Maintaining accurate and up-to-date records for a large volume of loans can be complex. If you think about how much tracking goes into monitoring the entire process of creating and approving loans, it can be overwhelming. It’s also critical not to waste time and effort, getting stuck in some manual step that might not even be necessary anymore.
What Needs to be Tracked During the Loan Process?
- Follow-ups
- Policy exceptions
- Covenants
- Funding schedules
- Leads
- Loan request status
- Insurance documents
- Sales goals
- Pipelines
- Online loan requests
- Appraisal status
- Renewals
- Recurring documents
- Business financials
- Rent rolls
- Site visits
How are these being tracked today?
- Excel® - Invented in 1985 – the same year Michael Jordan was drafted.
- Outlook™ - Released in 1990 – when the first episode of The Simpsons
- Sticky notes - Invented in 1968 – “Hey Jude” by The Beatles was the #1 song.
- Human memory - !!?!
Why are we doing it this way?
- “If it ain’t broke, don’t fix it.”
- “Everyone is already trained to do it this way.”
- “We have not found a better way to do it.”
- “This is the way we’ve always done it.”
Loan Tracking and Holiday Turkey Prep
This way of thinking reminds me of a story about turkey prep. A young woman was preparing a holiday turkey for her family. She cut off both legs and put it in the roasting pan to cook. Her child noticed and asked why. The woman answered that that was the way her mother had always done it. This made the young mother think about why she was preparing the turkey that way, so she called her mother to inquire about the reason. Her mother gave a similar answer – that’s how she’d seen her own mother prepare a turkey.
They then called the grandmother and discovered that the grandmother had done so over the years because her roasting pan was too small for a typical turkey – so she’d trimmed off the legs to make it fit!
Sometimes old habits die hard. And simply repeating previous practices is not only unnecessary but can be wasteful and counterproductive!
When it comes to your loan tracking system, consider how much time is wasted time because “It's the way you've always done it.”
So What’s Wrong with the Way We’ve Always Done It?
- We’re tracking in multiple places.
- We’re relying on imperfect humans/memory.
- We’re using manual processes that are slow and error-prone.
- We’re wasting too much time!
These outdated, manual processes can lead to missing items. For example:
Exception Tracking
In my former life as a lender, I never had exceptions on any of my loans, and I am guessing none of you have either. That’s a joke, so feel free to laugh! I can’t tell you how many times I was in trouble with my compliance department for this alone. When you’re working on a loan, you get caught up in the moment trying to get everything done in order to close, and eventually, you forget to log any exceptions you have.
Covenant Tracking
I talk to a lot of financial institutions. There are some that typically put covenants on loans. Then there are those that don’t. I often ask during my demos if the institution I’m talking to typically puts covenants on loans. I can always tell the ones that don’t because they’ll start laughing. Upon further investigation, this is usually because tracking and measuring the covenants is such a hassle.
Pipeline Tracking
Back in the day, I’d ask my loan officers to email me a weekly Excel sheet with the bank’s loan pipeline information. I think I spent more time emailing, calling, trying to chat with my loan officers just to get that report than I ever did going through it. On the loan officer side of things, I’m guessing they spent less than 30 seconds putting it together after I nagged them over and over. I’m sure the accuracy was not what it should’ve been.
Document Tracking
Tracking documents is typically one of the biggest pain points in lending. When we think of tracking documents, which ones do we need to collect upfront? If we miss a document, how are we tracking those documents? What about recurring documents? Let’s not even get started on past-due recurring documents and the difficulties there.
Think about how you send out notifications for documents. Are you sending those out manually? Then, how do you collect them? Typically, this is done in-branch or through email. Let’s break down what it looks like to track a document into each step:
1. Figure out who we need to collect from.
2. Prepare the notification.
3. Send the notification.
4. Wait.
5. Wait.
6. Wait.
7. Borrower returns the documents to you:
- Via email?
- Bring it into the branch?
8. Documents received, but:
- Is it the right document?
- Do you have to enter it manually?
9. Save the documents somewhere.
10. Analyze the documents.
11. Get the documents to imaging.
12. Reset the tracker and start at step 1 again / start all over again.
In an ideal world, how could we do it better?
- With one place to track everything.
- A dashboard that shows results.
- Generate reports with the click of a mouse.
- Programmed automated reminder emails.
- Easily escalate late items automatically.
- Have a secure, organized location to upload, file, and store all documents.
- Automate all processes.
- Use mobile technology to track on the road.
There are systems available that can manage day-to-day loan tracking and ultimately, make your life easier. Your institution can overcome the flawed “We’ve always done things this way” mindset by adopting and using innovative loan management software.
If you don’t, you’re likely wasting time and resources – and might just watch your competitors (and prospective borrowers) pass you by.
For more on this topic, here is a handy checklist that can help you eliminate unnecessary manual steps and take the pain out of loan tracking today.
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