Have you ever wondered why some loan applications get approved right away while others seem to drag on forever? As a loan officer, you know that applying consistent rules and making objective decisions is key. A rule engine built into your loan origination system can help speed up the process and reduce headaches. With a rule engine, you define your lending criteria once, and the system applies it automatically for each application. No more worrying if you’re being consistent or playing favorites. A rule engine eliminates human errors and biases, so you can focus on the exceptions and complex cases, rather than wasting time on routine approvals. For your bank, it means faster, fairer lending decisions and happier customers. For you, it means less stress and more job satisfaction. If your loan origination system doesn’t already have a robust rules engine, talk to your software provider. It’s a game changer.
What Is a Loan Origination System?
A loan origination system (LOS) is the software that mortgage lenders use to manage the entire loan application process, from taking a loan application to approving and closing the loan. An LOS allows lenders to automate much of the loan origination workflow.
Why LOSs Need Rule Engines
Loan origination systems depend on rule engines to handle the complex logic required to determine loan eligibility and guide borrowers through the application process. A rule engine is software that evaluates data and executes predetermined rules that define a course of action.
Rule engines in LOSs handle tasks like:
-
Determining what documentation a borrower needs to provide based on their loan type and personal details.
-
Calculating debt-to-income ratios and ensuring borrowers stay within lending guidelines.
-
Checking that appraised home values meet requirements for the requested loan amount.
-
Ensuring data accuracy by flagging any inconsistent information provided during the application.
Without a robust rule engine, lenders would need teams of people to manually review each application and all supporting documents to verify information and make sure every detail complies with lending laws and the lender’s own guidelines. Rule engines automate this process, evaluating applications systematically and flagging anything that needs further review. This helps speed up application processing times and reduces costs for lenders.
In short, rule engines are essential for any LOS to function. They inject intelligence into the system and enable a smooth experience for both borrowers and lenders. Lenders benefit from faster application turnaround, lower costs, and reduced risk, while borrowers get quicker decisions and fewer hassles during the application process.
The Role of a Rule Engine in a LOS
A solid rule engine is essential for any modern loan origination system (LOS). Here’s why:
Flexibility
Rules engines give lenders flexibility. As regulations and policies change, lenders can easily adjust rules to comply without needing developers to alter the LOS code. This agility is crucial in today’s fast-changing lending environment.
Consistency
A rules engine applies policies uniformly across all loans. This ensures compliance and a consistent experience for borrowers and loan officers. Without a rules engine, lenders rely on human loan officers to manually check each loan for policy adherence, which can lead to overlooked issues or inconsistent application of rules.
Improved decision making
By codifying lending rules and policies, a rules engine can automatically validate loans and catch non-compliant scenarios early on. This allows loan officers to focus on more complex decision making instead of repetitive manual checks. The end result is faster, higher quality lending decisions.
Future-proofing
Rules engines future-proof LOSs by making them more adaptable to change. As new regulations and products emerge, lenders can simply update the rules, rather than re-coding their entire systems. This flexibility and extensibility maximizes the lifespan and value of a lender’s technology investment.
In summary, an intelligent rules engine should be considered essential infrastructure for any digital lending operation. By codifying policies in an adaptable rules engine, lenders gain compliance, consistency, improved decisions, and future-proofing —all of which drive a superior borrower experience and a more strategic, digitally-enabled lending business.
Benefits of Using a Rules Engine for Loan Origination
A robust rule engine is essential for any loan origination system. Here are some of the major benefits of implementing a rules engine:
Improved Compliance
With constantly changing regulations, keeping up with compliance requirements is challenging. A rules engine makes it easy to configure new rules as regulations change, ensuring your system stays compliant. You can create rules to validate data, check calculations, and enforce policies to meet legal and regulatory standards.
Increased Efficiency
A rules engine can automate many manual tasks, like validating application data, checking for errors, and routing applications through the proper workflow steps. This reduces the time and resources needed to process each application. Staff can focus on more complex tasks rather than repetitive data checks and reviews.
Improved Data Quality
By setting up rules to validate data as customers enter it into applications, you can catch errors and inconsistencies early on. This results in higher quality data from the start, reducing the need for manual reviews and corrections later in the process. Customers will also appreciate receiving immediate feedback if they enter invalid information.
Flexibility
A robust rules engine allows you to easily adjust rules to match your changing business needs. You can turn rules on and off, modify them, and add new rules without having to recode your software. This flexibility lets you optimize processes and address new issues quickly.
Consistency
With a rules engine, the same set of rules are applied to each application in a consistent manner. This helps ensure fair treatment of all applicants and reduces the risk of errors, subjectivity, and compliance issues that can result from manual reviews and decisions.
Using a rules engine for loan origination provides so many benefits, from compliance to efficiency to data quality. Any system without a rules engine will ultimately fall behind and require far more manual work. For success in today’s fast-paced lending environment, a rules engine is essential.
Features to Look for in a Powerful Rules Engine
A powerful rules engine is crucial for any modern loan origination system (LOS). The rules engine acts as the “brain” behind the LOS, automating and streamlining many of the decisions and processes involved in loan origination. Here are some of the key features to look for in an advanced rules engine:
Flexibility
The rules engine should be flexible enough to handle the complexity of your lending workflows and products. It should support multiple rule types, including deduction, validation, calculation, and routing rules. The engine should also allow you to create rule sets that can be applied to specific loan types, products, borrower attributes, and more.
Ease of Use
The rules engine should be intuitive and easy to use for business users and IT staff alike. It should provide a graphical user interface for designing rules and rule sets without needing to code. Users should be able to quickly build, test, implement, and modify rules as needed to respond to changes in regulations, products, and business requirements.
Seamless Integration
For maximum effectiveness, the rules engine needs to be tightly integrated into your LOS. It should be able to access data within the LOS in real time to evaluate rules and drive dynamic decisions. The rules engine should also be able to automatically trigger various actions within the LOS like data validation, calculations, task creation, and data routing.
Reporting and Audit Trails
A robust rules engine will provide detailed logging and audit trails to track how rules are applied and the outcomes they produce. It should offer reporting to gain insights into how the rules engine is impacting your lending operations and workflows. Comprehensive audit trails and reporting are also important for compliance.
Scalability
The rules engine must be able to scale with your business. It should handle a high volume of rules and decisions without impacting the performance of your LOS. The rules engine should also scale to support a growing number of users, loan types, and overall loan volume over time.
A sophisticated rules engine with these capabilities will transform your LOS into an intelligent, automated system that streamlines loan origination, reduces costs, minimizes risk, and ensures compliance. The power and flexibility of the rules engine is essential for optimizing your lending operations.
Integrating a Rules Engine Into Your LOS
A loan origination system (LOS) helps streamline the loan application process, but to truly optimize it, you need a rules engine. A rules engine allows you to set up automated rules and decision logic to handle parts of the lending process. This can save your team time and make the experience faster and more accurate for borrowers.
Reduce Manual Tasks
With a rules engine, you can automate many of the repetitive, manual tasks in loan origination like data validation, risk assessment, and decision making. For example, you can set up rules to automatically verify applicant information or check for fraud indicators. The rules engine will run through the rules and logic, validate the data, and flag any issues – all without manual intervention. This frees your team up to focus on more complex tasks.
Improve Accuracy and Compliance
A rules engine can help improve the accuracy of your LOS by enforcing consistent rules and logic every time. You won’t have to worry about human errors or subjective decision making. The rules engine will objectively evaluate each application according to the criteria you establish. This also helps ensure compliance with lending laws and regulations. The rules you set up will be based on the latest compliance requirements.
Faster Application Processing
With automation handling many of the routine parts of origination, you’ll be able to process loan applications much faster. Applicants won’t have to wait as long to get approved or denied. Your team will have more time to review and make final decisions on the applications that require human review. This speed and efficiency can help improve the customer experience and your conversion rates.
Easily Adjusted
The best part about a rules engine is that the rules and logic are easily adjusted as needed. If lending laws or your internal policies change, you can quickly update the rules engine to reflect the new requirements. You don’t have to overhaul your entire LOS or retrain staff. You simply modify or add new rules, and the rules engine will immediately start applying them. This flexibility and control allows your LOS to evolve with your business needs.
A rules engine brings automation and intelligence to your LOS, allowing for a faster, more accurate lending process. When integrated properly, it can have a hugely positive impact on productivity, compliance, and customer satisfaction. For these reasons, a rules engine is a must-have for any high-performing loan origination system.
Case Study: Lender Sees Increased Efficiency With Rules Engine
A major US-based mortgage lender saw significant improvements in efficiency and productivity after implementing a robust rules engine in their loan origination system (LOS).
Streamlined Loan Processing
With over 200 steps required to process a mortgage application, having a rules engine to automate many of these repetitive tasks saved loan officers and processors valuable time. As information was entered into the LOS, the rules engine would automatically determine what additional data, forms or documentation were required based on the specifics of the application. It would then generate a dynamic checklist for the loan officer to keep the application moving efficiently through to approval.
Reduced Compliance Risk
By embedding compliance rules and requirements into the rules engine, the risk of human error leading to non-compliance was greatly reduced. As data was entered, the rules engine would monitor for any information that did not meet guidelines. It would immediately flag the issue, specify what was required to correct it, and lock down the application from proceeding until resolved. This ensured applications were fully compliant before moving to the next stage.
Improved Data Quality
With a rules engine monitoring data inputs, quality was significantly improved. Invalid information, incomplete entries or data that did not meet formatting standards were detected upon entry. The user was prompted to correct the issue before the system would accept the data. This resulted in “clean” applications with higher data integrity moving efficiently through the origination process.
Increased Productivity
By automating repetitive tasks, flagging non-compliant or invalid information in real-time, and streamlining the application process with dynamic checklists, employee productivity saw major gains. Loan officers and processors were able to focus their efforts on high-value activities that truly required human intervention or judgment. The lender estimated a 35% reduction in the time required to process a “clean” application through to closing with the implementation of an advanced rules engine in their LOS.
Top 5 Rules Engines for Loan Origination Systems
A robust rules engine is essential for any modern loan origination system. It gives you the flexibility and control to configure your lending workflows and make real-time decisions without needing to change your core system code. Here are five of the top rules engines to consider for your LOS:
FICO Blaze Advisor
FICO Blaze Advisor is a full-featured business rules management system (BRMS) used by many leading banks and lenders. It provides an easy-to-use interface for creating complex rules involving risk, compliance, lending, and customer management. Blaze Advisor integrates directly with your LOS and core systems.
IBM Operational Decision Manager
IBM’s ODM is an enterprise-grade BRMS used by many Fortune 500 companies. It offers advanced rule authoring and management capabilities, complex event processing, and the ability to create predictive analytic models. The open architecture can be deployed on-premises or in the cloud.
Pega Decision Management
Pega Decision Management provides a robust framework for managing rules across your enterprise. It features an intuitive portal for business users to create and test rules, embed predictive models, and optimize and simulate rules before deployment. Pega is a leader for decision management and one of the top vendors for LOS and core systems.
FIS Profile
FIS Profile is a comprehensive decision management platform tailored for financial services. In addition to a flexible rules engine, Profile offers case management, workflow, and predictive analytic capabilities. It has pre-built solutions for areas like account opening, lending, customer service, and fraud detection that can provide a quick start for many lending processes.
Experian PowerCurve
Experian PowerCurve is a cloud-based decision management platform focused on lending, account opening, and customer relationship management. Its intuitive interface makes it easy for business users to create and manage rules. PowerCurve taps into Experian’s data and analytics to enable personalized customer experiences, accelerate lending decisions, and reduce risk. For LOS, it provides seamless integration and pre-configured solutions.
Using a specialized rules engine built for lending and financial services can help maximize the power and potential of your loan origination system. Evaluate vendors based on your specific needs, existing technology infrastructure, and long-term digital transformation roadmap. The right rules engine will give you the agility and control to improve processes, enhance the customer experience, and gain a competitive advantage.
Implementing a Rules-Based Approach: Best Practices
Implementing a rules-based approach for your loan origination system (LOS) requires following some best practices. To get started:
Define your rules and logic
First, determine what rules and logic you need to implement in your LOS. This could include things like:
-
Credit score requirements for different loan types
-
Debt-to-income ratio limits based on loan purpose
-
Property valuation policies
-
Verifying applicant information from various data sources
Clearly outline all the rules that will govern your lending decisions and structure the logic required to evaluate applications and make approvals.
Choose a flexible rules engine
Select a rules engine, like a business rules management system (BRMS), that can handle complex rules and logic. It should be:
-
Highly customizable to adapt to your specific needs
-
Able to integrate with your LOS and other systems
-
Capable of handling a high volume of rules and loan applications
-
Easy to update as rules and regulations change
The rules engine will act as the “brain” that applies your predetermined rules and logic to each loan application.
Carefully map rules to the engine
Map your rules and logic to the rules engine to ensure they are applied properly. This includes:
-
Translating each rule into a format the engine can interpret
-
Defining rule order and priority to resolve any conflicts
-
Setting rule parameters, like score thresholds and ratios
-
Testing the mapped rules with sample loan applications to validate they are functioning as intended
Double check that the rules engine is implementing your rules accurately before deploying it in your production LOS.
Monitor and update regularly
Rules and regulations in lending are constantly changing, so you need to monitor your rules engine frequently. Make any necessary updates to:
-
Adjust score, ratio or valuation requirements
-
Add or remove rules to comply with new regulations
-
Improve the rules engine’s accuracy and effectiveness over time
Staying on top of changes will keep your LOS compliant and ensure the best results. Using a rules-based approach backed by a powerful rules engine can transform your lending operations. Follow these best practices and your LOS will be equipped to handle complex rules and decisions, all while adapting to ongoing change.
Loan Origination System Rules Engine FAQs
A loan origination system rules engine allows lenders to configure and enforce business rules to streamline the lending process. Here are some frequently asked questions about rules engines:
What is a rules engine?
A rules engine is a software system that applies business rules to data to produce outcomes. In a loan origination system, the rules engine evaluates loan application data and uses business rules to determine whether the application should be auto-approved, sent for manual review, or denied based on the lender’s underwriting criteria.
Why do I need a rules engine?
A robust rules engine can help reduce costs, increase efficiency, and speed up funding times. As applications are submitted, the rules engine automatically reviews the details and data points to determine if the application meets the lender’s guidelines for approval. This reduces the need for manual reviews and helps get funding into the hands of borrowers faster.
Can I configure my own rules?
Yes, a key benefit of a rules engine is that lenders can configure their own rules to match their unique underwriting guidelines. Rules engines provide an interface for entering rules with “if-then” logic that can be highly customized for each lender. Lenders are in full control of their rules and can make changes as needed to adapt to market conditions or risk management strategies.
What types of rules can I set up?
Lenders can set up rules for income, debt-to-income ratios, loan-to-value ratios, credit scores, property types, loan terms, and more. For example, you may have rules that instantly deny applications with a credit score below 600 or debt-to-income ratio above 50%. Or rules that fast-track applications for physician loans up to 95% LTV. The possibilities are endless.
How are rules engines integrated with other systems?
Rules engines work in conjunction with other components of a loan origination system, including the application processing module, underwriting workbench, product eligibility engine, and pricing engine. As applications are submitted, the rules engine reviews the data and determines the appropriate next steps based on the outcomes of other systems and the lender’s configured rules. This seamless integration is key to an efficient lending process.
Conclusion
You’ve seen why a rule engine is so crucial for any modern loan origination system.Without one, you’re stuck manually configuring hundreds of business rules, and good luck keeping up with all the changes and updates.A rule engine handles all that for you, so you can focus on what really matters – improving your processes, boosting efficiency, and closing more loans.
If you’re evaluating new LOS solutions, make sure a robust rules engine is included.And if you already have a system in place, determine whether it’s flexible and powerful enough to meet your needs now and in the future.The mortgage industry moves fast, and you need technology that can keep up.A dynamic rule engine is the only way to stay ahead of the competition while reducing costs and risks.Give your team the tools they need to thrive, and you’ll all be celebrating more wins and stronger performance.Sounds like a smart investment to make.
