A loan origination system (“LOS”) is technology that helps financial institutions generate loan documentation in a way that complies with regulatory and internal requirements. Banks and credit unions usually install loan origination software on their local servers or access it through a cloud-based platform.

Each day, banks and credit unions of all sizes across the United States utilize loan origination software to reduce risk and streamline lending.

Potential Benefits of a Loan Origination System

Before loan origination systems became common in banking, loan departments typically relied on legal form templates to manually generate promissory notes, deeds of trusts, and other documents for customers or members. This approach was time-consuming and prone to errors, especially for banks and credit unions that have many account holders, branches, and loans.

Loan origination systems help banks and credit unions overcome the challenges of manual document creation, delivering numerous potential benefits to the institution:

  • Compliance: Reduced risk of compliance issues caused by missing or errant information in documents.
  • Productivity: Increased efficiency through a streamlined approach to document generation.
  • Collectability: Preventing oversights in documents helps banks and credit unions ensure collectability during foreclosures.

How Banks and Credit Unions Use Loan Origination Systems

Some banks and credit unions use their LOS primarily for document preparation, while others use it from application through closing. Prior to use, however, financial institutions should ensure the LOS is configured to their specific needs. For example, a bank or credit union may determine that certain default clauses need to be adjusted prior to use. Consulting with the institution’s legal counsel is an important step to ensure proper LOS setup.

Once configured, general use of an LOS follows this basic workflow:

  1. A banker inputs specific pieces of information into the LOS that pertains to the customer/member, loan, and/or account.
  2. The LOS generates the document(s) that are appropriate for that specific situation.
  3. If a document requires a signature, the banker either prints it for wet signature or prepares it for eSignature.

Managing Documents Generated by Your LOS

Generating documents through an LOS is not the end of the story. Documents must be retained in accordance with the bank or credit union’s retention policy and other regulatory requirements. Some financial institutions choose to store most or all their documents in hard copy format, which can consume large amounts of physical space. Other banks and credit unions integrate their LOS to an electronic document management system, such as AccuAccount, which can yield additional efficiencies.

Continue Reading about Document Management

Download helpful eBooks and spreadsheet templates on our resource page. To read more banking terminology, visit our definitions page.

Explore more resources

eBook: NXT Level Optimization in Digital Banking

Future Proof your Digital Channels Many digital banking solutions fall short of today’s user experience expectations, opening the door for larger, digital only players and jeopardizing your established banking relationships for both consumer and business...
Read More »

AccuAccount: Solution Overview Brochure

Track and manage every loan document in one system and streamline loan management from application through servicing with our core-integrated software platform. From loan application automation, to drag-and-drop document imaging, to document tracking, and five...
Read More »

Related articles

Wednesday 7 June 2023

Enterprise Information Management (EIM) Solutions and their Role in Safeguarding Data Privacy at your Financial Institution

Data privacy remains a top priority for banking leaders across the globe and unfortunately, there isn’t a single solution or tactic that will stop a…

Learn More »

Monday 5 June 2023

The Savings Boost: 3 Ways a Modernized Deposits Platform Cuts Costs in the Back Office

Are item processing operations costing financial institutions more than the revenue they generate? Many industry experts say yes. With check volumes decreasing, the cost to maintain…

Learn More »

Wednesday 31 May 2023

4 Reasons an Enterprise Content and Information Management Strategy is an Investment in Growth for your Financial Institution

An emphasis on digital engagements is pushing financial institutions to take a step beyond simply acquiring data, but to utilize that intelligence and incorporate transformative…

Learn More »

Thursday 25 May 2023

[Playbook] Enabling a “Decentralized” Strategy for Electronic Documents

Here’s the situation: Your commercial lenders feel overwhelmed by the amount of electronic documents that land in their inboxes each day. Financial statements, collateral documents…

Learn More »

Tuesday 23 May 2023

Business Banking: Understanding Account Takeover Fraud and the Importance of Dual Control within your Digital Banking Platform

Corporate account takeover can be costly for an organization to repair, which is why it's crucial for banks and credit unions to rely on modern…

Learn More »

Tuesday 16 May 2023

Which Cloud Deployment Model is Right for Your Financial Institution?

The American Bankers Association (ABA) estimates that more than 90% of financial institutions maintain at least some data, applications, or operations in the cloud today. If…

Learn More »

Wednesday 10 May 2023

The Employee Side of Digital Banking: Administrative Tools You Need to Easily and Effectively Manage your Digital Banking Platform

Launching a new digital banking solution is exciting for banks and credit unions, but this isn’t the end of the journey, it’s just the beginning…

Learn More »

Wednesday 19 April 2023

Cloud Banking: A Strategic Business Objective, Not an IT Project

Cloud adoption in the banking industry has proven tangible results for institutions of all sizes, showing positive growth in the adoption of hosted environments versus…

Learn More »