth and successful implementation. These are the top three factors that our team has determined from its extensive experience: 

1. Initiation – Defining Requirements, Planning Workflow, & System Design
2. Allocation – Establishing Priorities and Assigning Roles
3. Execution and Training

Initiation – Defining Requirements, Planning Workflow, & System Design

As mentioned above, you cannot stress enough the importance of the right loan servicing software when you are in the lending business- therefore you must carefully determine the right software for your organization. Being clear in your requirements is the first and most important step in flawless implementation. For this, all team members must share their input which must be valued and carefully studied. This includes the departments of collections and customer service as well.  

Ensure the use of the same terminology regarding the new software among the entire workforce i.e., your in-house team as well as your loan servicing software provider. This will ease communication and understanding. That said, the software implementation manager must draw a detailed outline regarding the project plan and conduct a launching meeting to explain new workflows, project requirements, establish milestones, and set expectations regarding the completion of implementation.

Allocation – Establishing Priorities and Assigning Roles

Once the implementation process has been initiated and the workflow with the new loan servicing software has been designed, you will need to finalize the scope of the implementation. You must establish priorities keeping any prerequisites into account, divide the implementation process into smaller phases, meet deadlines, and ensure that the most important tasks are catered to before the others. 

In the whole stage of allocation, the lender must take and exhibit proper sole project ownership. Consultants, vendors, and even your employees are there to just serve their essential individual roles in the process. As a lender, however, you know your business the best and you alone truly know the details and importance of your business goals. Use that ambition and knowledge to ensure the completion of the implementation process. If a lender doesn’t take project ownership, that ship is bound to hit rock bottom.

The lender must put together a committee of executives who take ownership of the project, ease decision making, cater to the need for resources, and encourage accountability. There must also be a dedicated project manager who solely focuses his energy, efforts, and skills on keeping the implementation process steady and the team organized. Moreover, the project team member must be empowered to make decisions to support the strategies that are a part of your business case. Otherwise, they will have to seek approval from multiple layers of senior management even for small business decisions. Therefore, to avoid delay in the implementation process, you must ensure that your team is sufficiently empowered. 

Moreover, when it comes to key areas of your lending business such as accounts, collections, IT, and customer service, you must identify the experts. The experts will be able to promptly deal with any issues in their domains and will save you precious time, thereby facilitating the implementation process. With that done, you must conduct regular staff meetings to keep tabs on the software implementation status and to ensure transparency, visibility, and good pace. We at Fundingo, hope that you will benefit from the insights gained from our experience of facilitating clients with our software implementation for years.  

Execution and Training 

If your team isn’t trained to use and manage the new loan servicing software, by the time it goes live, it will create a lot of lag and chaos. Therefore, you must develop a training schedule in a timely manner and begin it as soon as possible. The training sessions can be conducted on-site, online, or be pre-recorded. Use workflows from the initiation phase of software implementation for the user training content. The need to prepare your business organization workforce and your user communities to use the new software is crucial. You will need to prepare an effective communication strategy that clears any ambiguities the users may have. You must set the tone right from the very start and make sure to answer the key questions that people may have in their minds such as:

1. Why are you opting for new software? 
2. Which issues will the new software resolve? (in case your firm is not a new venture)  
3. How will it benefit the end-user? 
4. When will the changes occur? 
5. How will those changes be implemented?

Communicate the answers to these questions through frequent communication, short and precise demos, and newsletters. Once you have sufficiently trained your personnel and everybody knows their duties, has a thorough understanding of the new software both in terms of usage and expectations, and set up a date for going live with your new software, make sure to assign minimal work for that date. On a side note, it’s always a good idea to choose a weekend for going live.  

Even after your now loan servicing software has been successfully implemented, it’s best to maintain ongoing support for all those dealing with it firsthand. Arrange additional training sessions, provide tech support, and always be ready to facilitate your entire team as implementation is only the beginning of your fresh start. 

Five Ways to Lend Better by Using Data

Alternative Lending

What are the two types of lenders who won’t last? Those who don’t use their data.

All jokes aside, data is the lifeline that keeps lenders ahead of their challenges. There will never be a time with no struggles to overcome. The way that every financial institution has endured is by planning with data.

Who are lending metrics really for?

Smaller lenders may think they’re exempt from the rule that businesses need data. That couldn’t be farther from the truth. Small lenders significantly benefit from collecting and analyzing their lending metrics. While larger firms can weather a little more damage, others need to carefully plan each step for their success.

Some of the most valuable information likely won’t come from any one lender. Instead, compiled industry data should guide your next steps. For example, mortgage lenders should stay on top of property records and the movement of assets to make educated decisions. It can also help you steer clear of trouble. Market watching, especially during a recession, can prepare lenders for what’s to come.

The new-tech jitters?

It’s not uncommon for fear of technology to hold lenders back from capturing and utilizing their data. And reasonably so. For someone whose business is money, the idea of losing both time and money by adding tech is an absolute no. If your staff is not tech-savvy, the apprehensions grow.

That said, the tech that lenders use knows about these apprehensions. Many have full teams to handle implementing the tech and training your staff. In any case, it’s good practice to outline your concerns with your team before interviewing tech providers.

So, what are the five ways data can improve your lending

1. Ensure consistency in processes

How can you be sure you’re following the right protocol if you have nothing to check? Missing information, disorganized flows, and fragmented processes cost time and resources. However, just a little time spent organizing your process results in mountains of useful information.

First, make sure you know what you want from your data. What processes are you trying to improve? Are you already experiencing a problem or looking to enhance your existing flows? Once you have what you want, see what your current data has and lacks. To get the best insights, you’ll need high-quality data.

Some loan management software will go as far as to alert you to inconsistencies. Of course, with unified data, you can then compare deals and pull more significant insights. Every insight you get depends on the quality of your data. Make sure that it’s complete.

2. Meet your borrowers’ needs

How can you tell that you’re taking action on your deals on time? Do you have a log of communications with your customers? If you don’t, you may be missing significant opportunities to cultivate repeat deals.

Studies show that your customer experience is the number one factor clients consider when selecting software.  These experiences don’t just include how they interact with your technology, but also your customer service and overall speed.

When you begin, start with a baseline assessment of your customers’ experience. For example, what are your current metrics for customer care? How are you collecting them? If you have trouble answering those questions, then think hard about the software you’re using.

Cloud lending software lets you see the detailed history of your communications with your borrowers. If one or more deals encounters an ongoing problem, you can see the email chain, messages, and actions taken to solve it. In a similar respect, this brings systemic issues to the surface, so you don’t have to spend as much time searching.

3. Find inefficiencies

Speaking of, do you know how long you spend finding those systemic issues? After ensuring your data is complete, you can then understand the amount of time spent on any given step. Digital lending apps eliminate most duplicate processes, but some may still slip past you. Take a close look and detailing your procedures using your data. Where do you see redundant, time-consuming, or unnecessary steps?

These analyses are necessary under normal circumstances but critical in financial downturns. Collecting essential data during prosperous times helps your business pull through its struggles. Knowing how to identify them early is one of the superpowers of data for lending.

And what about those wasteful processes? You can use them to identify opportunities to optimize pieces of your lending with AI or process integrations.

4. Track trends in late payments and delinquencies

Late payments happen. Delinquencies, too. But when is a one-time event really part of a bigger pattern?

Digital lending systems can highlight deals or borrowers with repeated missed payments and highlight risk factors before they go into default. Considering the challenges lenders face, looking at new risk indicators is the only way to stay afloat.

What is your company’s plan to ride out the next financial downturn? Of course, they will happen, but you must steer yourself to safety with data. By collecting data both in good times and bad, you learn where (and where not) to steer your operations.

5. Right product, right time

You may think you know your clients inside and out. How can you be sure without data? Smart, data-driven lending covers more than knowing how they work. It helps you offer them the right product at the right time for the right price.

Demographics data guides you to your customers. After all, the needs, preferences, and results that baby boomers value are undoubtedly different from younger generations. Your demographic guides you on how to structure and price your loans. Offering the right product to the right audience has the bonus of increasing originations and lowering delinquency rates.

Final thoughts

Lending without data is a lucky guess at best. Especially in uncertain times, your lending NEEDS data to survive. Keep in mind that your competitors may already be using this and more in their lending. While other factors, like your software and team, steer your company in the right direction, the only test to be sure lies within your data. Only then can you begin to prepare your lending for future trends.

Having apprehensions about technology is expected. Keep them in mind and discuss them when addressing your software and lending metrics. These apprehensions are not a barrier to your use of data but essential considerations that help you find the right fit. Remember, data is there to help you. It’s the map that leads you to your destination.

New Construction Needs New Lenders

Alternative Lending

All across the country, office buildings lie empty. Hotels have closed, some unsure that they will reopen. New constructions have halted, and funding grows scarce. Is this the end of our old way of commercial real estate? Or is it the birth of something new?

The initial shock of the pandemic alarmed professionals across the construction loan industry. Complications resulting from COVID-related restrictions and the work from home shift halted office construction projects—lack of business and vacation travel affected hotels and spaces catering to corporate events. Even if a vaccine were released tomorrow, hesitation among banks and lenders would still fail to return new construction to its pre-pandemic life. So, where does that leave us now?

The Current State of Construction Lending

Currently, market forecasts predict a 10.5% decline annually in effective rents in the top 79 metro office markets. Compared to the decrease in 2009, which was 8.9%, the figure initially looks alarming. However, not all cities across the country will be affected equally. 

For example, the areas predicted to perform worse are predominantly metro areas experiencing a high number of COVID-19 cases. Many are also affected by strict lockdown measures. Other cities with slower expected recoveries include those experiencing difficulty containing their outbreaks.

How the markets respond following the pandemic depends on how cities maintain their control over the virus. Lenders will undoubtedly resume activities sooner in areas with greater control over the outbreak first. Other contenders include those with reliable data on their recoveries and plans to manage the virus’s spread. 

In the same respect, a lack of reliable reporting could hurt some areas’ chances of receiving funding. Traditional lenders are naturally cautious as they do not have the data they need to predict whether borrowers can repay. While alternative lenders offering construction loans may have more flexible criteria for borrowers, they too are moving forward with caution.

Who Else Is Affected By The New Construction Slump?

Much like office construction, COVID-19 sideswiped the tourism industry. While cities’ initial restrictions have lifted, many now reimposed rules or bans on travel to contain the virus’s spread. Personal travel is at a comparative standstill and business events have opted to go virtual. Now, even corporate events no longer guarantee hotel bookings. 

The concern over having many people in closed space drives similar worries for multifamily housing. Shortages in labor and construction materials that affected the industry early on have lessened. Now, lenders’ concerns look to the long-term feasibility of traditional multifamily housing. 

What Will The Future Look Like?

Does this mean that the new construction market will not recover? Not necessarily. The recovery will not result in the same kinds of projects seen before the outbreak but will offer new opportunities to lenders willing to take the risk. 

For example, in the 1980s, the savings and loan crisis toppled the commercial real estate market. However, as a response, mortgage-backed securities were born. The dot com boom and its subsequent collapse impacted Silicon Valley’s commercial property value even harder than COVID. These events are nothing new to finance. However, reliable data is currently scarce; the lenders that lead the recovery will have to make the best of the information they have and think differently about who they fund.

As mentioned, previously safe construction investments such as multifamily housing have lost their appeal to lenders. Renters are struggling with their payments, and those who can buy are moving to less densely-populated areas.

Even those living in apartments will still need housing, and more people than ever can benefit from more affordable options. While this does not mean multifamily construction will continue as it was before the pandemic, it does mean that its next steps will follow a different path. Affordable multifamily housing must be a priority and must involve other options apart from traditional apartment buildings.

What Are Construction Lending’s Options? 

One possible option is modular housing, which has a far lower overall cost and quicker construction time than standard apartment buildings. However, borrowers for modular multifamily units typically require more capital upfront. Their increased need rules out financing options with many traditional lenders. 

Since most modular construction happens in the company’s warehouse, lenders cannot assess the projects as easily as they would with standard apartments. Many are concerned about their ability to ensure that builders are meeting their milestones in the planned timeline. Since modular multifamily housing is relatively new, assessing property value poses another challenge.

Similarly, eco-friendly construction projects present new risks and opportunities to lenders. Updated ventilation and climate control methods prevent future virus outbreaks and reduce the buildings’ overall carbon footprints. Additionally, lenders can bank on borrowers’ increased ability to repay due to decreased costs over time. 

What Has to Change For Construction Lending’s Survival?

In order to construct buildings that will survive this pandemic and future unknowns, they must be built with personal and environmental safety in mind. This shift also means older buildings with closed spaces and poor ventilation will have to be retrofitted to stay in use. To make heating and cooling more efficient, current office buildings are tightly sealed to prevent air leakage. Now, buildings need to heat and cool efficiently while also permitting airflow. 

Despite all the recent changes in construction, traditional lenders and banks still have to adhere to pre-COVID regulations. Though construction’s needs are changing, the rigidity of their system makes it hard to accommodate them. There is still not enough data on the kinds of projects that will lead the recovery for them to make it usable. Further bumps in the road may also. So, where does this leave us?

What Does This Mean for Alternative Lenders?

Alternative lenders face a tremendous opportunity. In areas where traditional lending falls short, they can afford more flexible terms and finance projects that will weather future challenges. This is not, however, to say that they should approach the situation without examining new risks. Lenders should pay close attention to the areas in which borrowers plan to build and how its reopening has progressed. Additionally, the number of businesses shifting to permanent distance work may affect even the most promising locations.

So, where does that leave the industry now? Ultimately, lenders will have to open themselves to new opportunities and risks, finding different ways to assess borrowers and evaluate risk. Much like the response to former crises, legislation may change to make it easier for lenders to finance future projects that aid in the recovery. 

Closing Notes

When pressed by the need to finance new projects, governments, borrowers, and lenders will have to come together on a plan to address the change. While traditional loans may not be feasible, changes in the industry and new ideas from alternative lenders provide much-needed opportunities. Work, travel, and life at home may not be the same, but the most crucial place to look is the future. How can we embrace the change in a way that moves us forward? Alternative lenders will ultimately be those who decide.