In lending and financial services, the credit origination process plays a crucial and significant role. With design and delivery components that put customers’ expectations first, the finance industry is now refocusing on customer engagement and satisfaction and for this financial institutions are turning to BankPoint. A loan will have a unique approval process, which may be automated or human. Credit origination solutions handle the entire process, from prequalification to funding approval.
What is Credit Origination Solution
A Loan Origination Software (LOS) oversees a loan transaction from beginning to end after receiving a completed loan application. To reduce risk and improve loan production quality, LOS systems may integrate components such as records management, pricing, compliance tools, and eligibility engines. During this process, it also incorporates a variety of other systems, such as CRM, POS, document generation, third-party vendors, and compliance.
To understand LOS in a nutshell, you could say that loan origination is the process by which a borrower, or individual, applies for a mortgage, and the lender either accepts or denies the application. From application to finance payout, or rejection of the application, the entire origination process is included.
7 Components of Credit Origination Solutions
1. Process of Pre-Qualification:
In this step, the prospective borrower will receive a list of what they need to present to the lender in order to be approved. This may include:
- The voter identification card, the AADHAR card, and the PAN card are all acceptable forms of identification and address verification.
- Pay stubs and information about current employment
- History of credit,
- Statements from the bank and previous loans
2. Request For a Loan:
The borrower completes a loan application during this phase of loan origination solutions after completing the first stage. It may occasionally be sent on paper; however, today’s lenders are moving toward electronic submissions, making this stage Paperless. With the help of new technology, applications may now be submitted online or through a mobile app, and the data gathered can be tailored to particular loan products.
3. Processing of Applications:
At this point, the credit department receives the application, and it checks it for sincerity, accuracy, and completeness first. Should all the mandatory fields not be filled out, the application will be returned to the borrower or the credit analyst, who will contact the borrower to get the information that is missing.
4. Process of Underwriting:
Once a complete application has been submitted, the underwriting process begins. Several factors, including credit score and risk score, are taken into account by the lender when evaluating the application, and many lenders create their own scoring criteria tailored specifically to their industry and business. In a rule engine, lenders can load product-specific underwriting standards.
5. Credit Assessment:
As a result of the underwriting process, an application may be approved, rejected, or referred back to the originator for further discussion. In the loan decisioning software, there may be automated modifications in the parameters, such as reducing the loan amount or changing the interest rate, if certain criteria do not conform to the system’s rule engine.
6. Quality Control:
For lenders, the quality check phase of the loan origination process is crucial since lending is heavily regulated. Before financing, the quality control team reviews the application for the last time, comparing it with internal and external laws and regulations.
7. Loan Financing:
Generally, loans finance quickly after they are signed. However, loans against property, business loans, second mortgage loans, and lines of credit may take longer to complete due to regulatory and legal requirements. LOS can monitor funds and ensure that the appropriate papers are signed before or concurrent with funding.