What is a loan origination software?

Today's lenders routinely use loan origination software (LOS) to streamline the lending lifecycle and make it more efficient for both lenders and borrowers.

LOS is a reaction to the traditional loan application process, which has tended to be both involved and time-consuming, requiring lenders to make many emails and phone calls and to complete extensive paperwork. Responding to lenders' many requests for documentation made the process tedious for borrowers as well.

Using LOS, lenders can easily determine accounts that belong to each customer and the balance on those accounts, allowing them to identify the greatest lending risks. LOS should capture loan applications for review and ensure that customers apply for the right loans based on their needs and qualifications. Given the volume of documents processed during a loan application, document tracking becomes a necessary feature of LOS. The software organizes documents in a central repository that includes applications, income reports, and identity verification documents.

When underwriting is required, LOS can automate much of the process, allowing lenders to easily define their own underwriting rules and quickly assess a customer's ability to repay a loan. LOS also contains disbursement-management features that can track the payments that lenders make to customers after approving their loans. The software is capable of monitoring payments that occur through an online system, by wire transfer or physical check.

LOS optimizes customer management by harvesting client information from multiple sources and storing it in a central location for convenient access. Lenders also can manage sales leads more easily with a LOS that can keep the information in one place. Post-sales, LOS can automatically generate invoices and send them to customers via email or SMS.

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