Every day, financial institutions of varying sizes throughout the United States leverage loan origination software to minimize risk and optimize the lending process.
Potential Benefits of a Loan Origination System
Before the widespread adoption of loan origination systems in banking, loan departments typically relied on manual methods such as legal form templates to generate documents like promissory notes and deeds of trusts for customers or members. This manual approach was time-consuming and prone to errors, particularly for banks and credit unions managing numerous account holders, branches, and loans.
Loan origination systems offer a solution to these challenges, providing several potential benefits to financial institutions:
- Compliance: Minimized risk of compliance issues stemming from missing or inaccurate information in documents.
- Productivity: Enhanced efficiency achieved through a streamlined document generation process.
- Collectability: Improved document accuracy aids banks and credit unions in ensuring collectability, especially during foreclosures.
How Banks and Credit Unions Use Loan Origination Systems
While some banks and credit unions utilize their LOS primarily for document preparation, others employ it throughout the entire loan process, from application to closing. However, prior to implementation, financial institutions must ensure that the LOS is tailored to their specific requirements. This may involve adjusting default clauses or configurations according to the institution’s needs, a step often guided by consultation with legal counsel.
Once configured, the general workflow of an LOS is as follows:
- Bankers input relevant customer/member, loan, and/or account information into the LOS.
- The LOS generates the appropriate document(s) for the specific situation.
- If a document necessitates a signature, the banker either prints it for wet signature or prepares it for eSignature.
Managing Documents Generated by Your LOS
Generating documents using an LOS is just the beginning. Document management extends beyond mere generation; it entails adhering to the bank or credit union’s retention policy and other regulatory mandates. While some financial institutions opt for storing documents in hard copy format, this can consume significant physical space. Alternatively, others integrate their LOS with electronic document management systems like AccuAccount, which offers additional efficiencies.
