Application Creation
The first step in the origination process is creating applications for consumer and commercial loans and leases in Q2 Origination. Creating an application includes specifying the details relating to the lending product, the applicant applying for the loan, and the terms proposed by the lending organization. For example, for a consumer loan, you specify the loan amount, the desired loan payment frequency, the loan term, the interest rate, and the interest calculation details such as the days convention and the interest rate.
The configuration of the lending product that is chosen drives the rules and workflows related to the subsequent credit analysis, scoring, pricing, and documentation tasks and approvals. Once credit approval and pricing are done, the application is converted into a contract. Cloud Lending’s servicing platforms or your own servicing system are then used to service the contract.
Consumer Loans
Consumer loans are extended to individual borrowers. Education loans, simple loans, and home improvement loans are some examples of consumer loans. A lending organization can configure these as collateralized or non-collateralized, often referred to as secured and unsecured loans, respectively.
Commercial Loans
Commercial loans are extended to businesses and may be of the following types:
Loans taken by a business for operational reasons, for example, paying the salary of employees or setting up a new business venture.
Loans taken for purchase, development, or renovation of real estate for commercial purposes. The company would subsequently sell this property to customers, for example, a residential complex or a business complex, or use it for commercial purposes like developing a hotel or resort. These loans are called Commercial Real Estate (CRE) loans.
The due diligence and approval processes for commercial loans are mostly manual, given the extensive evaluation of the customer, the property, and the soundness of the realty decision.
Asset Class
The Asset Class in the CL product definition determines the type of consumer, commercial lending, or Lease product. It also determines the fields to be displayed for capturing the borrower information. Some asset classes are available out-of-the-box in Q2 Origination. You can create more asset classes as per your business requirements and product portfolio.
For example, the product type, loan, and asset class like commercial or consumer, determines the information required for an application. This also drives the rules and workflows related to the subsequent credit analysis, scoring, pricing, and documentation tasks and approvals. The Introduction section provides information about the steps required to process applications of different product types. Once credit approval and pricing are done, the application is converted into a contract. Cloud Lending’s servicing platforms or your own servicing system are then used to service the contract. You can capture details in the application that are carried forward into the contract for servicing, for example, the payment start date and disbursement date.
Use Contact as an Account
Q2 Originate 2.1003 and later considers both contact and account as an account. Therefore, when you create a contact from within the application, you must specify its legal entity type as an Individual to create an individual borrower. Q2 Originate associates it to a pseudo account by the same name, which is then displayed in the application. Similarly, if you have created contacts in the Salesforce org, you must associate them to accounts for them to be picked up as existing borrowers while creating an application.
You must select the org parameter Use Contact as Account to enable the new UI theme in Q2 Originate 2.1003.
Dashboard
When you save an application, the Loan Dashboard is created for it. The Loan Dashboard provides a high-level view of the most important components of the loan opportunity and lends access to detailed information related to the loan opportunity, borrowing entities, documents in the credit file, and any collateral pledged to the loan. The Loan Dashboard also provides access to other services such as fee management, credit memo generation, document management, collateral management, and loan task management.
Repayment Procedure (Loan)
The repayment procedure offers you multiple options for generating the repayment schedule for the loan. These include:
Equal Monthly Installments - The installment amount remains constant each month. This is the default value.
Flexible - The installment amount changes each month.
Equated Principal - The principal amount remains constant each month. The interest is calculated based on the principal outstanding, and over the life cycle of the loan, both the installment amount and the interest amount decrease.
Interest Only - During this period, the borrower is charged only for the interest accrued.
When the repayment procedure is Flexible, you must specify the flexible repayment plan in the Amortization tab of the application. If you are upgrading to Q2 Originate 2.5012 or later, refer to the section Repayment Procedure for steps to add the field to the application page layout.
The following chapters explain how to use the Applications tab to create an application.