Leveraging Digital Lending Solutions for Exception Tracking

Exception tracking is a part of the loan origination process that can have great benefits through implementing a digital lending solution. Most financial institutions use some kind of checklist for exception tracking to manage their loan requirements. These are usually an Excel spreadsheet, Word documents, or physical paper kept in front of the loan file. These antiquated processes are cumbersome to maintain and difficult to keep uniform throughout various departments, leading to missing requirements, communication struggles, and frustrations for both financial institution team members and customers. So, what options are there to streamlining exception tracking? Baker Hill NextGen® has digital lending solutions available to help you minimize the need for paper checklists and effectively track exceptions throughout the entire lending process.

First, it’s important to understand how you are using your paper checklists before converting to digital lending solutions. These typically tell the story of your loan process starting with pre-approval requirements like financials and CIP/entity docs. The next steps are typically due diligence requirements needed for closing such as appraisals, insurance, title etc. The final steps in the process are usually post-closing/booking, exceptions, and ongoing requirements.

When evaluating digital lending solutions to help manage exception tracking, it’s important to ask yourself a lot of questions about your checklists. What are your checklists based on? Does each role such as lender, loan assist, processor, credit, have its own requirements? have its own (Lender/Loan Assist, Processor, Credit)? What about different collateral or products such as real estate, vehicle, or revolving?

Are you using a lot of different checklists by scenario such as construction, SBA, or real estate?

Second, it’s important to understand what is being tracked to completion with your paper checklists that digital lending solutions could help you track exceptions more efficiently.

You can break these down into two types: documentation items and process items. Documentation items would be any physical requirements like appraisals, inspections, entity docs, financials, insurance etc.  Process items fall into two categories; One: reminders to do something like completing the loan narrative, pulling credit, collecting fees and Two:  steps to completion of a document like order appraisal, review insurance, or Jane in X department needs to review/scan and send email to booking department.   

Both documentation and process item types can be translated into digital lending solutions like Baker Hill NextGen®, but you will need to decide the right ones to use for your team and processes.

Electronic checklists within digital lending solutions are your primary and best tool. This allows you to create multiple tracking items at once based on the scenario. Tracking statuses can account for many process items and will provide visibility to team members and reporting capability within digital lending solutions. Ordering/reviewing documents or noting when received are all easy translation to statuses.

If you are using one of our loan origination digital lending solutions, you will also have access to tasks. These are great for one and done process items like collecting fees or completing narratives. If tasks are too limiting, you can create a tracking family for those and have a limited status set to show when it is needed and when it is completed. This gives you the bonus of being able to include in your electronic checklists and keeping the requirements together.

Translating these checklists from a manual process to digital lending solutions can be overwhelming, here’s some considerations to assist with decision making:

• Keep as close to what you know as possible. Name the tracking items and checklists the way they are today as this will help with adoption.
• Make sure to gather examples of checklists from all departments. You may be surprised by how many you have.
• Check for overlap, especially if departments have multiple checklists or you have team members who wear multiple hats.
• Consider the business reasons you have these checklists. Do you have users with multiple hats or newer users needing a lot of guidance? Are there issues with communication between teams? 
• Do you have one checklist for all requirements or multiple checklists for different scenarios? Are there items listed that you don’t need every time? Some prefer to include everything in one so all tracking items are together and others either move them to a separate checklist or plan to create tracking items only when needed.

When you are ready to start translating your “paper” checklists to digital lending solutions, focus on the ones most frequently used first and run your existing processes parallel with your digital lendign solutions to make sure everything needed is accounted for. Managing loan requirements is a necessity and streamlining some of the above with modern digital lending solutions can provide a lot of lift for users responsible for and improve visibility for the overall team.

Baker Hill has been evolving the way banks and credit unions lend for almost four decades with digital lending solutions that help financial institutions reduce friction throughout the entire lending process. The technology behind the digital lending solutions is paired with deep lending experience to grow loans, effectively manage risk, and drive profitability for banks and credit unions across the United States.