Applying Automation for Optimal Loan Origination Performance

Despite efforts to minimize loan origination costs, they remain constant in the origination process.

High loan volumes can disguise many production inefficiencies, but the rising costs involved with recruiting and hiring experienced staff is always present.

Lenders have seen significant inflation in the cost of good people and the corresponding increase in the cost of recruiting them. This has underscored the importance of making the most of an institution’s lending automation, allowing it to do more with fewer people.

As a result, many lenders are now giving serious consideration to the appropriate application of digital lending technologies and seeking out tools that offer them the flexibility to make adjustments to their tech stacks as they see fit with the IT resources they have in-house.

Some could argue that this consideration was due early last year when lenders began investing in technology to deal with COVID-related changes. But a global pandemic is not conducive to careful consideration of options.

Overnight, lenders were forced to work with remote teams and transact with borrowers over distance. Digital lending became a priority. Many rushed to implement tools that would keep them originating business, with only precursory consideration of the long-term value of these technologies.

But now, in hindsight, many lenders are reconsidering.

Today, many lenders are operating with bloated tech stacks that no longer serve to help the institution reach its goals. Today, lenders need to consolidate their production systems in order to reduce costs and free up resources they can use to grow.

Let’s look at what successful lenders should be considering as they undertake the work of making the most appropriate use of consumer lending automation.

The Primary Consideration: The Borrower

Providing a satisfying and fully compliant consumer loan origination process has become an industry-wide imperative. Given increased competition and regulatory oversight, no lender can afford to operate in any other manner.

As a consequence, the first consideration must be the borrowers. Lenders are realizing that today’s borrowers are not willing to accept a legacy process that doesn’t consider their needs and desires first. Given that new competitors are more than happy to provide such an experience, every lender is now focused on doing so.

But what is a satisfying borrower experience? Because different lenders serve different segments of the industry, there is no single answer to that question. In fact, many loan officers will tell you that there is often little uniformity in the needs or desires of the borrowers they serve.

This means that lenders must employ technology capable of supporting a range of processes around different loan and borrower types. This is not to suggest that lenders must do everything differently, just that they should have the power – and ability – to orchestrate their various workflows as they see fit to achieve both efficiency and borrower satisfaction.

The Critical Factor: Ease of Configuration

When COVID struck and lenders were forced to send their workforces home and begin to originate with their borrowers over distance, many went in search of technology solutions to solve those immediate problems. This is exactly what they needed to do at the time.

As a result, many lenders ended up with new technologies that were only good at solving a single problem. A good example of this was the rapid increase in point-of-sale (POS) technologies available on the market. Suddenly, lenders were able to effectively interact with borrowers online and through social media.

Today, our modern consumer loan origination system (LOS) technologies have integrated full POS capabilities, eliminating the need to connect these external tools to the lender’s database of record. At the same time, we see POS providers working to turn their platforms into more than point solutions, but with limited success.

The additional benefit these modern consumer origination technologies bring is flexibility in configuration. In the past, when lenders relied mostly on their technology providers to make changes to their platforms, flexibility was generally offered to lenders.

Today, loan originators want technology they can easily configure from the point of sale all the way through to the closing and beyond. This allows the lender to decide the appropriate use of automation for any loan product or workflow they care to design.

This gives lenders the ability to quickly create new workflows that allow them to rapidly shift to compete under new market conditions.

In today’s evolving purchase money market, lenders must be capable of managing multiple loan products delivered through multiple channels by smaller teams. Lenders want the power to make adjustments they feel will allow them to reach this goal, without requiring the support of an outside party.

A certain skill set and a knowledge of both the technology employed and the lender’s goals will still be required. But, modern origination technology finally makes it possible for the lender to determine how they will use technology to optimize the loan origination process and overall success.

The Impact of Getting Automation Right

Getting the lender’s automation solution right offers many benefits. First and foremost is higher borrower satisfaction. More than anything else, this will help a lender be more competitive in the ever-competitive marketplace.

But the right tech stack also has the potential to impact efficiency. Higher efficiency means closing on time, and lower overall origination costs. But it also means the lender has more flexibility to offer better customer service.

There has been a long-standing view that you can either have efficiency or good customer service, but it’s actually a balancing act of both of these that the smartest lenders use to differentiate themselves from the competition. Efficient lenders that are using the right technology can easily tailor their workflows to the needs of different borrowers.

Workflow orchestration is a game changer. Orchestration gives lenders highly efficient, specialized workflows to deliver higher levels of borrower satisfaction.

Getting Everything Technology Is Supposed to Offer

The traditional approach to lending technology, much like offerings in many other industries, has been that while you can have a great product, a great price and great customer service, the buyer can only pick two.

But today, consumer origination automation tools are capable of offering everything modern technology has long promised. But this is only possible if a clear thoughtful approach and a good process design are used to choose the right automation solution.

The days of piggy-backing/affixing a POS on an LOS to solve a problem are over. It’s about the smarter use of technology and the appropriate application of automation. Lenders that incorporate this strategy to implement technology will be more successful today and in the future.

Brit Barker is SVP Sales, Enterprise Solutions for the Irvine, Calif.-based Origence, a brand of the CUSO CU Direct.