CRE Market Tightening Continues and Investor’s Rejection of Substandard Loan Docs Increases

GoDocs Getting Surge in Revenue for its Quality Loan Docs

Irvine, California – November 1, 2022 – GoDocs, the automation leader in commercial loan document generation highlights the fact that as the CRE market continues to tighten, the rejection of substandard loan documentation is on the rise. As lenders work to accelerate loan documentation to meet demand, they are often dealing with substandard automated loan documentation, which runs the risk of having loan documents challenged.

An example is noted in a recent article published in the Scotsman Guide, “In the past decade, the private lending industry — once a financial Wild West of nonstandard lenders, products and terms — has evolved into a more stable market. This change is due in large part to a number of major players creating better underwriting standards, providing efficient access to funding in the capital markets and offering overall support for the institutionalization of the sector,” according to Ketan Parekh, Managing Director of Toorak Capital Partners. As the market has evolved, stabilized, and become more competitive, there is more focus on quality loan documentation.

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In addition, from what the industry is now experiencing, lenders are cautious and should remain cautious when looking at loan docs. This is true whether they are coming from substandard loan doc automation providers or attorneys that have created repeatable templates that are substandard unless reworked in a law practice. In this area, cheaper is most definitely not better and the buyer should beware. Substandard loan documents put the lender at risk and for those lenders that want to sell portfolios to investors, they will inevitably find that investors simply aren’t interested in these types of loans. Investors are recognizing the substandard quality of these loan documents and don’t want to take on the unnecessary risk. 

GoDocs has experienced a 96% year-over-year surge through Q3 2022 in its loan volume. A portion of this level of growth is directly tied to its ability to provide greater document protection to lenders looking to take advantage of demand, especially in the 1-4 unit segment. The affordable housing CRE momentum will continue well into 2023 to address the ongoing housing crisis. This portion of the market is largely dominated by private lenders who are often working with non-traditional borrowers and complex loan terms. The consequences of inaccurate loan documentation with these loans are real. 

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“We recently had a new client come to us who had 3 loans refused {by an investor] and we have consistently heard from our private lending customers the importance of quality docs especially in today’s climate. Critical terms such as cross collateralization, cross default, full doc treatment for non-standard vesting scenarios must be there. GoDocs built these into our docs early on and, thus, we have experience, and continue to experience, a surge in business from lenders. In 25 years of business our documents have never been challenged,” according to Steve Butler, CEO GoDocs.

The current market conditions are leading to more court challenges, which is the real test of a loan document. Over the last few decades, GoDocs has continued to refine the complexity of its documentation. In the past two years, as loan volumes surged, they have doubled down on improving their document generation capabilities to address the unique demands of commercial multifamily loans.

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“Lenders are abandoning doc gen solutions that either have docs that are rooted in residential mortgage documentation, which is hugely different than commercial multifamily, or from law firms that created standardized “vanilla” documents. The latter lack the development teams or a true software development process to evolve the documents to support these complex lender protection constructs,” says GoDocs’ SVP of Product Development, Sujai Asur.

While other loan documentation solutions have remained focused on residential loans, GoDocs has read the market and understood the need for automation tools for the commercial sector and responded. As the private lending commercial market gets more competitive and more substandard loans are rejected, lenders are looking for accurate and compliant loan documentation. Fortunately, GoDocs delivers.

About GoDocs

GoDocs, the automation leader in commercial loan document generation, offers next-generation software solutions for banks, credit unions, and private lenders to create a streamlined process for closing commercial loans. They provide lenders and borrowers with access to the first and only purely cloud-based system that offers a solution that is both flexible and frictionless. This allows commercial lending to operate at scale. GoDocs has remained ahead of the curve when it comes to modernizing organizations and embracing the power of digital transformation. Today, the company is trusted by industry-leading banks and is proud to back its solutions with onshore support for a seamless experience.

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