Innovation doesn’t always mean inventing something completely new — in many cases, it’s building upon what exists and delivering a best-in-class solution.

Stronghill Capital, based in Austin, Texas, has perfected that model for commercial and residential brokers. Stronghill provides a variety of lending solutions for today’s unique non-QM brokerage. However, it’s not just what Stronghill offers but how it delivers that elevates the experience for their clients.

Capitalizing on the Market

Stronghill has built up its non-QM business over the past couple of years. As the market shifted with rising interest rates, the opportunity arose naturally.

“A huge opportunity that arose was non-QM, and within non-QM was investor residential because investors are not as hyper rate-sensitive as a consumer looking to purchase their first home or second home,” Stronghill President, Dustin Wells, said. “You also had conforming rates rising, and refinances almost stopped overnight, which created this artificial pause of everything else and this influx of individuals that still wanted to acquire real estate. They realize that there aren’t nearly as many buyers because the rates have started to increase, so they don’t have to be as competitive on their offers and can continue to build their real estate portfolios. It’s an ideal time to invest.”

Stronghill positioned itself to help its clients identify these investors in order to provide them with capital.

“We tried to be at the forefront of that,” Wells said. “It was the right time to roll out and expand our company and our product offering.”

A subsidiary of Denver-based investment management firm ArrowMark Partners, Stronghill also provides small-balance commercial mortgage loans in addition to its residential non-QM and investor-focused products.

A Better Way

One key to Stronghill Capital’s success is elevating those it works with by making it easier to do business. Around the same time it began making inroads with residential investors, Stronghill also started building a tech platform that could simplify and speed up workflows for the brokers it works with.

Wells said that, when he joined Stronghill in April 2022, CEO John Eisinger challenged him to start with a clean slate and an open mind in creating the new tech solution — going beyond “what you’ve done in the past or what you’ve seen work in the past. Is there a better way?”

“Admittedly, I’ve never had anybody in my past career kind of say, ‘Listen, there are no constraints. What would you do if you could build out whatever you wanted to?’” Wells said.

“And so, with that as a backdrop, it was a refreshing approach.”

As he dug into finding the best solution for Stronghill, Wells identified that technology was underutilized in the firm’s commercial business. Until the firm started building out its residential non-QM offering, he said, there wasn’t much focus on implementing innovative technology.

Smaller brokers had been somewhat left behind in innovation, Wells explained.

“It’s a very manual process. Their businesses are run on spreadsheets and Word documents,” he said. “And it’s a relationship business. They are working with a customer they’ve known for a while, and they’re doing a manual, physical application at best. It’s a short-form application, and then they would send that short-form application into a small-balance commercial or investor residential lender who would then key that information into their system. And a lot of the dialogue would be either phone calls or emails. There wouldn’t be one source of truth, one system they could log into for updates, dialogue, feedback — it was all manual. The whole process really didn’t lend itself to scale.”

From their experience working with larger brokerages, the Stronghill team knew what key features were needed to make the loan process easier for their clients. Their solution, the Elevate portal, eliminates the need for the barrage of emails and phone calls common to the industry. It offers a short-form application online to capture the data, and that information is uploaded straight to the underwriter’s queue. Users then receive real-time updates on their loan status.

“The days of having to call and say, ‘Did you get the email and has somebody looked at it?’ are gone and replaced with, ‘I’ve uploaded the information, I’ve received confirmation that they received it and that it’s going to be reviewed within 24 hours.’ It just completely simplifies the process for the broker,” Wells said.

The platform is unique in the wholesale and correspondent space, he said, and the feedback Stronghill has received is “phenomenal.”

Active Listening

Stronghill’s flexibility and responsiveness to client feedback about Elevate has enabled the team to stay ahead of the curve and deliver an outstanding product.

“We’re pretty proud that, when a client reaches out to one of our account executives or to our executive team directly and says, ‘I had this pain point’ or ‘I thought this was supposed to happen and it didn’t,’ we address it in real time,” he said. “If it is something we need to resolve quickly because it is going to create friction, then we deploy the team necessary to solve whatever that problem is.”

Wells provided several examples of features Stronghill has added or improved thanks to its commitment to listening to what clients want from Elevate.

One addition that has been “a big win,” Wells said, has been the delivery of an online pricing engine that can be used in the SFR and multifamily space. Providing pricing early in the process can help structure the deal for success.

“Empowering the client to identify what the rate is going to be on the loan early in the process allows the client to figure out the DSCR payment from the very beginning, so they know whether the deal will work before it’s even submitted,” he said.

Another pain point Stronghill identified was in ordering appraisals, which Wells described as another “very manual process.” The team built a bespoke storefront experience where brokers can order an appraisal via a click rather than trying to find their own appraiser and working with them directly. In addition, Stronghill learned that ordering a broker price opinion (BPO) for multifamily or mixed-use properties often took additional time after the appraisal, creating delays in the overall transaction time for borrowers. Now, through Elevate, the appraisal and BPO can be ordered simultaneously.

“So, when one (report) comes back, the other comes back, and we’re making the collateral decision at one time — we’re not waiting for something else a week later when maybe the yes becomes a no. This enhancement has improved the client experience because, previously, the broker would not know what to say until they had the whole collateral picture. We’ve streamlined the process,” Wells said.

Another process Stronghill was able to automate through Elevate was in requesting delivery of a letter of intent, or LOI, that brokers can provide to borrowers.

“Now there is a process where a commercial-facing broker can upload basic information and request just an LOI — the broker can then take that LOI and deliver those terms to the customer the same day, getting the deal off the street. Then, we can start working through processing and underwriting,” Wells explained. “This adds much-needed efficiency to what has typically been a very manual process.”

Improving Inch by Inch

In his ongoing commitment to improvement, Wells said he actively seeks out feedback from his team and clients. He holds virtual roundtables to hear how Elevate is working for customers and visits with clients when he travels. He also emphasizes open dialogue among his team, he said.

“I consistently remind everybody that if I don’t know it’s broken, I can’t fix it. So please don’t keep things a secret,” he said. “Also, if I don’t know what’s working, then I don’t know how to replicate that for somebody else. So, if one client is having a really good experience and the other one’s not, how do we ensure the other one’s having the proper experience — could it be a lack of training? We need to make sure to take the things we’re doing well and replicate them across all of our partners so everyone has that same positive experience across the board.”

Wells often thinks back to an adage frequently repeated by one of his former bosses: Inch by inch, life is a cinch. Yard by yard, life is hard.

“If you can identify the little things on a consistent basis and make those improvements, then inch by inch, you can make improvements deliver better service,” he said. “If you take two months off and don’t really focus on making improvements, and now you have a yard’s worth of work to do, it’s a lot harder — it’s a much bigger list, and it’s a lot more time-consuming.”

Of course, it’s not always pleasant to receive customer comments, but Wells called the dialogue “mission-critical.”

“Sometimes, you don’t want to hear them tear apart a solution you just deployed that you thought was really slick,” Wells admitted. “But then you kind of redirect that conversation and get actionable feedback that will help improve the overall process. Then everybody wins.”

Strong Foundation in Technology

Elevate was built by harnessing current technology and customizing it for Stronghill’s clients, Wells said. While some private lenders pride themselves on creating a custom platform from scratch, Wells said he and his team decided against this path for two key reasons: the cost to build a completely bespoke platform and the speed to deployment. With the executive team’s depth of experience in the field, he said they had a good idea of what needed to be included. In his own career, Wells said he’s done technology builds both ways — from scratch and off-the-shelf — and has seen pitfalls of completely custom solutions.

“Historically, I found that they spend three times what they expected to spend, and at the end of the day, the solution is marginally better or marginally worse than what they could have deployed two years prior had they started with an existing platform,” he said.

Given his extensive experience, Wells offered advice for other firms considering creating a technology platform:

• Listen to what the customer is asking for. “Spending the money to build a technology stack that you feel is best-in-class when it’s not what your customers are asking for is a monumental miss, a cash burn, and it’s going to delay delivery of a true solution out to your customers.”
• Keep the dialogue going with customers. “The idea is that, if we need to enhance something we thought was a best-in-class delivery a month ago, then let’s put it on the docket for further iteration, because we’ve got three or four customers that are experiencing the same friction.”
• Know your business and know your audience. Don’t get overly bogged down in everything the technology can do if it’s not relevant to your clients, he said. “Here’s my customer base. Here is the way the business operates today. Let me survey those customers to see what we could deploy that would help them scale their business, accelerate delivery, provide more certainty.”

Location, Location, Location

As is true in any aspect of real estate, Wells said Stronghill’s location is a major factor in its success. Its presence in Austin, one of the country’s biggest tech hubs, bolsters its focus on innovation.

“You’re around it all the time,” he said. “You’re hearing about what one company is leveraging over another. You’re hearing about a company’s win with leveraging XYZ versus another company that is trying to figure out how to race to deliver XYZ.”

Hearing from clients throughout Texas reinforces those conversations about technology and how to stay on the cutting edge, he said.

“Because we’re in one of those environments where it’s talked about, discussed, and dialogued about a lot, I feel an expectation to try to do our best to deliver a solution that’s aligned with or exceeds expectations,” Wells said.

Those expectations push Wells and Stronghill to keep innovating.

“It’s not easy to say that you want to be at the forefront of technology delivery because it is incredibly challenging not only to execute, but to execute effectively. But we certainly work at it.”To learn more about Stronghill Capital, please visit https://stronghill.com/