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Intro to Loan Statuses and Sub-Statuses

Table of Contents

Complexity:    

Audience: Loan Servicers or Collectors, Upper Management, Developers, Accounting, Loan Servicing/Collections Managers, Administrators, Compliance, Data

Introduction

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.

Use Case: Write-Offs

Use Case: Write-Offs/Statuses

The Problem

A borrower has stopped making payments and a lender is in the process of doing post charge-off collections on the loan. In their current system, they have two groups they categorize these type of loans into when they're going through this process—one for loans they are attempting to collect on and another for loans that are officially charged-off. In order for the lender and agents to know which group the loan is in, they need to go into each account and view the notes left by the previous agents. Instead of having to manually delve into a loan to figure out its status, the lender is looking for an easier and quicker way to understand where the loan is during this process.

LoanPro's Solution

LoanPro creates and assigns specific statuses and sub-statuses to loans so that they're easily trackable as they move through the loan lifecycle. For the situation above, you can create two loan statuses that represent both stages of post charge-off collections—Collectible and Uncollectible. Then, you can write rules that will automatically change the loan status from Collectible to Uncollectible once the loan meets the conditions you've set. You can then filter the loans by their status in the Loan Manager with just a few clicks and view every loan that is currently in either the Collectible or Uncollectible stage. Notifications can also be set up to alert your agent users when a loan's status changes to either charge-off stage so that they can stay updated and immediately complete the applicable tasks for the loan. 

 

 
 

Highlights

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 whether 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.

In the chart above, you can see that there is a sub-status under the ‘Application’ status called ‘Manual Review Needed’. 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 ‘Application’ status. You could make ‘Manual Review Needed’ it’s own loan status, but if you are only reviewing loans that are in the ‘Application’ status, it makes the most sense to include ‘Manual Review Needed’ as a sub-status of ‘Application’.

Conversely, there is a sub-status of ‘Approved’ under the ‘Application' 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 detailed breakdown of the Underwriting status to help illustrate 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.

Default Statuses

LoanPro offers default statuses that may be used in some of our default processes. Click the accordion below to view all of the default statuses and sub-statuses we offer.

Default Statuses and Sub-statuses

Loan Status Loan Sub-Status Description Processes
Application      
  New Not used in processes, but comes standard.  
  Manual Review Needed Not used in processes, but comes standard.  
  Declined Not used in processes, but comes standard.  
  Approved Not used in processes, but comes standard.  
  Contract Pending Signature Not used in processes, but comes standard.  
  Ready to Fund Not used in processes, but comes standard.  
Open      
  Open - Repaying A loan that is current and is not involved in any other life cycle process. Involved in most processes
  Open -Fraud Process A loan that has begun the Fraud Investigation process, but has not yet been confirmed and closed. Fraud
  Open - Attorney Retained A loan that has been retained by an Attorney. Attorney Retained
  Open - Deceased Process A loan that has begun the Deceased process, but has not yet been closed. Deceased
  Open - Charged Off Collectible A loan that has been written off on the books but is still being attempted to collect. Usually accompanied by a stop in interest accrual. Insurance Claim, Attorney Retained, Policy Charge Off
  Open - Pending Payoff A loan that has received its last payment and is waiting for the 7 day wait period to close out completely. Payoff/Small Balance Write Off
  Open - Bankruptcy A loan that has begun the Bankruptcy process, but has not yet reached a Discharge or Dismissal. Bankruptcy
Closed      
  Closed - Settled A loan that was closed due to a Settlement Agreement.  
  Closed - Charged Off A loan that was closed due to the balance being charged off (balance added to the net charge off amount) in LMS. Repossession, Fraud, Rescission, Bankruptcy, Policy Charge Off, Deceased
  Closed - Bankruptcy A loan that was closed due to Bankruptcy. Bankruptcy
  Closed - Rescission A loan that was closed due to the completion of a rescission of the loan. Rescission
  Closed - Dynamic Funding Cancelled A loan that’s funding was cancelled for a variety of reasons and was subsequently closed. Dynamic Funding Cancelled
Paid Off      
  Paid Off - Paid In Full A loan that was fully satisfied without entering another life cycle process. Payoff/Small Balance Write Off
 
 

Where Does Statuses Fit?

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.

It’s best to use loan statuses as they were intended. We recommend that you try to not create statuses that will overlap the other functionality provided by LoanPro like portfolios or filters.

This Feature is Not

  • Statuses are not used for understanding the health of an account. They're best used to see where a loan is in a company's loan lifecycle. Warning Flags and stoplights will be the best indicators for this kind of information. 

What's Next?

Now that you understand the basic information about statuses in LoanPro, we recommend learning how to Create New Loan Statuses for your company. You may also be interested in reading articles about other loan grouping tools, like portfolios, or tracking options that may suit your needs better than statuses, like filters


Written by Andy Morrise

Updated on February 19th, 2024

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