So you’ve decided it’s time to invest in a new loan origination system. Congratulations—that’s a big step towards improving efficiency and boosting your lending business. But with so many options out there, how do you choose a system that will truly meet your needs? The key is to focus on functionality, not just flashy features. There are several key components a solid loan origination solution absolutely must provide. If any of these items are missing, keep looking.
What Is a Loan Origination System?
A loan origination system (LOS) is the software that facilitates the entire loan application process for both borrowers and lenders. An LOS allows lenders to accept loan applications, review applicants’ information, and make lending decisions. For borrowers, an LOS provides an easy way to apply for a loan and check on the status of your application.
While evaluating LOS options, there are a few must-have features you’ll want to consider:
•User-friendly interface. The system should be intuitive and easy to navigate for both borrowers and lenders. A clunky or confusing interface means frustration and wasted time for everyone involved.
•Fast processing. Quickly evaluate applicants and make lending decisions. No one wants a long, dragged out application process. Look for an LOS that can process applications in minutes or days rather than weeks.
•Automation. Automated tools like document recognition, pre-approval calculations, and risk assessments save time and minimize human error. Automation also provides a better experience for borrowers by reducing the amount of paperwork and shortening approval times.
•Compliance monitoring. Choose an LOS that helps ensure compliance with lending laws and regulations. The system should prompt lenders with the necessary disclosures and monitor loans to prevent predatory lending or other unethical practices.
•Reporting and analytics. Get insights into your lending portfolio and processes with detailed reports and analytics. Metrics on application volume, approval/denial rates, and more help lenders gain visibility into their operations and make better business decisions.
•Scalability. If your lending business grows quickly, your LOS needs to be able to scale with it. Look for a system that can handle an increasing number of users, loans, and integrations without sacrificing speed or performance.
•Customization. No two lenders have the exact same needs and processes. Select an LOS that provides flexibility through configuration options, APIs, and additional integrations. The system should work the way you do rather than requiring you to change your operations to fit its constraints.
Automated Workflow Management
To keep your loan origination process running smoothly, you need automated workflow management. This helps ensure tasks are completed efficiently and on time by the right people.
An automated workflow moves a loan application through the necessary steps and checkpoints, assigning responsibilities and deadlines to specific users based on their role.### For example, once a loan officer enters application details, the system automatically routes it to the underwriter for review. If approved, it then goes to the closing agent to prepare final paperwork.
With manual workflow management, there’s too much room for error and delay. Applications can sit for days awaiting the next review, and people may not realize they have a task to complete. Automated systems send email alerts as soon as a file is routed to a user, so they can handle it right away. They also track open tasks and deadlines to keep the process on schedule.
Workflow automation is highly customizable. You can set rules to determine the path each application takes based on details like loan type, applicant information, and loan amount. The workflows can also incorporate checklists, questions, and data validation at multiple points to ensure information is complete and accurate before moving forward.
By handling the routing and monitoring of loan applications, automated workflow tools reduce confusion, increase transparency, and speed up the overall origination process. Your team will be able to handle higher volumes and turnaround times will improve significantly. For any lending institution, optimized efficiency and productivity are essential, and automated workflow management is key.
Robust Reporting Capabilities
A robust reporting suite is essential for any modern loan origination system. As a lender, you need visibility into key metrics and KPIs to gain insights, uncover trends, and make data-driven decisions. Look for a system with:
Custom Reporting
The ability to create customized reports based on your specific needs and criteria. You should be able to filter, sort, and group data in reports by loan types, loan officers, time periods, and more. Reports may include loan volume, approval rates, turnaround times, and other metrics you define. Having a flexible reporting engine gives you the power to analyze data in the way that benefits your organization most.
Dashboards
Intuitive dashboards that provide an at-a-glance view of performance and productivity. Things like loan application funnels, loan officer scorecards, and portfolio snapshots should be included. Dashboards make key data visual and easily digestible so you can spot issues quickly and gain actionable insights.
Standard Reports
In addition to custom reporting, there should be a library of standard reports available out of the box. These may include origination by loan program or property type, loans in process, closed loans, loan exceptions, and compliance reports. Standard reports save you time and ensure you have data on essential KPIs at your fingertips.
Automated Report Delivery
The ability to schedule reports to run automatically and deliver to key stakeholders on a recurring basis. Automated report delivery eliminates the need to log in and generate reports manually, freeing up valuable time. Reports can be emailed on a daily, weekly or monthly basis based on the needs and roles of recipients.
Data Exporting
A way to easily export raw report data to CSV or Excel format. Exporting data gives you more flexibility in how you analyze and manipulate information. You may want to combine data from multiple reports, create pivot tables, or build charts and graphs not available in the standard reporting tools. Data exporting expands your options for gaining meaningful insights from loan origination data.
A robust, flexible reporting system will provide the transparency and metrics needed to gain a competitive advantage, pinpoint areas of opportunity, and make strategic improvements to lending programs and processes. Don’t settle for limited reporting capabilities in your loan origination software. Demand a solution that gives you the full, customizable visibility you need to optimize lending performance.
Flexible Integration Options
Having flexible integration options is crucial for any loan origination system. As lending institutions grow, their tech stacks become more complex. A system needs to work with both current technology as well as new solutions that may be adopted down the road.
Look for a system with open APIs (application programming interfaces) that allow for easy integration with other software. APIs provide a way for systems to communicate with each other, sharing data and functionality. With open APIs, the system can connect to everything from CRMs and marketing automation tools to accounting platforms and customer service software.
Several common integration options to consider include:
• Core systems integration – Connecting to core banking systems is a must. Data like customer information, accounts, and transactions should flow between the systems seamlessly.
• CRM integration – Integrating with your customer relationship management (CRM) solution allows contact and lead data to be shared, providing a single source of truth for your customer data.
• Accounting integration – An integration with your accounting software automates the flow of data related to loans, payments, fees, and income for more efficient and accurate bookkeeping and reporting.
• Servicing integration – For institutions that service loans, integration with servicing platforms is important to automatically onboard new loans and share data related to payments, escrow, default, or other events in the loan lifecycle.
• Third-party integrations – Many lenders rely on additional third-party tools for things like fraud detection, ID verification, appraisal management, and more. Look for a system that offers pre-built integrations to work with these kinds of partners or can build custom integrations as needed.
The more open and flexible a loan origination system is, the more it can grow and evolve with your business. Don’t overlook the importance of integration capabilities—having a system that can connect the dots across your entire tech stack is essential. With the right solution in place, you’ll have a single source of truth for all your lending data and processes for maximum efficiency.
Configurable Business Rules Engine
A configurable business rules engine is essential for an effective loan origination system. This feature allows you to set customized rules to automatically approve, deny or pend loan applications based on your specific lending criteria.
Having a rules engine gives you more control and flexibility over your lending decisions. You can configure rules based on:
Loan types (mortgage, auto, personal, etc.)
Applicant details (income, credit score, debt-to-income ratio, etc.)
Property details (for mortgage loans)
Loan terms (interest rate, down payment, amortization, etc.)
For example, you may set a rule to instantly approve applicants with over 700 credit scores and income 50% higher than the median for your area. Or deny those with bankruptcies in the last 2 years. The options are endless.
A good rules engine will also allow you to create complex rules with multiple conditions using “and/or” logic. For instance, approve applicants with 700+ scores or over $100,000 in annual income and less than 35% debt-to-income ratio.
With an intuitive interface, setting up and managing rules should be easy. Some systems provide pre-configured rules based on standard lending criteria which you can activate or customize as needed. You’ll want the ability to test how rules will function before implementing them, as well as get alerts if there are conflicting rules.
By taking lending decisions out of the hands of individual underwriters and putting control into a rules engine, you can speed up the application review process while reducing subjectivity and risk of human error. The end result is a faster, fairer, and more efficient lending process for your financial institution.
When evaluating loan origination systems, make sure the rules engine capability is robust enough to match your current and future needs. An ideal solution will provide enterprise-level flexibility and control over the entire lending lifecycle.
Multi-Channel Loan Applications
To effectively originate loans in today’s digital world, your loan origination system needs to offer borrowers the ability to apply for a loan through multiple channels.
Online Loan Applications
Allowing borrowers to apply for a loan directly on your website is a must. An online application that is optimized for mobile devices makes the process quick and easy for borrowers. With an online app, borrowers can apply day or night from anywhere.
Call Center Support
Even in an increasingly digital world, many borrowers still prefer to apply for a loan over the phone with the help of a call center representative. Your system should allow call center agents to take a loan application over the phone and directly enter the information into the platform on behalf of the borrower. This provides a human touchpoint for borrowers who want it.
In-Person Applications
For some borrowers, especially those with more complex financial situations, sitting down face-to-face with a loan officer to go through the application process is the most comfortable option. Your loan origination software needs to support in-person applications that can be taken on a laptop, tablet or other mobile device by a loan officer during an in-person meeting. The application should be easy to navigate and allow the loan officer to quickly and accurately input the borrower’s information.
Application Program Interfaces (APIs)
Many lenders and banks want the option to embed a loan application directly into their own website or portal. An open API allows your loan origination system to connect with third-party platforms. Borrowers can then start and complete a loan application without ever leaving the lender’s website. APIs deliver a seamless user experience for borrowers.
Offering multiple ways for borrowers to apply for a loan—online, over the phone, in-person or through an API—provides the convenience and flexibility today’s borrowers expect. A modern loan origination platform gives lenders the ability to meet borrowers wherever they are in the process.
Data Security Compliance
Data security and compliance are crucial for any loan origination system. If customer information isn’t properly protected, it puts the entire business at risk. As you evaluate different solutions, look for the following must-have features to ensure sensitive data remains secure:
Encryption
Encrypting data, both in transit and at rest, is essential. This means customer information should be encrypted when it’s stored on servers and also when it’s being transmitted between the lender and borrowers or third parties. Look for 256-bit SSL encryption or higher for data in transit and AES-256 for data at rest.
Role-based access
Not all employees need access to the same customer data. Role-based access control limits employee access to only the information they need to do their jobs. This helps prevent unauthorized access and ensures compliance with privacy regulations like GDPR.
Audit trails
Robust audit trailing tracks all access and changes made to customer accounts and loan files. This creates an electronic paper trail so any unauthorized access or tampering can be detected immediately. Audits should log who accessed accounts, what changes were made, time/date stamps, and more.
Integrations & API
For maximum data security, the loan origination system should offer secure integration options like APIs to connect with other software. This avoids the need to download and re-upload sensitive customer data between systems, reducing the risk of exposure or theft. APIs and integrations should use the same strong encryption and security controls as the main system.
Compliance certifications
Up-to-date compliance certifications like SOC 2 Type II and ISO 27001 demonstrate a solution meets strict security and control standards. Lenders can have confidence customer data will be properly safeguarded to avoid penalties, fines, and damage to reputation. Compliance also gives borrowers peace of mind their information is being responsibly handled.
Protecting customer data and maintaining compliance should be top priorities for any lender. Choosing a loan origination system with robust security features and controls helps minimize risks so you can focus on growing your business.
Scalability for Future Growth
To handle growth over time, an effective loan origination system needs to be scalable. As your business expands, the last thing you want is a system that can’t keep up and bogs down your processes. Look for a system with:
Flexibility to add new loan types
As you move into new markets or offer new products, your system should make it easy to configure new loan types with their own workflows, data fields, documents, compliance checks, and more. The more adaptable the platform, the less custom development needed to support your evolving product line.
Ability to handle higher volume
A scalable system is built to handle more loans and larger workloads without sacrificing speed or performance. It should allow you to increase the number of concurrent users, add server capacity, and scale the database as needed. The platform itself is designed for volume from the ground up using technologies that can scale.
Streamlined processes
Efficient processes are key to high volume. Look for a system with workflow automation, document generation, compliance monitoring, and other tools to speed up loan origination and servicing. The more you can optimize and accelerate processes, the higher the volume the system can support.
Reporting and analytics
As your volume grows, data becomes increasingly important and difficult to manage. A scalable system provides robust reporting and analytics to gain insights into key metrics, monitor productivity and quality, detect trends, and make better business decisions. Custom reports and dashboards give you visibility across your entire loan portfolio.
Integration capabilities
A system that integrates with your other tools will scale more easily. Look for pre-built integrations with services you use, like credit bureaus, fraud detection, document signing, etc. The system should also offer open APIs to build custom integrations with internal systems. Integrations reduce repetitive tasks, minimize errors, and allow data to flow seamlessly between systems.
With the right loan origination platform in place, your business can handle growth in volume, products, and complexity without breaking a sweat. Scalability gives you the freedom to expand into new areas and the confidence your system won’t hold you back.
Loan Origination System FAQs: Your Top Questions Answered
Loan Origination System FAQs: Your Top Questions Answered
So you’re interested in a loan origination system (LOS) but have some questions. No worries, we’ve got you covered. Here are the most common FAQs about LOS platforms:
What exactly is a loan origination system? An LOS, also known as a lending platform or mortgage software, is the technology used by lenders to manage the entire loan process from application to closing. It helps collect borrower information, pull credit reports, evaluate risk, and facilitate underwriting and approval.
Do I really need an LOS? If you’re a lender of any size, yes. An LOS can save you an enormous amount of time and manual effort. It automates key steps, reduces errors, and provides a centralized place to store all your loan data. Without an LOS, scaling your lending business would be nearly impossible.
How much does a loan origination system cost? LOS pricing varies depending on the features and capabilities you need. Many vendors charge an initial setup or implementation fee, plus ongoing monthly subscription fees. The total cost for a typical LOS ranges from $300 to $1500 per month for small to mid-sized lenders. Enterprise systems for large lenders can cost $10,000 per month or more.
What features should I look for in an LOS? Key features to consider include:
•Borrower and loan application management
•Automated underwriting
•Document management and e-signature capabilities
•Compliance monitoring and reporting tools
•Integrations with credit bureaus, banking systems, and other third-party services
•Robust reporting and analytics to gain insights into your lending operations
•Scalability to handle growth in loan volume and complexity
•Regular updates to keep the software current with industry regulations and standards
•A user-friendly interface for your team to easily navigate the system
•Round-the-clock support in case any issues arise
Does an LOS integrate with my other systems? Yes, most LOS platforms offer integrations with various third-party services like credit bureaus, CRMs, banking platforms, and document providers. These integrations allow for a seamless flow of data between systems and a better overall user experience. Be sure to ask potential LOS vendors about the specific integrations they offer to ensure maximum compatibility with your existing technology stack.
Conclusion
So there you have it, the key features your loan origination system can’t be without if you want to streamline your lending process and keep your borrowers happy. Don’t settle for a system that only covers the basics. Look for a solution with built-in compliance mechanisms, flexible workflows, robust reporting and analytics, and a modern interface your team will actually want to use. The right technology can transform your lending operations overnight. Do your research, ask the right questions, and invest in a system that’s equipped to handle anything your lending portfolio can throw at it. Your borrowers and bottom line will thank you.
