Hey there, you’re looking for a new loan origination system and want to make sure you invest in the right solution. As someone who has evaluated many options out there, I want to share the key capabilities you should be looking for. A modern system needs to be able to handle the entire loan lifecycle, from application to closing and servicing. You’ll want a platform that can accept applications from anywhere, whether it’s your website, mobile app, or in-person. It should be able to verify information, pull credit reports, and automate decisioning. Once approved, it needs to handle all the closing details and documents electronically. After closing, you’ll want a system that can service the loan with payments, statements, and accounting. With the right solution, you’ll gain efficiency, improve customer experience, ensure compliance, and reduce costs. Here are the top things to consider in your search.
What Is a Loan Origination System?
A loan origination system (LOS) is the software used by lenders to manage the entire loan application process, from origination through closing. As a lender, an LOS allows you to handle applications efficiently and compliantly.
When evaluating an LOS, look for the features that matter most to your business. For example, an intuitive interface and simple workflow are must-haves. You want a system that’s easy to navigate so your team can quickly input applications and guide borrowers through the process.
Robust compliance management tools are also essential. An LOS should help ensure you follow all regulations for your loan types. It should have built-in compliance checks, document management, and reporting to simplify audits.
Strong integrations expand an LOS’s capabilities. Look for options that integrate with services you already use like credit bureaus, appraisal management platforms, and e-signature providers. Integrations eliminate repetitive data entry and speed up the application process.
Reporting and analytics provide insights into your lending operations. An LOS should offer standard reports on application volume, turnaround times, and pull-through rates. It should also allow you to create customized reports so you can closely monitor KPIs and make data-driven decisions.
When you invest in an LOS, you gain a powerful system to improve productivity, reduce risk, and enhance the borrower experience. But to maximize those benefits, you need a solution built with the key features and functionality for your unique lending needs. Evaluate options carefully and choose an LOS that will support your business now and into the future.
Key Features of a Robust Loan Origination System
A robust loan origination system (LOS) is essential for any lending institution. As you evaluate options, here are some key capabilities to look for:
Seamless Borrower Experience
An LOS should provide a simple, user-friendly interface for borrowers. Things like an online application, document upload, and eSignatures make the process convenient and paperless. With an intuitive, mobile-responsive design, borrowers can apply anytime, anywhere.
Automated Underwriting
Using built-in rules engines and integrations with credit bureaus, the best LOS solutions can automatically evaluate applications and determine eligibility and risk. This accelerates the underwriting process while reducing costs and human error.
Compliance Management
With frequently changing regulations, it’s important an LOS maintains compliance. Look for a system with compliance monitoring, testing, and auditing to ensure your lending processes follow the latest rules. Compliance management tools can also generate required disclosures, reports and notifications automatically.
Robust Reporting and Analytics
A good LOS provides reporting and analytics to gain insights into your lending operations. It should offer out-of-the-box reports on application volume, approval rates, processing times and more. Custom reporting and dashboard features allow you to analyze data and key performance indicators specific to your needs.
Scalability
As your business grows, an LOS must be able to scale with you. Consider options that are cloud-based, which provide unlimited storage and computing power. A scalable LOS will allow you to increase volume and complexity over time without sacrificing speed or performance. Scalability also ensures the system can be upgraded easily as new features become available.
With the right LOS in place, you’ll be equipped to improve the lending experience, reduce costs, minimize risk, ensure compliance and gain data-driven insights into your operations. Look for a solution focused on continuous innovation to support your needs both now and in the future.
Automated Workflow Management
A good loan origination system should have robust workflow management capabilities to streamline the entire loan process. This allows lenders to handle higher loan volumes efficiently while reducing costs and turnaround times.
Automated Task Assignment
As applications come in, the system should automatically assign tasks to the appropriate staff based on workloads, skills, and compliance requirements. This prevents bottlenecks and ensures that applications move through the process smoothly. Staff are notified when a new task is assigned to them, with clear instructions on what needs to be done.
Configurable Checklists
The system should provide configurable checklists for each step of the loan origination process. These checklists prompt staff on exactly what information and documentation needs to be collected from the borrower. Checklists can be tailored for different loan types and customized for each lender’s unique policies and procedures. This minimizes errors and helps staff work systematically.
Deadline Tracking
A good loan origination system monitors deadlines for different stages of the lending process and sends automated reminders to responsible staff. This could include deadlines for collecting additional information from the borrower, processing times, and closing dates. Deadline tracking, combined with task assignment, ensures that no application falls through the cracks.
Audit Trails
For compliance and quality assurance purposes, the system maintains detailed audit trails of all actions taken, comments made, documents uploaded, and status changes for each loan application. Authorized staff can review audit trails to monitor productivity, identify any issues, and make improvements to processes. Audit trails also provide evidence of compliance with lending laws and regulations.
In summary, powerful workflow automation and management capabilities allow lenders to handle higher volumes, accelerate turnaround times, minimize errors and ensure compliance. When evaluating a loan origination system, look for one with configurable rules to automate as much of the lending process as possible. The result will be a fast, streamlined experience for both lenders and borrowers.
Flexible Product Configuration
A flexible product configuration is key to adapting to the changing needs of your borrowers and staying competitive in the lending market. As a lender, you need an LOS that allows you to easily create new loan products or modify existing ones without relying on IT resources or costly custom development.
Look for a system that provides an intuitive product design framework to configure products on your own. You should be able to define eligibility criteria, data fields, fees, documents, decisioning logic, and more for each product. The ability to copy an existing product as a template for a new one saves a ton of time.
With a flexible LOS, you can offer innovative new lending options like personal loans, HELOCs, bridge loans, and construction loans to capture more business opportunities. You can also quickly rollout promotional loan products for a limited time to stay ahead of competitors.
An adaptable LOS gives you independence and control to keep up with trends. You can make changes to:
Interest rates, APRs, and repayment terms to match market conditions
Underwriting criteria based on evolving risk policies
Fee structures to optimize profitability
Documentation requirements in line with regulation changes
Look for a system with an intuitive rules configuration engine. This allows you to easily set up decisioning rules, scorecards and underwriting requirements without hard coding. Rules should be adjustable at any time to tighten or loosen as needed.
With flexible product configuration capabilities, your LOS can support your key business objectives:
Attract new customers with the latest lending products
Optimize profitability through precision pricing
Reduce risk with adjustable underwriting rules
Gain operational efficiencies from quick product setup
Stay compliant with configurable policy rules and documentation
A modern, flexible LOS like Celestiq LOS gives lenders the agility to thrive in today’s fast-changing market. You have the power at your fingertips to craft innovative products, optimize your lending programs, and gain a competitive edge.
Integrated Credit Checking and Risk Analysis
A robust loan origination system should have integrated credit checking and risk analysis capabilities. This allows lenders to thoroughly evaluate a borrower’s creditworthiness and the risk associated with a loan. Look for a system that:
Pulls credit reports from all three bureaus
Having access to credit reports from Equifax, Experian, and TransUnion gives a more complete picture of a borrower’s credit history and allows for better risk assessment. The system should be able to automatically pull these reports as part of the initial loan application evaluation.
Calculates key risk metrics
The system needs to analyze the credit reports and calculate critical metrics like debt-to-income ratio, credit score, credit utilization, payment history, number and type of credit accounts, etc. These metrics help determine a borrower’s ability and willingness to repay the loan.
Compares metrics to lending criteria
The system should let lenders set customized credit criteria and policies for different loan products. It should then compare a borrower’s metrics to these criteria to assess whether they qualify for a loan and determine the appropriate terms and interest rate based on their risk level.
Produces detailed credit analysis reports
In-depth reports on a borrower’s credit background, risk metrics, and an assessment of their loan qualifications allow lenders to make an informed lending decision. Look for a system that provides a highly detailed credit analysis report for each loan application.
Re-checks and re-analyzes as needed
If a borrower’s situation changes during the application process or if new information comes to light, the system should allow lenders to easily re-check credit and re-analyze risk. Regular re-checking of credit also helps detect signs of fraud or identity theft.
An integrated credit analysis and risk assessment system gives lenders a data-driven way to evaluate borrowers and make objective lending decisions. This helps reduce risk, decrease default rates, and ensure compliance with regulatory requirements. For these reasons, credit analysis capabilities are one of the most important features to look for in a loan origination system.
Multi-Channel Loan Applications
A modern loan origination system needs to provide an intuitive, streamlined experience for borrowers across multiple channels. As a lender, you want to meet customers where they are and make applying for a loan as easy as possible, whether they start on your website, mobile app, over the phone, or in person at a branch.
Website and Mobile App
Having a user-friendly website and mobile app for loan applications is essential these days. Borrowers expect to be able to apply 24/7 at their convenience. An intuitive, responsive interface with minimal clicks to complete and submit an application is ideal. Forms should be easy to fill out on any device. Guiding borrowers through the process with helpful information and clearly explaining any documents needed will minimize confusion and increase completion rates.
Phone and Call Center
Some borrowers still prefer to speak to someone over the phone, so call center support and the ability to accept verbal applications is important. Loan officers and call center staff should have a seamless experience capturing information from the phone call directly into the loan origination system. They’ll need features like call recording, scripting tools, and the ability to move between calls and applications easily.
In-Person at Branches
For lenders with physical branch locations, the option to start an application in person is necessary. Loan officers will need an interface to directly and efficiently enter information from their conversation with the borrower. They should be able to pull up details of any pre-qualification the borrower received to continue the process. Some borrowers will require or prefer guidance from a loan officer to choose the right loan program and get approved.
A multi-channel loan origination system delivers a great experience for both borrowers and lenders. With the right solution, you can offer borrowers flexibility and convenience while streamlining your own processes. Giving customers options in how and where they apply will improve satisfaction, increase application completion rates, and gain more high-quality leads.
Compliance and Audit Trails
Compliance is crucial for any financial institution, and your loan origination system needs to have strong capabilities in this area. As regulations frequently change, make sure the system stays up-to-date with the latest rules.
Audit Trails
Look for a system that maintains detailed audit trails of all actions and changes made in the loan origination process. Auditors and examiners will want to see who entered what data, when and from where. The audit trails should track details like the user, date, time, old and new values, and more. Robust reporting capabilities are also important so you can quickly generate audit and compliance reports when needed.
Configurable Compliance Checks
The system should perform automated compliance checks at various points in the loan origination workflow. For example, it should verify certain data points when an application is first entered, when conditions change, and before final approval and closing. The compliance rules should be highly configurable by your administrators so you can adapt the system as regulations evolve.
### Third-Party Integrations
In many cases, compliance requires verifying information from third-party sources. An advanced loan origination platform will offer pre-built integrations to services like fraud detection, credit reporting, flood determination, and more. These integrations automatically pull data to help ensure loans meet all compliance standards before proceeding to the next stage.
Compliance Alerts and Notifications
The system should proactively alert users to any compliance issues as soon as they arise. This could be an alert that required information is missing or that a loan does not meet certain eligibility rules. Notifications help avoid potential compliance violations before the loan is approved and funded. Users should also receive alerts if any changes made impact the compliance status of the loan.
With strong capabilities around compliance and transparency, a loan origination system can give you confidence that your lending process meets all regulatory requirements. Be sure to evaluate each vendor’s approach to compliance to choose a system with the most robust and adaptable controls.
Reporting and Analytics
Reporting and analytics are key to effectively managing your loan origination system and business. Robust reporting tools allow you to gain valuable insights into your lending operations and make data-driven decisions. Look for a system that provides:
Customizable Reports
You should be able to easily build custom reports to meet your specific needs. Create reports on application volume, approval rates, processing times, and more. Filter by date range, loan type, branch, or loan officer to analyze performance and trends.
Interactive Dashboards
Interactive dashboards provide an at-a-glance overview of key performance indicators (KPIs) and metrics. Look for dashboards that allow you to visualize data with charts, graphs, and gages. Spot potential issues quickly and drill down into reports for more details.
Automated Notifications
Set up automated alerts and notifications to stay on top of important events without having to run manual reports. Receive emails or in-app alerts when applications meet certain thresholds, loans are nearing closing dates, or documents require review.
Data Exports
For in-depth analysis, you’ll want the ability to export report data into formats like CSV, XLSX, and PDF. Exporting data allows you to manipulate and analyze information using third-party tools like Excel, improving your insights into lending operations and outcomes.
Audit Trails
Comprehensive audit trails log all system and user activity, tracking details like who accessed accounts, reports and documents as well as when the actions occurred. Audit trails give you transparency into how your system and data are being used, supporting compliance and risk management initiatives.
With robust reporting and analytics, you gain visibility into your lending processes and outcomes. Look for a loan origination system that provides the tools and capabilities to extract actionable insights from your data, enabling data-driven decisions that optimize operational efficiency and profitability. Comparing multiple systems? Evaluate each solution based on the strength and usability of its reporting features—the more powerful and customizable, the better.
Choosing the Right Loan Origination System Vendor – FAQs
With so many loan origination system (LOS) vendors out there, how do you choose the right one? Here are some of the most frequently asked questions to consider:
functionality
What core capabilities does the LOS provide? At a minimum, it should handle loan application intake, processing, underwriting, closing, and servicing. The more of the end-to-end loan lifecycle it can manage, the better. Look for vendor that provide solutions for various lending types – mortgage, auto, personal, business, etc. Also consider how well it integrates with your other software systems. The more seamless the integration, the more efficient your team can be.
compliance
Does the LOS ensure you stay on the right side of regulations? Compliance is key in lending, so the LOS must help you adhere to all federal and state laws, as well as industry standards. It should prompt your team with compliance checks, track necessary disclosures, and maintain an audit trail. The vendor should also provide regular software updates to keep the LOS compliant as laws and regulations change.
reporting and analytics
What insights can you gain from the LOS? Look for a system that offers robust reporting, data analysis tools, and key performance indicators (KPIs) to optimize your lending operations. The more you can track, the easier it will be to make data-driven decisions, minimize risk, and maximize profitability.
cost
How much does the LOS cost? Pricing varies significantly based on the capabilities and deployment method. On-premise software typically has higher upfront costs, while cloud-based SaaS options usually have a monthly subscription fee. Consider both the initial investment as well as ongoing costs for maintenance, support, and customization. The total cost of ownership will depend on the complexity of your lending needs.
vendor support
What level of service and support does the vendor provide? Look for a vendor with extensive experience in the lending technology space. They should offer phone and email support, software updates, and continual improvements to the LOS. It’s also helpful if they provide additional services like implementation assistance, training, and consulting. The more support available, the more value you’ll get from the LOS.
Does this help summarize some of the key things to consider when evaluating loan origination system vendors? Let me know if you have any other questions!
Conclusion
You’ve now got a solid overview of the key capabilities to consider when evaluating a loan origination system. The right system for your needs can streamline your lending operations, reduce costs, and improve the customer experience. As you review options, keep your priorities and pain points top of mind. Look for a solution with an intuitive interface, robust compliance controls, and flexible workflow automation. Consider scalability for future growth and a provider with a track record of great customer support. With the right system in place, you’ll be well on your way to funding more loans, faster and at lower cost. The search may seem daunting, but stay focused on solutions that will empower your team to do what they do best: help more people achieve their dreams through the power of lending. You’ve got this! Now go find a system that will help take your business to the next level.
