Commercial Real Estate lenders certainly understand the concept of fiduciary responsibility.  

As lenders, we spend much of their day in service of their fiduciary responsibility to their investors and to the Agencies who have entrusted them with their balance sheets. 

Analysts spend their days carefully analyzing operating statements, rent rolls, and proformas to determine that there will be sufficient cash flow to cover debt service.  Underwriters pore through appraisals to assess whether the loan to value is appropriate. Credit committees scrutinize engineering reports to ensure that there are sufficient funds reserved for required repairs over the term of the loan.

The Invisible Fiduciary Responsibility 

The fiduciary responsibilities of a lender to investors and Agency partners are explicit in the documents that govern the lender’s role.  

However, lenders have another fiduciary responsibility that is invisible to the naked eye.  You won’t find mention of it in any legal document, yet it is implicit in every transaction. 

This responsibility is for an asset that every lender has under management … yet, you won’t find a record of it on any balance sheet.  

Measuring return on this asset might not change a lender’s credit decisions … yet, would entirely transform the way the lender does business.   

The asset I’m referring to is our Client’s Time.  

Return on Client Time

This asset of Client Time is invaluable compared to any capital for which we as lenders are responsible.  We can always reimburse an investor for losses incurred. But, we can’t reimburse a client for time irresponsibly squandered.

As lenders, we measure return on equity and return on assets.  Those of us focused on operational efficiency might also monitor the amount of time it takes to close a loan as well as the costs to do so.  

But, what if we also measured Return on Client Time?

How would that change how a lending team viewed its relationship with the client through the underwriting process?  

What does a signed loan application mean to you?

Consider something as simple as the loan application.  

What does it mean when a client signs a loan application?  

Client Time – The Blank Check Mindset

To many lenders, the client’s signature is a blank check.  As if, the client has just announced — “use my time to your heart’s delight!” 

The lender hears the client’s unspoken oath in the signed application.  I hereby commit to: 

  • Provide you with any documentation that you may request even if I’ve already sent it to you  
  • Split that documentation into several emails to conform with the lender’s arbitrary email size limitations 
  • Answer all of your questions whether or not they have relevance to the underwriting  
  • Respond to questions as if this were our first transaction.  Even though this is my fifth deal with you  
  • Input the same information over and over in whatever forms you send to me.

The net result is a client experience that is often painful and frustrating.  Any originator is familiar with the shock of seeing an owner leave hundreds of thousands of dollars on the table, rather than endure another refinance process.  

Client Time – The Trustee Mindset

But, what if lenders recognized that with a signed loan application, the client was appointing the lender as trustee of their time. 

The lender would implicitly commit: I humbly accept this responsibility to serve as custodian for your most precious asset — your time.

I will request your time only when it is impossible for me to accomplish a task without your input. 

I commit to deploy your time as carefully as I would if I were charged with investing my grandmother’s life-savings.   

Client Time is More Valuable than Absolute Time

Measuring client time is much different than measuring the absolute amount of time it takes to close a transaction.  People usually value their own time, much more than they do absolute time.  

The success of Amazon is a clear illustration of this.  Why would a customer choose to receive an item in two days?  They could just go to the store have it within a couple of hours!  Because it only takes two minutes to place an order on the  Amazon app.  But, it will take me two hours if I want to go to the store.  Not to mention the emotional and energy costs associated with going to the store myself.  Sitting in traffic, finding a parking spot, waiting on slow cashiers, etc.

I’d happily wait two days of “absolute time” if it saves me two hours of my own time.  

This is not to take away from the valuable goal of striving for shorter “absolute” close times.  However, even in this pursuit, lenders should not lose sight of the supreme importance of Client Time.  

Return on Client Time Changes Everything

How would a lender act if Return on Client Time was its primary directive?  Imagine if, whenever the lender was going to make a request of a client, they first asked themselves: 

1) Do we absolutely need this information in order to approve and close the loan? 

2) Is there any way for us to accomplish this task without investing the client’s time?   

3) Will receiving this request in any way detract from the client’s confidence in our process?

How would senior leaders prioritize their efficiency projects and technology initiatives if the success of those projects was measured in terms of improved Return on Client Time?

But the consider the more far-reaching impact of focusing on Return on Client Time:

Underwriting teams might reduce the number of duplicative document requests if they knew that they would be compensated based on Return on Client Time.  Salespeople might not sign up a deal just to “get it off the street.”  Perhaps credit committees might reduce the number of 11th-hour pre-closing conditions, in consideration of the Client Time costs of their asks.  Servicing and asset management might develop methods to approve loan assumptions and reserve releases with as little Client Time as possible.

But, the impact of measuring Return on Client Time might not stop there.

How might employee engagement increase if team members saw their job as not just about selling money, but about freeing up time for their clients so that these men and women could now spend the extra hours with their families?  

Could this new sensitivity to Client Time drive employees to pay more attention to how their actions impacted Return on Colleague Time as well?  Could it lead to team members becoming more thoughtful and intentional about how they used their own time – in and out of the office?

If a lender truly focused on Return on Client Time, could it not revolutionize everything?