Creating loan statuses that will meet your company’s needs is an important step in the process of setting up your company in LoanPro. The purpose of this article is to give general information about what loan statuses are to help you make decisions about which statuses your company will need. This article will also give basic information on other options that LoanPro has for tracking and grouping your loans so that your loan statuses will be as appropriate and useful as possible.
Loan statuses were designed to help you classify loans by where they are in the lending cycle. For example, if you have loans in the system that have not yet received funding, you might create a status called “Underwriting” in order to help you classify and easily search for these loans.
Which Loan Statuses Do You Need?
Remember that loan statuses should be specific to the loan process you follow. You should create a loan status for each major step of your loan cycle. You can then create any sub-statuses under those statuses that are useful in designating where the loan is in the loan cycle.
For example, if you want to decide if you should use a specific loan status, you will want to ask yourself what you would use it for. The chart below shows five possible loan statuses with associated sub-statuses. This is by no means what will be right for your company.
As an example, if your company acquires loan notes by purchasing seasoned notes from other companies, there is no reason for you to create an underwriting status for your company. It is best if you organize your statuses and sub-statuses well. In the chart above, you can see that there is a sub-status under the Underwriting status called In Review. If you use this sub-status to designate loans that haven’t been funded, but are being evaluated, it makes sense to include it as a sub-status under the underwriting status. You could make In Review it’s own loan status, but if you are only reviewing loans that are in the underwriting status, it makes the most sense to include In Review as a sub-status of Underwriting.
Conversely, there is a sub-status of approved under the underwriting status. If there is a large process that takes place between approval and funding of a loan in your company, it may make more sense to make approved it’s own loan status with sub-statuses underneath it.
Here is a breakdown of the Underwriting status with some explanation of what is occurring in each sub-status:
You can see that in this example, once a loan is funded, it moves to open status. Your company may have a different underwriting process or a label other than open for your performing loans. It is important that you choose statuses and sub-statuses that make sense for what you do as a company.
Other Loan Grouping Options
LoanPro offers other options for grouping your loans. This section will provide some explanation of the intent behind these other options so that you can make more informed decisions when choosing loan statuses. The other grouping options are:
- Portfolios – Portfolios were designed to let you designate your own groups of loans. We recommend you use portfolios to group loans by a static characteristic of those loans. For example, you might create loan portfolios to group loans by state, or by the language that the customers on those loans speak. By contrast, loan statuses were designed to group loans by where they are in your company’s loan cycle.
- Source Companies – Source companies were designed to help you group loans by which company you received the loan from or referred the customer to you.
Other Loan Tracking Options
LoanPro also gives you options for tracking specifics about a loan. For example, it may be tempting to add a loan status for your performing loans that has sub-statuses based on the delinquency of the loans. You may then want LoanPro to move your loans through these statuses automatically so you know which loans are behind what amount of days. This is unnecessary since LoanPro already keeps track of delinquency and offers other features so you can view loans by delinquency brackets. Here are the available options:
- Brackets – You can set up specific brackets that will let you search for and pull reports on loans based on:
- Aging – The number of days since the contract date on an account.
- Amount Past Due – The amount that is currently due on an account.
- Days Past Due – The number of days that an amount has been due on an account.
- Human Activity – The number of days since something that required human input (not a part of the daily update) happened on an account.
- Loan Recency – The number of days since a payment was made on an account.
- Checklist – You can create checklists that will let you record when items have occurred on a specific loan. You can then search for loans where items have been either checked or not checked. So, for example, if you require your borrower’s to send your proof of residence, when you receive proof of residence for a specific customer on a specific loan, you can create a proof of residence item on the checklist for your company and then check it off for that loan. You will then have the option to search for all loans that have or don’t have proof of residence.
- Custom Fields – Custom fields were designed so you can track values for your loans that LoanPro does not track natively. You can set up custom fields to hold numbers, dates, or even be presented to users as a selection box. While you could create a selection with options that represent significant points in your loan cycle, it is not necessary to do so, since loan status is intended to do just that. It’s also important to note that you can’t search by custom field values, so trying to do this wouldn’t be nearly as effective.
When creating the loan statuses and sub-statuses that your company will use, you should think through your company’s loan cycle and add statuses and related sub-statuses that represent all the significant parts of that cycle. Remember to accommodate for the divergent paths loans can take. For example, not every loan will be paid off completely, so make sure you have statuses and sub-statuses to accommodate things like collections and writing the loan off your books.