There are two major growth drivers of online loan originations. The first is demographic. Millennials, born digital, are now a larger segment of the US population than baby boomers. The second is technological. Ubiquitous internet and mobile use has virtually replaced all outdated, manual means of initiating and transacting business.
Lenders who want to meet the demand for future online loans need a loan origination platform that is up to the task. Based on our experience in working with lenders and monitoring technology trends, here’s our condensed guide on what to look for in a loan origination platform.
Applications Optimized for Online and Mobile
Your loan application process is guaranteed to change in response to market expectations, so you want a development environment that rapidly transforms concept into experience. Look for these capabilities:
- What you see is what you get (WYSIWYG) development environment (forms, fields, text, images, and buttons) that allows you to create both online and mobile loan applications;
- Configuration menus (not programming) that tailor the interface to your brand and smoothly guide the applicant through the loan origination process;
- Data validation using masking, rules, minimum values, maximum values, and integration with external data sources to ensure accurate data capture; and
- Simulated mobile devices and desktop test environments to preview the user experience and verify process flow, interface, and overall usability.
Want to find out more about our software and services? Contact our team today
All Digital, No Paper
With online loans, there’s no tolerance for paper that does nothing but delay the process. Your loan origination platform needs to:
- Capture supporting documents (driver’s license, pay stub, proof of residence) via scanner or mobile device;
- Include captured documents with applicant information entered online via mobile and electronically send the information to the loan origination system; and
- Use optical character recognition (OCR) technologies to automatically extract and verify information contained in digital documents.
E-contracts and E-signatures
Potentially the most document-intensive phase of lending, electronic contracting lets lenders package all relevant deal information in digital format and send it securely to the borrower. These capabilities eliminate any delays or physical handling associated with paper processes.
- Workflow management creates contracts, automatically populating documents with accurate borrower information, terms, conditions, and required disclosures;
- Review and sign contract documents on a desktop computer or mobile device, allowing convenient and near-immediate confirmation of loan offers; and
- Establishing retention policies based on document type, including automatic calculation of document destruction dates.
Automation: The Backbone of Enhanced Productivity
Automation enables lenders to evaluate online applications and return a decision in seconds. Rapid, consistent processes significantly enhance productivity and reduce risks associated with differences in underwriter skills or judgments. Your loan origination platform should support workflows, decision rules, and integration with cloud-based services.
Configurable workflows allow lending professionals to determine the sequence of automated steps that move an application from submission to final decision. Workflows coordinate the information to be evaluated, the decisions to be made, and the underwriters involved in the loan origination process. They also dictate when to invoke third-party or alternative data sources or to take additional steps. Workflows automatically keep track of the who, when, and where of lending processes allowing lenders to continually monitor overall as well as individual productivity.
Decision Rules Bring Speed and Consistency
Decision rules replicate repetitive yet critical underwriting decisions, allowing underwriters to focus their time and expertise on high-value decisions that cannot be automated. Rules bring consistency in evaluating applicant attributes and structuring deals that may otherwise vary based on the judgment and experience of the underwriter. Decision rules also provide a formal record of current and past decision policies in support of compliance regulations.
Auto structuring is one of the most powerful applications of decision rules. By iteratively applying rules that determine how credit policies can be modified, auto structuring attempts to reach a deal resolution that the applicant would qualify for and any stips that might be required.. Successful resolutions trigger immediate approval or conditional approval with stipulations. Unsuccessful resolutions automatically issue an auto decline.
Third-Party Cloud-Based Services Enhance the Loan Origination Platform
No single loan origination platform provides all the functionality a lender needs. Dozens of innovative, services allow lenders to add the services they need to enhance productivity and improve decision quality.
- Fraud analytics identify applications with a high probability of false identity, misrepresented income or employment, straw borrower, or inflated collateral valuations.
- Valuation services provide accurate used vehicle pricing estimates.
- Alternative credit data opens new lending opportunities and provides a more detailed picture of an applicant’s financial strength.
- Machine-learning credit models help assess applicant creditworthiness and price deals for risk.
When these cloud-based services are integrated into the loan origination process they can significantly reduce processing costs and portfolio risk.
A Cloud-Alternative for Loan Origination
Cloud technology provides for an optimal online and mobile experience. The benefits of a cloud-based loan origination platform include lower capital and operational expenditures, quick implementation and frequent software updates to take advantage of the latest functional improvements, and access to a wide range of data sources and services to help you continually improve process efficiency and decision quality.
defi SOLUTIONS’ cloud-based technologies deliver greater lending efficiency while reducing risk. Take the first step toward meeting the lending needs of 2019-2020 by contacting our team today or registering for a demo of defi LOS.
Get in touch with us today and get a demo!