How Does the Decision Engine Work in the LendFoundry Loan Origination System?
Loan origination can be a complex and time-consuming process, involving numerous steps and decisions. LendFoundry, a comprehensive loan origination system, offers a powerful Decision Engine to streamline this process and make it more efficient. In this blog, we will delve into the workings of the Decision Engine in the LendFoundry Loan Origination system, exploring what Decision Engines are, how they help automate loan origination, the concept of business rules, and specific examples of business rules in action within the Decision Engine.
What Are Decision Engines?
Decision Engines, in the context of the LendFoundry Loan Origination System, are the intelligent core components responsible for automating various aspects of the loan origination process. They use a combination of data sources, business rules, and workflow automation to make decisions at different stages of the application workflow. These decisions help determine how the loan application progresses and, ultimately, whether it is approved or denied.
How Decision Engines Can Help with Automation
Automation is a key feature of LendFoundry's Decision Engine, and it plays a crucial role in simplifying the loan origination process. Here's how it works:
Data Collection and Integration
LendFoundry integrates seamlessly with third-party data providers, enabling the automatic retrieval of essential information required for underwriting. This includes credit scores, employment verification, bank statements, tax returns, and other relevant data. Additionally, it can use Optical Character Recognition (OCR) technology to extract data from scanned or photographed documents.
Furthermore, the Decision Engine is not limited to external data sources. It can also compute data that is useful in the underwriting process, such as cash flow analysis and debt-to-income ratios.
Decision Rules Engine
The Decision Rules Engine is the heart of the Decision Engine in LendFoundry. It utilizes the data collected from various sources to automatically execute business rules at different stages of the loan application workflow. This engine is versatile and is used in various scenarios, including:
- Workflow management: Applications move through different stages of the workflow, guided by business rules.
- Automated verifications: The engine can handle tasks like credit/risk modeling and offer generation.
- Rule management: LendFoundry provides tools to configure, modify, and test rules before implementing them in production.
Workflow Automation
By combining data from third-party providers with the Decision Rules Engine, LendFoundry creates an automated workflow that guides applications through all necessary stages. This can range from initial data collection to the final loan decision. The workflow engine is highly configurable, allowing for both automated rules and human intervention when needed.
It can also:
- Engage with multiple third parties to gather additional data.
- Integrate using APIs with a client's proprietary code.
- Support various product types and loan products.
- Incorporate credit models for different loan products.
- Generate one or multiple offers for selected loan products.
In essence, LendFoundry offers a high degree of automation while still allowing for necessary manual processes.
What Are Business Rules?
Business rules are the foundational principles of the Decision Engine, guiding its decision-making in the loan origination process. They serve as the criteria and guidelines that determine how the engine operates. These rules act as a set of instructions, dictating under what conditions specific decisions should be made. Business rules can be triggered automatically, often based on predefined data parameters, or they can be initiated manually when specific events or actions occur. These rules ensure consistency and efficiency in the loan origination process, allowing for both automated and human-guided decision pathways, depending on the circumstances and requirements of each loan application.
Example of a Business Rule Used in Decision Engine
Let's look at a practical example of a business rule used in LendFoundry's Decision Engine:
Suppose a rule is set up to determine the loan product based on the "loan amount requested." The rule could be defined as follows:
- If the loan amount is less than $5,000, assign the loan product as "micro_loan."
- If the loan amount is greater than $5,000, assign the loan product as "standard_term_loan."
This simple rule demonstrates how business rules can help automate the decision-making process, allowing for quick and accurate product assignments based on application data.
Business rules can range from simple to complex. Simple rules are typically written as functions within the workflow engine, while more complicated rules can be developed as microservices that can be used across different components of LendFoundry. Additionally, the Loan Origination System supports the calling of external services via APIs, offering even more flexibility for rule execution.
How LendFoundry Decision Engine Works
LendFoundry's Decision Engine operates across several key modules, effectively serving as the backbone of the loan origination process. These key modules include:
- Workflow Engine: Applications progress through different stages of the workflow, driven by business rules. This includes stages like "lead generated" to "application submitted" to "email verified."
- Credit/Risk Model: The engine helps assess creditworthiness and risk, aiding in the decision-making process.
- Offer Generation/Pricing Engine: This module determines the loan offers and pricing based on the collected data and business rules.
The Workflow Engine is particularly versatile. It can:
- Collaborate with multiple third-party data providers to enhance application data.
- Support various product types and different loan products within each type, such as term loans and lines of credit.
- Accommodate unique credit models for each loan product.
- Generate one or multiple offers for selected products.
Business rules are integral to the functioning of the Workflow Engine, ensuring that applications are routed through the appropriate stages, and decisions are made based on defined criteria.
Conclusion
LendFoundry's Decision Engine is a powerful tool for automating the loan origination process. It seamlessly integrates with data sources, executes business rules, and facilitates workflow automation to streamline and expedite loan approvals. Understanding how Decision Engines work, the role of business rules, and the real-world examples of their implementation can empower financial institutions to make more informed lending decisions and provide a better experience for both borrowers and lenders.
LendFoundry uses cloud technology and microservices to help FinTechs create and deliver big apps quickly and easily. We have invested very significantly in Kubernetes, and other Cloud technologies to deliver a cloud-native, API-first, microservices-based digital lending technology platform for loan origination and servicing.
To learn more about our services and offerings and get the acceleration your FinTech business needs, please do contact us.
