Unlocking Data Through Digitization

It’s no secret that no matter the business, access to the right data at the right time can provide valuable insights into the current state of that business and potentially an entire industry and its future.

Accurate, real-time data serves as benchmark against past performance while also providing a roadmap for future trends. Access to the right information could be the key to preventing small issues from becoming multi-billion or even trillion-dollar problems.

During the global financial crisis, the International Monetary Fund estimated that banks and other financial institutions faced aggregate losses of $4.05 trillion, $2.7 trillion of which came from loans and assets originating in the United States, according to The New York Times. Additional news outlets, including the Wall Street Journal, have reported total global losses as large as $15 trillion from the crisis. Imagine if just a fraction of these losses could have been avoided with timely access to critical data insights.

Within an industry that has remained confined to spreadsheets and paper files, the real value in digitization is the data modern technology can unlock. Too many decisions in the construction lending industry are being made with outdated information and in some cases, purely by instinct. With so much data available to us, why isn’t every decision data-driven?

Software Can Help Streamline Processes
The traditional construction lending administration process requires loan administrators to manually gather data from various spreadsheets and paper files when assembling reports. 

This manual and time consuming process costs credit departments days, and sometimes weeks of valuable time, and as a result, many financial institutions only review comprehensive portfolio data when it is deemed absolutely necessary. Put aside for a moment the high percentage of human errors found in everyday spreadsheet reporting, this lack of oversight leaves lenders vulnerable to compliance issues and unexpected risk, which can easily be avoided with proper reporting and analytics platforms.

Mitigate Risk with Data
Despite the earning potential of construction portfolios, lenders and credit management departments typically avoid construction loans because they are often considered the riskiest loans within a bank’s portfolio, garnering significant attention from regulatory agencies to ensure risk is being managed properly. Construction lending software allows financial institutions to leverage the growing construction market without absorbing the additional risk. Digitization provides financial institutions complete reporting capabilities and unprecedented portfolio insights, giving lenders the ability to readily access complete reports about an array of issues including rate and fee variances, inactive or stale loan accounts, matured loans, liens and insurance lapses, among others.

Up to date and readily available reporting and portfolio insights allow lenders to quickly identify potential issues, significantly reducing the inherent risks associated with the complex nature of construction lending.

Satisfy Auditors and Examiners
Limited inventory, especially in entry-level housing, and increased demands within the housing market have resulted in a continuation of the national housing shortage in 2018. With an influx in first-time homebuyers expected this year, experts have predicted significant growth in the construction industry, including a 9-percent increase in single-family housing starts. 

As a result, examiners will be paying closer attention to swiftly growing construction portfolios in order to ensure regulatory compliance. Construction loan automation software allows lenders to better prepare for compliance exams with easily accessible reports that provide examiners the information they require with little interruption to a credit management department’s daily workflow.

Drive Your Decisions with Data
Through digitization, financial institutions have the ability to quickly and easily pull both global and granular reports from their entire construction portfolio, allowing lenders to use reporting capabilities to create insightful metrics that can be applied to performance tracking, accounting strategies, and strategic planning. In construction lending, reporting of this caliber allows lenders to make data-driven decisions by identifying, measuring, and tracking effective solutions, while eliminating or improving failed strategies.