Automating Hard Money Lending Origination with Flexible Workflows

Automating Hard Money Lending
Origination with Flexible Workflows

About the Client

The client is a well-known hard money lender based in Texas and has been operating since 2002. With average ticket size upwards of $200,000, the loans are used to finance short-term projects in construction for both acquisitions or refinances. The client team consists of experts in private lending, real estate, loan underwriting, and loan servicing.

Background

The client was looking to set up a hard money lending marketplace where borrowers apply for a loan and, post underwriting, the details are available in a marketplace for investment. The client uses a third-party frontend application for loan application intake. The missing piece was a system that would facilitate the entire underwriting and decision-making aspect of the loan application to simplify, automate, and thus reduce the cost to process such loan applications.

The client mandate was to have a Loan Origination System that could be integrated with the existing third-party frontend web application and onboard the loan application into the LOS via APIs. All subsequent steps in the loan application journey, i.e., verification, underwriting, offer generation, agreement signing, etc., would be done via the LOS. The system would also enable interactions between the various internal and external teams for the client organization and would have to allow interactions between the borrower, broker, and multiple teams, like the appraisal team, construction control, finance, and underwriting.

There would be a lot of repeat borrowing as real estate companies work on multiple construction projects and require financing for most of them. Due to the nature of the industry, there would be a large number of documents that would form the basis of the credit underwriting, viz, building permits, site plans, property inspection reports, title company verifications, warranty deeds, etc.

Third Party Data Sources

To Summarize, The Mandate Required

Flexible intake fields that map to the existing front-end web application
Flexible workflow to meet the exact product specification as per the client’s requirements

Configurable business or verification rules to move the loan application through different stages
Support for role-based access

Proposed Solution

LendFoundry Loan Origination System (LF-LOS) for Hard Money Lenders was proposed to address the needs of the client:

Lendfoundry LOS API would be used for application onboarding from the existing front-end application for borrowers & brokers
Application Qualification based on the client’s business rules to enable automated underwriting
Document-based verification, including Document Upload by Borrower, Back Office Users, and Centralised Document Storage
Tools for the verification team to easily review and approve documents, and if the documents are unverifiable, seamless communication with the borrower
Back Office Portal to manage rejections, approvals with audit logs
User management module for role-based access
Agreement signing via Docusign Integration
Customized UI with client branding specifications

Features Used in the Solution

The following features of the LendFoundry Loan Origination System (LF-LOS) for Hard Money Lenders were used to fulfill the client’s expectations:

LF-LOS’s connector-based design lays the foundation for an ecosystem where seamless integration with Third Parties is possible. In this case, the integration was done with the frontend Loan Onboarding application.
Apart from this, there are 80+ other third-party integrations available for faster, better, and compliant decision making.
Robust and scalable system design handled a large number of document-based verifications
Flexible workflow engine helped define the borrower flow based on loan purpose (Acquisition/ Refinance) and loan program (Fix and Flip, Rental Loans, New Constructions, Bridge-Asset only, Multi-family Properties, Bridge-Infill Lots, etc.)
Action Menus for different roles, like Capital Markets Desk, Construction Control, Closure, etc, helped define role-specific actions
Action Menu also supported checklists for different roles to track the actions, e.g., whether the Closure was followed up with the State Local counsel or the CMT had wired funds to the title company
A hybrid workflow for backoffice users, where certain actions have to be completed offline and the status updated in the system before being able to move to the next stage
Auto-scheduled emails triggered by different events

Overall Impact

The client achieved complete automation of the loan origination, underwriting, and decision-making process. The LF-LOS platform provided a single system where different teams could interact and perform appropriate actions based on the business functionality. The system also offered a document upload facility with a centralized repository where all documents uploaded by the borrower or broker would be available for reference. The system administrator could control which business users could view which aspects of the application.

About LendFoundry

LendFoundry is the next-generation, cloud-based, SOC1 and SOC2 Type 2 compliant, full-stack technology platform to enable digital lending.

Available as a SaaS offering on AWS, LendFoundry is built using a microservices architecture and is highly customizable and scalable. Powered by API integration with 80+ traditional and alternative data providers and platforms, it can help digitize a lender’s entire loan lifecycle to deliver faster loans and also add new customer segments.

Key Solutions Offered: Borrower Portal, Broker Portal, Dealer Portal, Merchant Portal, Lender Portals, Loan Origination System, Loan Management System, Business Analytics.