Testing Reporting For Loan Processing Software

Testing Reporting For Financial Software

In providing software testing services for our clients that have financial related software including loan processing, mortgage processing, accounting, and account reconciliation, XBOSoft’s clients often require specific and specialized reporting software testing. This requires deep knowledge in the domain of the software and the output reports generated in various formats. 

Testing Reporting for Loan Processing Software

As a software test engineer who has worked on several loan origination systems and loan processing software testing projects, accurate and detailed reporting is crucial for understanding how the system handles loans and identifying any issues. In this blog post, I will discuss some of the key difficulties, examples of defects, and overall challenges that can come up when testing reporting functionality in these complex financial systems.

Challenges in Testing Reporting

One major difficulty is that loan data and calculations tend to be intricate, with many interdependent variables that must be properly recorded and computed. For instance, interest rates, fees, credit scores, loan terms, payment schedules, taxes, insurance, and more all feed into loan reports. If any one element is miscalculated or reported incorrectly, it creates a domino effect that throws other figures off. For loan processing across international boundaries, currency exchange adds another layer of complexity as dates and usage of rates require not only calculation but also, disclosure.

In one case I tested an auto loan processing system that was failing to factor in a $500 documentation fee into the total amount financed correctly. This caused the loan principal, the payment schedule, the interest charges, and multiple other reported figures to be slightly off. Tracking down the root of the miscalculation took days of going through code and reports.

Reporting challenges also arise due to the many third-party data sources and services involved. Most loan software integrates with credit bureaus, national loan registries, employer data, appraisal systems, and more. I once saw an error where loans over $350,000 were all being denied due to an integration issue with fetching property appraisal data.

Regulatory compliance adds yet another layer of testing complexity for lending reporting. Guidelines like the Truth in Lending Act (TILA) and others mandate certain figures, calculations, and disclosures. For example, I tested a home equity system that was properly capturing all the monthly payment breakdowns per TILA in the raw data logs but failed to display two of the required TILA figures on the customer-facing PDF statements.

Multiple Views and Data

Reporting tests must cover multiple front-end views like PDF statements, CSV/Excel exports, website displays, printed statements, and more. Each format needs validation. For one mortgage company, we discovered the HTML reports shown in the web portal did not match the CSV bulk exports given to auditors due to a formula error.

Mining through millions of loans worth of test reporting data across years of projected schedules demands smart approaches. I like to collaborate with business analysts to design SQL queries and custom parsers that can hunt for anomalies across aggregated test data. This allows for catching issues that might otherwise slip by manual testing.

Portfolio-level snapshots of overall lending performance trends over time are also imperative to test for accuracy. Questions like “are higher risk loans being granted properly according to policy?” can only be answered with a big-picture view of lending patterns, risk assessments, and projected defaults. Only by asking questions like these can you determine possible conflicts with the policies and financial goals of the organization.

In one case a bank’s quarterly profitability tracking had underlying defects where forgiven principal amounts on some early payoff loans were being double-counted, leading to millions in misrepresented portfolio performance. This required meticulous reporting review to initially catch.

Testing Reporting Functionality in Regression

Reporting designs constantly evolve across new software versions, so regression testing all the changes is mandatory before going live. I once overlooked retesting amended principal calculations on interest-only home equity products during an upgrade. This caused some problems at first until we got reports revalidated.

Thorough, proactive testing across all reporting views, loan variables, calculations, integrations, snapshots, trends, formats, and compliance requirements is indispensable for accurate loan software. Constructing and executing comprehensive reporting test plans remains an incremental, demanding duty. But solid reporting is essential for proper lending decisions and risk management, so the diligence pays off. The right testing approach balances manual real-world loan scenarios with automated bulk data validations to catch difficult edge cases. There are always new defect possibilities, but strong test reporting reduces lending system surprises.

Despite these challenges, at XBOSoft, we assist our clients in tackling these challenges by applying our domain expertise in accounting and finance plus software testing experience. It’s a rare combination to have both. This knowledge and experience help our clients develop methodologies for prioritization as we work together on a daily basis. Preventing costly defects from being more than defects is our primary goal at XBOSoft and many of our clients consider us to be their secret weapon in releasing high-quality software and preventing defects from reaching their end users.