While new technology is completely changing the face of the residential mortgage market, the same story isn’t happening in the commercial mortgage market.
As it stands, mortgage lenders are almost being forced to use more technology in order to compete in the market.
However, the commercial mortgage market operates differently.
An article in The Wall Street Journal covers one midsize commercial-mortgage broker’s choice to cap its fee on any deal at $135,000, partly because executives saw that the real-estate-lending business was becoming increasingly streamlined.
The decision by Eastern Union Funding, which was founded in Brooklyn, is generating a lot of buzz in the commercial industry since many still that feel their businesses will be strong even with technological advances due to the complexity involved in deals.
But the executives at Eastern Union Funding don’t share that same opinion.
From The Wall Street Journal:
Eastern Union executives say that their flexibility on fees reflects major changes taking place in the commercial-real-estate finance industry, partly because of new technology. Increasingly, the process is becoming standardized and it’s becoming easier to do larger deals.
Eastern Union began thinking about capping fees as the commercial-real-estate market recovered from the downturn following 2008. Banks were getting bigger, loans were becoming more formulaic, and borrowers were become more sophisticated and going directly to lenders without a mortgage broker, said Ira Zlotowitz, the firm’s president and co-founder.
“I said there was going to come a point where more people are going to go direct and people are going to beat up the brokers fees more.”
Eastern Union executives said they decided to get out in front of these trends. In 2014, the firm capped its fees at $250,000, a move which had a negligible impact on business because the firm tended to do smaller loans.