Posted by MeridianLink | September 15, 2020

Loan Origination Software (LOS): Consumer vs. Mortgage

Loan origination software (LOS) plays a vital role for any financial institution. Those shopping around for a LOS (or replacing their current system) must first uncover what their business needs/goals consist of, and then determine whether they require consumer lending, mortgage lending, or both. The following blog post summarizes what each type of LOS is, and also aims to answer questions your financial institution might be asking during the discovery process. In this blog post we uncover the following:

  • What is a consumer loan?
  • What is a consumer loan origination system?
  • Overview of LoansPQ, a consumer loan origination system.
  • What is a mortgage loan?
  • What is a mortgage loan origination system?
  • Overview of LendingQB, a mortgage origination system.

If you’re looking for the answers to the following questions, you’re certainly in the right spot. Read on to learn more.

Loan origination software is the cornerstone of a successful financial institution. But how do you get there? As we’ve previously stated, financial institutions tasked with making an educated LOS purchase can be put in a precarious situation—the options seem to grow by the day, and software vendors developing LOS platforms often present similar claims. And because not every lender is the same, it all boils down to the due diligence period—look at a variety of vendors and talk about your criteria/goals. Lenders that utilize a superior product will easily acquire new customers and members for their branch; while positioning the financial institution for future success.

A LOS typically specializes in one of two loan areas: consumer lending or mortgage lending. When compared to a mortgage loan, most consumer loans are much simpler to review and require less information to apply for; thus, the two solutions are built out separately. Mortgage loans require more steps, more processes, and more time to complete. Because of this, these two loan types require different teams of people, with distinct education backgrounds and certifications. Therefore, the solutions are built to accommodate different workflows.

For those lending experts who know all about loan origination software, this may be a bit of a review. For those new to the digital lending world, we’d like to share with you the main differences between a mortgage origination system and consumer loan origination system.  

What is a Consumer Loan?

Let’s start out with the basics. A consumer loan, according to the Corporate Finance Institute, is “a loan given to consumers to finance specific types of expenditures. In other words, a consumer loan is any type of loan made to a consumer by a creditor. The loan can be secured (backed by the assets of the borrower) or unsecured (not backed by the assets of the borrower).” Examples of consumers loans include:

  • Credit cards
  • Auto loans
  • Student loans
  • Personal loans 

The application, processing, and funding for the examples above can all be done by utilizing a consumer loan origination system.

What is a Consumer Loan Origination System (LOS)?

A consumer loan origination system (LOS) is a type of loan origination software that allows a consumer to apply for a specific type of loan (see examples below) from a financial institution. Consumer loan origination software is a technology that streamlines the consumer loan applicant’s information, including such parameters as their credit data, and then applies specific business rules to determine a response for the applicant. The LOS will also fund the loan once the applicant agrees to the terms and services. Common loan types that are supported by the majority of consumer loan origination systems are:  

  • Direct/indirect auto loans
  • Indirect retail loans
  • Unsecured/secured personal loans
  • Lines of credit
  • Business loans
  • Home equity

A superior consumer loan origination system will allow for a consumer to apply for these loan types online, from the privacy of their homes, and on their timeframe. A fully realized LOS will prompt the same information, apply the same rules, go through the same steps…basically it’ll ensure that the process is just as quick as it would be in-branch.

Consumer LOS | LoansPQ Overview

The LoansPQ loan origination system is the industry’s leading consumer loan origination software, providing a full loan product suite to banks and credit unions. As a single loan origination system, LoansPQ consolidates and streamlines applications from all channels. This applies the same rules and procedures to ensure a streamline process for banks and credit union staff, and a world-class consumer experience for their members and customers.

Many of the top financial institutions today rely on LoansPQ as their loan origination system. LoansPQ ml_loansPQ_ds ensures a frictionless experience, by easily consolidating data from all existing channels—mobile, online, branch, call center, indirect, retail, and kiosk—into a single origination point. LoansPQ also provides over 1,000 configuration points, 200 third-party integrations, a robust underwriting and pricing engine, full loan product suite support, and a configurable dynamic workflow engine. This makes LoansPQ a loan origination software that can be tailored to fit the needs of any financial institution. 

What is a Mortgage Loan?

Now that we know what a consumer loan is all about, let’s get a more in-depth look at mortgage loans. Consumer Finance Protection Bureau states, “Mortgage loans are used to buy a home or to borrow money against the value of a home you already own. A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you’ve borrowed plus interest.” To put it simply, this is the loan a person would apply for when they want to purchase a home.

Although a mortgage is considered a consumer loan, it typically lives in its own category, as it is a lot more complex. Comparatively, major retailers often offer credit cards, known as indirect retail loans. The process to apply and get approved for a store credit card is typically very quick, within minutes. Most consumers walk out the door with a credit card open and working. The application for a mortgage loan requires much more consumer information, including proof of income, and proof of other assets.

Because the process surrounding an application for a mortgage loan is much more complex and time consuming, a mortgage-based LOS is crucial to proactively see things through to the end. As much as home buyers would like the process to be quick, this is not always the case. There are many moving parts for a mortgage-based loan to find its way to fruition. These are the reasons why this type of loan requires a totally separate LOS from consumer-based loans.

What is Mortgage Origination System?  

A mortgage origination system is a type of loan origination software that allows for a consumer to apply and receive their mortgage loan from a financial institution. A mortgage origination system is a key infrastructure piece for every mortgage lender to have. The mortgage LOS creates a streamlined process in collecting the consumer’s data, processes that data, and applies the set-up of business rules and stipulations in order to properly provide a loan amount for a home buyer.

A mortgage origination system is designed for a mortgage lender, as the solution is an end-to-end system and completes all the steps from application, processes, to the funding of the loan. There are pieces of the solution that can be used by a mortgage broker, but this LOS is built for the daily use of a mortgage lender.

Superior mortgage origination software will ensure that the applicant can go through the entire process of applying and receiving the mortgage loan from the comfort of their home. Digital mortgage lending is possible and can be completed safely and quickly for all parties involved.

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