A Lending Audit Doesn’t Have to be Painful for your Bank or Credit Union

Fair and equitable lending practices play an important role in our society, and the market is bursting with regulated risk areas. Intuitive product designs and ease of use not only benefit borrowers and lenders day-to-day, but the financial institution during an audit.

Banks and credit unions are beholden to audits performed by their governing bodies to demonstrate their commitment to regulation and compliance, during which regulators look at risk areas to measure the tools, processes, and procedures in place. Like any audit, transparency and simplicity are important to streamline the process and ensure a speedy completion with positive results. Just ask the Chief Lending Officer of Austin Telco Federal Credit Union, Tony Rawls.

What types of risks are reviewed?

Examining lending risks faced by financial institutions help us better understand how systems and software mitigate threats and meet audit requirements. Measuring the creditworthiness of a borrower helps lenders evaluate default risks, where the borrower fails to make required payments. This must be considered when a financial institution decisions a loan application, along with the applicants’ ability to make all required payments.

Where collateral is involved, liquidity and interest risk must also be considered. This is a risk that institutions face where they may be unable to meet short term financial demands. This manifests as a result of depreciated collateral or the time required to convert an asset, in the case of a loan default.

Another important risk for all financial institutions is documentation risk: an evaluation that exposes the institution’s financial assets, customers, and information if they do not securely store confidential data in the cloud or a secure server.

Best practices, tips and tricks.

As I mentioned earlier, Austin Telco FCU recently underwent an audit of FinanceGenius, Alogent’s loan origination platform. In addition to ease-of-use and completeness of the solution, Rawls shared how quickly the NCUA team was able to gain access to the platform, and to review the applications, underwriting, denials, and documentation. Tony explained, “The audit team was extremely impressed with the look, function, and thoroughness of FinanceGenius, making the audit painless for our credit union.”

This experience is common for FinanceGenius users, as the platform approaches lending from a best- practices standpoint, building on Alogent’s digital ecosystem, and integrating with value added partners.

• Thorough traceability for a rules-based loan approval is important to decide on a loan, as well as to demonstrate compliant lending practices. A platform that is easy to navigate qualifying criteria for a borrower allows underwriters to make informed decisions, as well as to demonstrate objective decision-making processes to regulators.
• Gap insurance is a common tool used to mitigate losses associated with liquidity and interest risk on a loan. FinanceGenius integrates cross marketing/selling for Gap insurance based on configurable rules thresholds, providing an integrated risk mitigation process directly within the loan application workflow. Integrating with best-in-class third-party service providers also provides real-time credit worthiness assessments, flexible loan term and payment calculations, and collateral valuation services that further enable lenders to minimize risk.
• Cloud-enabled document storage and integration with the Alogent ecosystem provide secure accessibility for loan related documentation. Integrations with electronic signing partners streamline lending workflows and ensure all documentation is aggregated and collected in accordance with your institutions’ procedures.

“The audit team [at Austin Telco FCU] indicated that FinanceGenius was one of the easiest systems to learn in comparison to others they’d seen, and that the level of information presented for underwriting and documentation was vastly superior to other offerings,” said Tony. “We’ve loved FinanceGenius day-to-day, but it’s always nice to hear external confirmation.”

Read about Austin Telco's complete audit experience in a case study. 

Click here to learn more about FinanceGenius and its simple, easy-to-use capabilities that can quickly be implemented at your financial institution.