Understand the Digital Loan Origination System: Actionable Tips and Guide

3 Mins read

Banks are rapidly moving to the digital space to ensure a better customer experience for the borrowers and make things easier for lenders. That involves a mortgage loan origination software that can automate resurfacing processes and make lending faster, smoother, and more transparent.

Based on the statistics are anything to go by, more and more Americans are choosing digital loan origination when looking for a mortgage. 

However, to understand where is the current system lacking, we have to first look at what happens in a digital loan origination system. It isn’t very different from offline methods because the stages remain the same.

Different Stages of Digital loan origination system

1. The first stage is data gathering; this is called the pre-qualification stage. A borrower submits all the required documents to the lender.

Offline: This could take 2-3 days. 

Online: One could visit the lender’s website and use their calculator to determine whether or not their application is good to go. This would take minutes.

Problem with Online systems: Complex UI, which doesn’t support an applicant 

Resolution: An interface that makes the documentation easier

2. In the second stage, one has to apply. Upon reviewing the documents submitted, the lender would inform if the loan is possible to be sanctioned or not. If it is pre-approved, then you can make the application. 

Offline: 2-3 days

Online: The application process is done via a form provided on the lender’s portal. 

3. Now comes the 3rd and perhaps the longest stage of the loan origination cycle, which is the processing. 

This could go on for weeks, if not months, in offline methods. How this usually works out is this is the stage where all your documents are cross-checked and verified, and if some documents have been missed, then you might be asked to summon them, which can further delay the whole process. When all the documents have been checked, it is then passed onto the underwriters, who take various factors into account, including your credit score, risk score, etc. Your application is either denied, approved or resent for more details based on these numbers.

Offline: 15-20 days

Online: 2-3 days

How to make it faster: Use more intelligent AI and cloud-based software and can derive authentic information from other networks to verify and process more quickly.

Depending upon how the stages prior, the credit decision is made. 

4. The legal team and quality review departments come into the picture to further attest and verify the policy terms. 

Offline: 2-3 days

Online: 1-2 days

How to make it faster: Automate the transfer of ownership from one team to another.

The last stage is that of loan sanction. The funds are credited. 

As we can see, the digital loan origination cycle is shorter, but how does that happen? 

  1. They are automating repetitive tasks like data verification and gathering. Intelligent AI and algorithms can work hand-in-hand to check creditworthiness and assess the risk factors. They can also use data available on the cloud network to verify the documents. 
  2. Seamless flow: A lot can get lost in translation, especially when one process ends and the file has to be transferred to another manually. Online methods move files ahead right after a stage. 
  3. Immediate resolution: If a document is found missing or not fit, lenders may forget to notify the applicant in time; however, the workflow can be digitally set so that the software sends notifications and updates on the cycle. 
  4. Lack of human error: Underwriters and loan officers need computational support to ensure their calculations make sense. 

However, to ensure an omnichannel seamlessly integrated lending process, you need updating, intelligent, and best-in-class software. Tavant Encompass – Center of Excellence doesn’t just make your digital protocol easy to understand and easier to use; it also allows you to take up more leads and serve them faster. With intelligent AI backing your business, online methods can generate more revenue than offline.