Loan Applications Processing, Servicing and Payment Collection
This section is devoted to the capabilities of back-office users in the course of loan application processing and loan servicing. The actions described in this section, subject to the company policies, can be all available to one user or distributed between the users with fewer permissions. However, best industry practices and general standards allow dividing them into several stages or groups of actions.
In most cases one group of actions is available from one workplace, however, some actions may be available at multiple stages, and then are available from multiple workplaces.
Some Things to Start With
For successful use of the loan application processing and loan servicing functionalities, it is recommended to get familiar with the following articles, explaining some basic principles at the core of the further detailed actions:
Loan Life-Cycle
Origination
Origination is what happens when the loan application is created. This can be done by the customer themselves, or by a Lender’s representative (permitted to use the Origination workplace) following their contact with the customer. As a result of the Loan Origination, details of the customer and of the loan application are entered into the system.
Loan Check and Evaluations
Before the loan application gets to the Underwriter who will make the final decision about its approval or rejection it can pass through several other verifications/evaluations
Originators Decision: When the loan application is originated by the Lender’s representative (in a Store or by the Lender’s Back-Office employee), the Originator shall send the loan for approval
Automatic Processing: This stage is not really seen in the back-office, as TurnKey Lender’s dedicated decision engine evaluates the loan application validity on the background, based on the rules defined for the company and information about the loan/customer. For example, automatic processing may request information about the potential customer from a credit bureau. It is usually performed right after the application has been submitted.
Additional verifications: Subject to the settings of the credit product, the loan application may require additional verifications, such as bank account verification that can be performed after the loan origination or at the later stages (subject to the company processes and corresponding integration settings). The results of such verifications are visible to the users at the stages to follow.
Collateral Evaluation: If so is required by the product, the collateral manager enters information about the collateral used to secure the loan, assesses this information, makes a decision on the validity of this collateral and the possibility of the loan approval, as well as sets dates of the next collateral check (if required).
Risk Evaluation: The risk manager runs additional checks based on all the currently available information and results of the automatic processing and makes a decision on the validity of this collateral and the possibility of loan approval.
Final Approval/Rejection of the Loan Application (Underwriting)
Once the Loan Application has successfully passed all the required preliminary evaluations it most commonly gets to an Underwriter who is responsible for the final approval or rejection of the application.
In some credit products (smaller ones) such stage may be omitted and the decision may be made as a result of automatic processing or risk evaluation.
If the loan has been approved by the Underwriter, the Loan Offer and/or Agreement are executed and signed with the customer.
Gathering Investments
In some cases, the loan may require the additional gathering of the investments that can be performed after the Underwriter provides its initial approval. Such a loan becomes available at the Investor’s portal.
Loan Servicing
Once the Loan Agreement has been signed, the loan servicing stage starts:
Reimbursement and initial loan schedule update: The loan is reimbursed to the customer and the repayment schedule is adjusted (subject to the customer’s request or company procedures)
Loan payments: If everything is OK, the loan is payed-off in compliance with the schedule monitored by the Loan Manager
Handling payment issues: If there appear some issues with the loan repayment, the Loan Manager contacts the customer and applies all the possible effort to find mutually beneficial solutions
Loan closure: Subject to the flow of the loan repayment and decisions made in the process of its servicing the loan may be repaid, restructured or written off. Any external investments related to the loan are handled correspondingly.
Debt Collection
Should there appear any payment issues that cannot be handled by the Loan Manager, Collectors may be involved to force the loan collection process.
Loan Archive
Any rejected, canceled or closed loan is archived. Users with specific permissions can change the status of an archived loan.