The Last in a Four-Part Series on Creating Successful Operations

Loan operations is a multifaceted segment of a financial institution’s overall operations, and it consists of far more than just transactions. It represents a delicate balance of experienced personnel, effective technology, and efficient processes. Maintaining that balance in today’s competitive business environment is crucial to success and profitability.

While the capabilities of loan operations can differ from institution to institution, depending on size, sophistication, and market focus, any financial institution can adopt improved practices and better technologies to increase its efficiencies.

The people factor

In the “old” days, loan operations was referred to as loan processing. It involved clerical staff that reported to a loan officer. Today, this function requires proficiencies well beyond basic clerical tasks, and may even demand operational reorganization.

To compete successfully in the marketplace, financial institutions must first seek out skilled and experienced personnel. The job requires seasoned staff with a strong knowledge of loan documentation, as well as experience with the data processing features of loan platform systems.

Establishing a line separate from loan production manned with highly skilled staff can also result in improved processes and enhanced service to both internal customers (loan officers) and external customers (loan customers).

Ongoing staff training is equally critical and must be conducted consistently, particularly for institutions that have personnel in multiple sites. Additionally, having the right selection of vendors for loan platforms and loan accounting systems that are well-suited to the institution’s distinct needs will provide another efficiency advantage.

The advent of paperless technology

Some call it paper-pushing, the paper shuffle, or plain-old red tape, but paperwork by any name is perhaps loan operations’ biggest challenge. It affects productivity, profitability, and risk management.

Many institutions still rely on a manual filing process, which increases transaction time, heightens the possibility of errors, and of course, escalates overall costs. Fortunately, technology can help financial institutions drastically reduce the paper trail, often without a major or costly overhaul to their existing systems.

The right technology can eliminate redundant data entry and avoid duplicate worksheets and checklists. It can integrate front- and back-end loan processing, thereby improving efficiencies and ensuring accuracies. Documents can be scanned into a well-indexed electronic file. Users can then access loan file information from their desktop monitors.

When implementing any new technology, institutions should proceed with caution. Financial institutions should remain aware of the legal ramifications surrounding irreplaceable contractual documents. They should also recognize that regulators and auditors must have access to loan files. Therefore, institutions that adopt any new technology should also ensure that the necessary steps are taken to protect data integrity and security.

Better processes

Inefficient processes tie up personnel, waste time, and drive up costs. Often, workflow issues arise that affect both internal and external customers.

Loan officers expect fast and seamless processing of loan requests at the front end. Likewise, platform capabilities, data integrity, and internal control requirements must be met on the back end. Ultimately, workflow must be effective to support the accuracy and timeliness of hassle-free processing.

Conducting a straightforward process analysis, or workflow review, can uncover inefficiencies and help an institution identify and create smoother processes. For instance, financial institutions can improve the efficiency and integrity of their due diligence processes by creating standard search guidelines and reducing the number of locations from which data is obtained. Additionally, loan portfolio management can be enhanced with a centralized system.

In the end, establishing streamlined processes allows an institution to focus its resources where it counts -- on generating more loan revenue.