Autopilot for Loan Document Management

By Todd Hunter, Systemware, Inc.

Managing a commercial loan portfolio is a challenge in the best of times. With complex relationships, structures and risks, these portfolios require time and attention. The economic downturn makes the situation even more challenging as collateral values change and credit becomes tighter. Operations must stay on top of things and continually monitor the performance of every loan. They have to be prepared to respond quickly to changes in a customer’s business and financial position as well as manage the risk of undervalued collateral and a customer’s ability to meet commitments.

To complicate matters further, loan operations teams are under pressure to reduce operating costs, streamline work processes and improve the flow of info rmation. With little relief in sight, it’s time to re-think how we manage complex and voluminous commercial loan document processes.

Proactive Loan Document Management
Automation is a key solution that is designed to improve workflow, lower costs and help control info rmation. Automation doesn’t mean that loan operations teams are not paying attention. It means that, like the autopilot on an airplane, much of the system is automated to handle routine aspects of established processes. Just as the airplane pilot stays engaged and never relinquishes responsibility, the commercial loan manager continues to monitor the portfolio and is prepared to handle any extraordinary situations.

Key components of an automated commercial loan solution include:

Document imaging – The foundation for automating the process includes support for distributed scanning at branch locations, barcode recognition, and versatile indexing

Prescribed rules – Business rules controlling required documents based on loan or entity type

Time-based actions – Actions defined by time, such as quarterly financial reports

Event-based actions – Actions based on events, such as disbursements or payoffs

Security and retention rules – Business rules determining the retention policy for documents to meet compliance

Dashboards – Online reporting specific to each role in loan operations

Customer correspondence – Automated tools for streamlining contact with customers regarding documents

Situational Awareness
Automated solutions provide an awareness of the ongoing situation that allows a loan manager to continuously monitor the process and be prepared for any issues. Similar to autopilot on an airplane, process automation gives early indications of upcoming volatility and makes it possible to steer clear of risky conditions. Such early warnings help avoid problems such as non-performing loans and potential loss.

Compliance Efficiency
Another crucial aspect of managing loan documents is the ability to meticulously follow loan policies and regulatory compliance. Using a solution that proactively manages the documents ensures that exceptions, such as missing or expired documents, for example, are visible for action so they can be resolved quickly. The time spent preparing for audits is reduced substantially since loan files are organized and complete. They can easily be copied to a CD and distributed to an auditor within minutes. The net result is that resources can stop concentrating on administrative functions and focus instead on loan performance.

The Time Is Right
With commercial lending volume down in the midst of the current economic uncertainty, many bankers are feeling the need to hunker down and wait for better times. Instead, they should consider that the time is right now to upgrade to loan document automation solutions that will reduce the overall cost structure of loan operations. Many banks can realize a one to five full-time employee (FTE) realignment, plus savings on all document storage and handling costs. These are significant savings, and the avoidance of a single non-performing commercial loan more than justifies the investment.

<back to July 2009 Lending & Credit Digest>