"Loan origination" is a broad term that is used to describe the process in which a borrower applies for a loan. It also includes the response from the lender, who will review, process, and approve the application. Loan origination refers to applications for mortgage loans, home loans, car loans, business loans, student loans, and other types of loans. Steps after loan approval fall under the “loan servicing” process.
Loan origination processes are different for each type of application and loan type. The process typically covers steps like:
- Seeking different loan options (i.e., “loan shopping” for the borrower)
- Filling out forms
- Submitting requested documents
- Undergoing background checks and credit checks
- Reviewing an application
- Negotiating loan terms if allowed
- Finalizing the loan application process
- Approval of the loan application
There may be other steps or requirements involved, which again will differ depending on the loan type and the company. Loan origination generally involves opening a new account for a first-time loan with that company.
Like any type of loan activity, loan origination can be a target for fraud and fraud-based activities. Fraudulent loan origination involves actions that result in a person getting qualified for a loan that they legally shouldn’t be qualified for. This can happen as a result of:
- Fraud by the borrower (i.e., submitting false information on an application)
- Fraud by the lender (i.e., knowingly approving a loan that doesn’t qualify; this may involve falsifying some information)
- Fraud by both the lender and the borrower, i.e. collusion or conspiracy
One of the most common types of fraudulent loan origination is where a lender helps a borrower get approved for certain types of federal loans, housing, or benefits. This is illegal and can result in legal penalties for both parties. Consequences for the liable party or parties may include criminal fines, jail or prison time, and civil fines for damages caused by the fraud.
Loan origination is a complex process that involves many steps and requirements. You may need to hire a real estate lawyer if you need help with any issues related to loan origination. For instance, your attorney can help when it comes to reviewing and negotiating loan terms. If you come across any legal disputes, your lawyer can help represent you if you need to file a legal claim in court.