Loan Zone: Making the Borrower’s Experience World-Class 

September 2018: Vol 41 No 9
Steven Martin
Key considerations for digitizing the lending process 
Loan Application Financial Help Form Concept

There are a number of pain points in the lending process at many financial institutions today, leaving members aggravated as their experience getting a loan falls far short of the convenient, digital processes they are used to in many other areas of their lives. The good news for credit unions is that automation along with some procedural changes can provide exactly that experience, starting with identifying some of these key areas for improvement.

Prefill information.
When it comes to new loan requests, we often ask the member to start from a clean slate. This is a waste of their time and yours if you already have their information. Best practice credit unions are pre-filling this information for the member, giving them a chance to correct or add, but not requiring them to fill in every field. A cutting-edge option is bringing in technology that pre-fills information from the borrower’s tax returns.

List required documents for members to upload.
Rather than asking for documents one at a time or, worse, requesting paper copies to be dropped off or snail-mailed, consider giving members the complete list of documents that will be required right out of the gate. That transparency allows members to go to their CPA or attorney one time to get all the information, rather than have a constant back-and-forth.

The most innovative lending teams also allow members to submit all of this information digitally. An online portal affords them more convenience, and provides the credit union significant efficiency—getting the documents faster and in some cases, using those documents to auto-populate spreads and credit files without data entry by either party.

Provide notifications via email, text and phone.
An easy area to fix in increasing transparency is making sure your member knows where things stand. You can do this with your online application through a progress bar, which is often expected by your borrowing member.

But you can also do this through email notifications or even phone calls, which may sound old-fashioned. However, a personal touch can go a long way. You will definitely differentiate your institution from others, alleviate concerns or anxieties about where things stand, and maybe learn something useful, too.

Ensure connectivity to internal and third-party sites.
The required connectivity for lending includes connectivity to such internal systems as the loan accounting system, customer data, and the sales and service platform. Credit bureau access is another basic electronic requirement. 

Beyond those systems, credit unions should examine their own lending process to decide what other data sources should be connected. For example, real estate lending groups should consider connecting to their real estate vendor services partner for ordering appraisals, flood checks and title insurance.

Automate decisions.
For simpler credits, let technology score and either make the credit decision or make a recommendation for the underwriter. Simpler credits may mean things like standardized products, smaller dollar amounts, straightforward financials and standard collateral, if applicable. You should be able to write the rules simply, for example, using a debt service coverage ratio and a credit score.

Now, there are many different ways to automate. If you already have a loan origination system, you may be able to use native automation. Or you could append a decision engine onto your existing process, feed it with the member’s information and get a decision quickly.

If you’re already automated, it may make sense to take another look at the rules. Make sure they are optimized for speed and do not require too much information. You don’t want to sacrifice credit quality, but there may be unnecessary rules in the existing scorecard.

Design workflow to give the entire team access to the deal.
When there are multiple groups involved in your lending process, your institution could benefit tremendously from a modern workflow. There are many different types of workflows available, so pay attention to the capabilities each can deliver:

  • Notifications - the workflow should notify participants that they have tasks assigned that are due
  • Allowance for sequential and concurrent work
  • Access no matter where you are - teams are often scattered in various offices, sometimes in different cities or states. Everyone should be able to access and view the workflow without limits
  • Access rights available for loan originators, analysts, portfolio managers, relationship managers, appraisal departments, documentation specialists, closers and even such external parties as attorneys.

Keep electronic credit files.
Documents don’t have to mean paper. Paper requires handling, scanning, indexing, filing, storing and eventual destruction. All of that can be eliminated by filing loan documents electronically. Many good solutions are available; the best allow for simple search and storage and have folder systems and meta fields, such as information about the document, its data and how long it should be kept.

Electronic credit files make managing the portfolio much easier. They provide portfolio managers everything they need, when they need it. Also, internal and external audit teams can do their work more thoroughly and efficiently with an electronic credit file from which real-time data is accessible.

Use electronic signatures.
Electronic signatures have been legally enforceable for more than 15 years; using one of the terrific solutions in the marketplace is an easy way to add convenience and reduce expense. The very best provide security, audit trail, document storage and notifications.

Automate correspondence with secure document upload.
One of my favorite solutions for the credit cycle involves ticklers. If you can set up your tickler system to automatically notify the member of exactly which documents are required, you are on the right track. Even better, if you can provide a secure document upload facility for them to send you their required documents, you will be making life more convenient and secure for them. Plus, you will save time and expense on your side, too. Some of the leading tickler systems have key correspondence and document-handling features and can be customized to your credit policy.

The borrower experience can be improved through a variety of commercially available, robust digital solutions. Some of these solutions may already exist elsewhere in your credit union, and some can be implemented quickly. This is a challenge worth solving because it can help your credit union grow safely while improving the borrower experience and lowering origination and administration expenses for the institution.

Steven Martin is vice president of Sageworks, Raleigh, N.C.

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