Sure, the residential side of the mortgage business has grown quickly in recent years. But don't forget about the commercial real estate side of the business. Commercial and multifamily real estate debt outstanding now totals $2.4 billion and it's a growing part of the finance arena as well.
While commercial banks continue to be the largest holders of CRE debt, mortgage companies and other players continue to expand in this field as well.
Just as in the residential market, concerns have been expressed about the stability of the commercial real estate market. Prices have been rising fast, and that means that capitalization rates - a ratio of the property's income to its value - have been stretched. Still, few industry analysts and experts believe there is a national "bubble" in prices for CRE. But that doesn't mean lenders shouldn't be careful. With aggressive competition in the market for commercial real estate debt - including riskier components such as mezzanine financing - commercial real estate servicers are sure to have their hands full.
And the servicing of that debt is just as competitive as the origination of CRE loans. Just ask anyone who has been bidding on servicing contracts for commercial mortgage-backed securities. The winning bid prices don't leave a very thick profit margin.
For that reason, efficiency is increasingly important in the servicing of commercial real estate loans, just as it has been in the servicing of residential loans. While CRE loans don't have the standardization common on the residential side of the business, technology and systems management are still critical to doing the job right and making a profit in the process.
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