Artificial intelligence (AI) underwriting software has the potential to revolutionize the commercial real estate (CRE) loan sector in 2023. These cutting-edge technologies can streamline the underwriting process, improve risk assessment, and increase the speed of loan approvals.

The CRE loan sector in the US is huge. According to IBIS World, the market size of the CRE loan sector is measured to be approximately $1.2 trillion in 2023 in the US. Hence, it is not easy to handle such a huge market manually. AI underwriting software helps increase loan processing speed, saving lenders and borrowers time and effort.

In this article, let's explore how AI underwriting software is becoming a boon to the CRE loan sector in 2023 by examining its benefits to lenders and borrowers alike.

Trickier CRE Loan Underwriting Processes Simplified by AI Technology

One of the most significant benefits of AI underwriting software in the CRE loan sector is its ability to simplify trickier underwriting processes. Traditional underwriting methods can be time-consuming and labor-intensive, making it difficult for lenders to quickly and efficiently assess the risk of a loan. With AI technology, the underwriting process can be streamlined and automated.

One example of a tricky underwriting process that can be simplified by AI technology is the assessment of property value. In the past, determining the value of a property was a labor-intensive process that involved manual inspections, market research, and other time-consuming tasks.

With AI technology, property value can be assessed using various data sources, such as property data, sales data, and public records. As a result, it allows lenders to quickly and accurately determine the value of a property, making it easier to approve or deny a loan application within a quick time. According to Forbes, it takes 3 to 7 business days to get a personal loan approved by banks and credit unions in the US.

AI underwriting software can help simplify trickier CRE loan underwriting processes, making it easier for lenders to assess risk and approve loans. With the help of AI technology, lenders can quickly and accurately evaluate loan applications, allowing them to make more informed decisions and reduce the risk of default. You can click here to learn more about AI underwriting software's benefits in the CRE loan sector.

1. Predictive Analytics in CRE Lending

Predictive analytics uses historical data and machine learning algorithms to forecast future events and trends. It can be particularly useful in the CRE lending industry, where accurate predictions about property values, rental income, and other factors can help lenders make more informed decisions.

You can also use predictive analytics to predict the likelihood of loan defaults. By analyzing historical data on loan defaults and borrower characteristics, predictive analytics algorithms can predict which borrowers are most likely to default on their loans. As a result, it can help lenders identify high-risk borrowers and take steps to reduce the risk of default.

2. End-to-End Underwriting Process

One of the most significant benefits of AI-powered underwriting software is the ability to automate the end-to-end underwriting process. It means that the software can handle every step of the underwriting process, from initial data collection to final approval or denial of a loan. 

As a result, it can significantly speed up the loan process, as manual underwriting often requires multiple steps and multiple people to complete.

The end-to-end underwriting process begins with collecting data on the borrower and the property being financed. This data is then analyzed by AI software, which can identify any potential risks or red flags. The software can also compare the data to historical data and industry standards to determine the likelihood of the loan being repaid.

Once the data has been analyzed, the software can generate a preliminary loan decision, including the terms and conditions of the loan. This decision can then be reviewed by a human underwriter, who can make any necessary adjustments before final approval. With more than 97,606 underwriters currently employed in the US, as per Zippia, there would be no problems finding one to complete the manual review.

3. Data Accessibility and Security

Another key benefit of AI-powered underwriting software is its ability to provide easy access to a wide range of data while maintaining high levels of security. Data is crucial for making informed decisions about loan applications in the commercial real estate (CRE) loan sector. However, collecting and analyzing large amounts of data can be time-consuming and difficult.

AI underwriting software can help to overcome this challenge by providing easy access to a wide range of data sources, including financial statements, property valuations, and credit reports. In addition, the software can quickly and easily analyze this data, allowing for more informed loan decisions.

In addition to providing easy access to data, AI underwriting software also offers robust security features to protect sensitive information. For example, it includes encryption of data in transit and at rest, as well as multi-factor authentication to ensure that only authorized personnel have access to the data.

4. Consistent Risk Assessment and Analysis

Another important advantage of AI-powered underwriting software is its ability to provide consistent risk assessment and analysis. In the commercial real estate (CRE) loan sector, risk assessment and analysis are crucial for determining the likelihood of a loan being repaid. However, manual underwriting can be subject to human error and bias, leading to inconsistent and potentially inaccurate risk assessments.

AI underwriting software can help to overcome this challenge by providing consistent and accurate risk assessment and analysis. The software can analyze large amounts of data, including financial statements, property valuations, and credit reports, to identify potential risks and red flags. 

In addition, the software can make more informed decisions using advanced algorithms and machine learning techniques than a human underwriter alone.

The software can also compare the data to historical data and industry standards to determine the likelihood of the loan being repaid. As a result, it can help to ensure consistency in loan decisions and reduce the risk of bias.

Additionally, AI underwriting software can also provide real-time monitoring of loans and can continuously assess the risk levels of the borrower throughout the loan tenure. As a result, it will help the lender to identify and mitigate any potential risks that may arise during the loan period.

5. Faster Decision-Making Through Impeded Data Analysis Procedures

One of the most important benefits of AI-powered underwriting software is the ability to speed up loan decision-making. The decision-making process can be time-consuming in the commercial real estate (CRE) loan sector, especially when analyzing large amounts of data. However, AI underwriting software can help to overcome this challenge by providing faster data analysis procedures.

The software can analyze large amounts of data, including financial statements, property valuations, and credit reports, in a matter of seconds. In addition, the software can quickly identify patterns and trends by using advanced algorithms and machine learning techniques, allowing for faster decision-making.

The software can also automate many repetitive and time-consuming tasks associated with manual underwriting, such as data entry and document review. As a result, it can free up human underwriters to focus on more complex tasks, such as loan structuring and negotiation.

Moreover, AI underwriting software can also provide real-time monitoring of the loans, which can help the lender to identify and mitigate any potential risks that may arise during the loan period.

The Software Comes with Several Benefits

The software offers many benefits to lenders and borrowers alike, including automation of the end-to-end underwriting process and easy access to a wide range of data. The benefits include consistent risk assessment and analysis and faster decision-making through impeded data analysis procedures.

In the CRE loan sector, AI-powered underwriting software can lead to more efficient and effective loan decision-making, lower default rates, and better overall loan performance. It represents an important development for the sector in 2023 and beyond.