Conditional Approval

Conditional approval is a statement from a lender asserting that the lender is willing to lend funds to the potential borrower after the borrower meets specific conditions. When the borrower receives conditional approval on an application, it makes a stronger case for their application than prequalification alone. However, it is not a guarantee that the application will be approved. 

For example, there is a scenario where a clear approval is not possible for an application due to various reasons like insufficient evidence of ability to repay or the low credit rating of the applicant. In such scenarios, the lender may offer conditional approval and ask for additional documentation/data from the borrower to meet the required guidelines. The lender can also lower the borrowing amount or increase the rate of interest if documents/data to support the application are not submitted. These documents/data might be entered early in the application life cycle as additional factors to the scorecard to approve the application. For example, a borrower may declare their property assets or submit proof of a secondary source of income, to establish financial soundness. Or, a borrower may appoint a guarantor to mitigate the credit risk from a low FICO score.  

Here are some common approval conditions when the borrower may be asked to provide the supporting documents:

• Income and bank statements verifying the monthly income

• Additional paperwork to meet specific loan requirements

• Verification of homeowners insurance

• Gift letters for home buyers using gift funds for their down payment

• A letter of explanation for a recent large withdrawal

Conditional approval can help speed up the closing process as the underwriting (which is a lengthy process) is already completed. So it could take less time to review and finalize the closing documents if the borrower is conditionally approved.

With the Spring'22 release, Q2 Origination’s approval feature is enhanced to support conditional approval by allowing lenders to add policy conditions (of type Approval) to the application while reviewing the application. Prior to this release, when an application was submitted for review, it was either Rejected or Approved. This new feature allows the lenders to keep a check on the conditionsbefore full approval is provided to the borrower. 

How to conditionally approve an application

The APPROVAL tab allows you to review all the approval instances generated for an application. You can approve, reject, or conditionally approve an approval instance.To approve an approval instance conditionally, add policy conditions to it. You can add more than one policy condition to an application/party/collateral. When all the added policy conditions are satisfied, the approval instance's status changes from Conditionally Approved to Approved. The status of the approval instance depends on the cadence. To know how the approval instance status changes based on the cadence, see Approvals.

Until the application is in conditional approval status, it cannot move ahead in the loan origination process. This is achieved by setting up a task generation rule on the Approval Type policy conditions. When all these conditions are satisfied, a task is generated to mark them satisfied. 

Prerequisites

Before you proceed to conditionally approve an application, ensure that the following prerequisites are met:

• The approval process is configured by an administrator.

• An approval instance is generated and assigned to you.

• Policy conditions of Type Approval are configured.

Steps

To conditionally approve an application:

1. Log in to your Salesforce account.
   

2. Go to  (App Launcher) > Applications and select the application id that you want to review.
   

3. Go to More> Approval.

4. Select the approval instance you want to review and then select Review Approval.

5. In the Review Comments section, select  Add Conditions.

   1. In the Create Policy Condition window, select the object to which you want to add the conditions and then select Next Step.
      

      

   2. Selectto select the preconfigured policy condition.
      

      Note:

      Policy conditions of Type Approval should be configured before approving an application conditionally.
      

   3. In the Select Policy Condition Definition window, select the policy condition that you want to add.
      

      
      

      Note:

      This screen should only display the Approval Type policy condition.
      

   4. Specify the comments in the Officer Comments field, and then select Save.
      

      
      The added policy condition is displayed in the Review Comments section. 
      

   5. Specify the reason for conditional approval or any other information in the comments box, and then select Approve With Conditions.
      

      Note:

      • The added policy condition is displayed in the Policy Conditions section. The details of all the fields displayed in this section are explained here.

      • If the application requires only one reviewer to review the application, the approval instance Status should be updated to Conditionally Approved.

      • The Status of the policy condition should be in Exception when it is added.

      • The status of the approval instance remains to be Conditionally Approved until all the policy conditions are satisfied.