Looking for Banker’s Toolbox? You are in the Right Place!

Banker’s Toolbox is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to Banker’s Toolbox Community Online.

Make yourself at home!

Looking for MainStreet Technologies? You are in the Right Place!

MainStreet Technologies is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the contact us button here, or the link in the top navigation, to reach product support for your MST products.

Make yourself at home!

Looking for Sageworks? You are in the Right Place!

Sageworks is now Abrigo, giving you a single source for all your enterprise risk management needs. Use the login button here, or the link in the top navigation, to log in to your Sageworks products.

Make yourself at home!

What is Loan Pathing?

by: Thomas Curley

Banks and credit unions inherently want to originate only the best loans, but that isn’t a reality in the banking world today. In an increasingly competitive environment, institutions look for earnings and efficiency gains. Many institutions look for these gains through expense cuts, but loan pathing may be solution. 

Loan pathing is the process of mapping the path that various loan applications follow, based on the application’s characteristics. The goal is to improve or optimize how loans are handled, and typically institutions implement this for only small to mid-sized loans. Loan pathing incorporates software and workflow management to ensure fast decisioning and a lower average origination cost. 

It is a relatively new concept that has been brought to life with the advancement in lending software and automation. In recent years there has been an obvious shift in customer expectations due to the availability of technology. No matter the industry, customers expect speed and accuracy. A slow loan decisioning process directly affects the customer experience and makes it difficult to win loans against competitors that can respond more quickly.   

When a loan application is received by an institution, in some instances it can be immediately weeded out or approved. But without a system in place to flag these obvious applications, all loans follow the same, laborious path, and analysts spend too much time on the strong and weak loans.  

If an application is strong  based on the criteria and thresholds set by the institution’s credit policy give it a quick approval to prevent competition from approving it first. Losing a deal on a strong loan leads to missed interest income and cross-sale opportunities down the road.  

Likewise, if a weak and risky loan enters the pipeline, it should also warrant a quick response. Every extra minute spent on evaluating a loan that inevitably will be denied is a waste of time and resources. By speeding up the application process for those loans, more time can be spent on evaluating the loans in the middle range. Former bank president Neill LeCorgne said in a recent whitepaper on loan pathing, “...applications in the middle should receive the most attention from commercial lenders, credit analysts, and approving officers, because making decisions for these loans is an art.” The loans in the middle are the ones that have the largest impact on returns and risk if not handled correctly.  

In an upcoming webinar, Loan Pathing: Fast Track Your Decisioning, Neill LeCorgne will discuss how to set up an effective loan pathing process at your institution. If used effectively this combination of automation and workflow management will help an institution improve the borrowing experience while also focusing resources on the loans that need more analysis.  

About the Author

Thomas Curley

Thomas Curley is a Segment Marketing Manager at Abrigo.

Full Bio

About Abrigo

Abrigo is a leading technology provider of compliance, credit risk, and lending solutions that community financial institutions use to manage risk and drive growth. Our software automates key processes — from anti-money laundering to fraud detection to lending solutions — empowering our customers by addressing their Enterprise Risk Management needs.

Make Big Things Happen.