By: Denise Dukette, Director Loan Review Services

With current events leading to increased remote work/telecommuting, many financial institutions that have not yet converted their credit and other files from paper to electronic are considering making the change.  There are a number of benefits in doing so, particularly the efficiency gained from the ability to access the information remotely as well the potential reduction of certain costs such as Loan Review and Audit by allowing for these tasks to be competed off-site.  The following are some observations that may assist you with the planning to make such a transition.

Many of our clients have converted to on-line imaging systems and have the stories to tell about what worked and what didn’t.  If you are looking to migrate to on-line imaging, or are considering an upgrade to a more robust system, it is important to plan carefully for system utility and for information security.

One of the big issues we hear is scanning.  This applies to converting paper files to scans, as well as ongoing scanning processes.  The common file conversion issue is that in order to save time and money, large sections are scanned as one document.  For example, in a legal file the entire “Promissory Note” section is scanned as one file, which makes scrolling through to find the specific note among the extensions, renewals, modifications, etc. time consuming.  Another example is financial statements in a credit file, which is often in date order but may include accountant prepared, management prepared interims, and tax returns, all of which can add up to a large electronic record.  In addition to scanning large sections, we hear about issues with naming conventions which are not detailed enough, making it hard to find the correct document.  For example real estate appraisals; there may be multiple appraisals over time but if the file name does not have a date and property address, it can be time consuming to find the one you are looking for.

Another major issue is with indexing – having the right categories to place file information.  We see some clients with few index categories, and others with a lot (15 or more).  Having appropriate index categories is important so you can go quickly to the correct folder (such as Annual Review, Business Tax Returns, Appraisals, Approval Memos, etc.) and then find the specific document you are looking for.  However, we see situations where having too many options results in a document type being placed in different folders over time, rather than consistently in one folder.  For example, Annual Review, Loan Review and Approval Memos may have a document which is placed in one file at one time, and another file at another time.  Having clear explanations of where a typical document should be placed is important.  Not all scanning staff are as ‘document savvy’ as the direct lending staff, and may not know the nuances of where a document belongs.

An additional aspect of indexing is cross referencing to another loan or customer record.  Often the TIN/SSN is used to ensure one document can link back to multiple loans, borrowers, and relationships.  However, it may be difficult to find a list of all the related TIN/SSN numbers to get to the necessary information – for example, the personal tax return or financial statement.  Likewise, an appraisal may apply to multiple loans or borrowers; knowing which loan has the appraisal file can save time and ensure that all subsequent appraisals are kept in the same folder.

Many  of our clients know how to ‘get around’ in their own system; having a reference for others, such as outside loan review, audit, or examiners can expedite the efficiency of all parties.  We hear from clients that not only are staff frustrated, but that examiners are frustrated with not finding current information which could impact examination findings.  Time spent to construct an effective system is well worth it over the long haul.