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Lenders sometimes refer to the mortgage fulfillment process as a “factory model,” drawing parallels between loan processing and traditional manufacturing. With the term “loan factory,” they are taking that idea one step further, using Lean Six Sigma and other managerial philosophies to streamline processes, drive out variation and create standardization.
In this feature article for the MReport, Accenture’s Henry Santos explains how overhauling outdated mortgage operations can help lenders improve quality and tame costs.
For decades, the mortgage industry has relied heavily on manual processes, ad hoc work routines, subjective decision-making and other outdated operating models. As cost pressures, customer expectations and regulatory scrutiny grow, the industry can no longer afford to maintain the status quo.
Lenders are beginning to apply modern manufacturing principles, such as quality control and systems design, to their mortgage operations in the hopes of becoming lean, mean mortgage machines.
Lenders can use the five principles of lean manufacturing to reengineer the mortgage process:
Value: Design processes, services and products that generate value in the form of quality and cost containment.
Value stream: Organize the order and flow of activities to enable efficient execution and minimize re-work and redundancy.
Flow: Eliminate barriers, such as hold times, work queues and re-work loops that increase complexity, interrupt flow and impede your ability to consistently commit to delivery cycle times.
Pull: Create a just-in-time delivery model that pulls work through the system only when processes and workers are ready in order to eliminate wasted time and effort.
Perfection: Use measurement and monitoring tools to identify inefficiency and make real-time corrections.
Lenders face many challenges in modernizing their operations, but four areas stand out:
Communication: Borrowers should be able to track their loans in real time, and specify how and when their lenders communicate with them.
Rules-driven workflow: LInstead of reaching randomly for another file, underwriters should be fed work through an automated, rules-driven system.
Specialization: Underwriting, process and closing should be broken down into subsets of activities to reduce training time, increase standardization and improve productivity.
Compliance: Compliance and quality audits should be conducted throughout the loan process, from application to funding, to keep loans compliant, creditworthy and complete.
October 28, 2013
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