Request a lending and leasing as a service brochure

Below are seven stages I feel are the critical components of loan origination
process.

7 Stages:

1. Pre-qualification – The first step in the loan origination process is pre-

qualification. During this stage the potential borrower will receive a list of items
they need to pull together to submit to the lender. This may include:

 Current employment information including hourly wage or salary

 Total household income
 Payment history
 Bank statements
 Tax returns

Once this information is submitted to the lender, it is typically processed and a

loan pre-approval is made, allowing the borrower to continue in the process to
obtain a loan.

2. Loan Application – In this stage of the loan origination process, the borrower
completes the loan application. Sometimes a paper application is completed, but
more often today, an electronic version is completed and submitted by the
prospective borrower. New technologies allow completing the application online
or through a mobile app, and collected information can be tailored to specific
loan products.

3. Application Processing – When the application is received by the credit

department, the first step is to review it for accuracy and completeness. All
required fields must be filled in, otherwise the application will be returned to the
borrower or the credit analyst will have to reach out to the borrower to procure
the required missing information. Depending on the technology employed by the
lender, a sophisticated Loan Origination System (LOS) can automatically flag files
with missing required fields and return it to the borrowers to re-work.
Depending on the organization, exception processing might be part of this
process, or manual loan processors can review each application for
completeness.
4. Underwriting Process – When an application is deemed complete, the
underwriting process begins. The company runs the application through a
process of taking a variety of components into account: credit score, risk scores,
and many lenders will generate their own additional unique scoring criteria that
are unique to their business or industry. Sometimes this process is fully
automated; other times it is manual or a combination of both. Underwriting
guidelines can be loaded into the LOS.

5. Credit Decision – Depending on the underwriting process, the file can be

approved, denied or sent back to the originator for additional information. A
denial may be revisited if certain parameters are changed, such as a reduced loan
amount or different interest rates to lower payments.

6. Quality Control – Since consumer lending is highly regulated, the quality

control stage of the loan origination process is critical to lenders. Typically the
application would be sent to a quality control queue where the final decision and
other critical variables can be analyzed against internal and external rules and
regulations. This is essentially a last look at the application before it goes to
funding.

7. Loan Funding – Most consumer loans fund shortly after the loan documents
are
signed. Second mortgage loans and lines of credit may require additional time for
legal and compliance reasons. LOS programs can track funding and ensure that
all
necessary documents are executed before or together with funding.

I have had the pleasure of meeting lenders that are strategic, analytical,
aggressive, quality focused, care about the customer, and embrace technology
upgrades such as new loan origination software (LOS) solutions. These are the
lenders that excel in their industry vertical. Here’s a quick list of features and
benefits that should be part of your LOS:

 Receipt of applications through multiple channels such as the web or fax

 Submit and receive credit bureau information online
 Calculation of user-defined credit scores with an internal scorecard, using a
weighted average on criteria from both the application and the credit bureau
data
 Make credit decisions automatically or manually
 Capability to re-score each applicant separately
 Interface with multiple collateral asset valuation guides and VIN checks, plus
VIN check digit
 Allow promotions, such as reduced rate or no interest for a period of time
 Provide completion checklists to user enhance processing and reduce
training
 Automatically transmit decisions back to the dealer, originator or applicant
Link the origination data to funding processes and the servicing module in
real time
 Process checks through an external Accounts Payable system or send
 Automated Clearing House (ACH) payment(s) directly from the system
 Build a customized underwriting workflow based on user-configurable
parameters for a paperless flow of information
 Upload scanned documents to an application
 Generate reports on applications based on status, dealer, user or
underwriter