The fortunes of the lending industry have seen some significant swings due to reducing volumes, increased compliance cost and margins hitting an all-time low. There has been a lot of talk about digital mortgages and technology, but the adoption of these technologies and the return on the technology investment has shown no significant impact on the margins for many of the SMB mortgage and title companies.
In such a scenario, what can a SMB mortgage/title company do? We recently engaged with an SMB mortgage company in a specialized lean analysis engagement, and we came with interesting findings.
With this post, we will take you through the details of the findings and our recommendations to them. Several of these will be applicable in your own set up as well, whether you are a title or a lending company. I am sure you will find them interesting.
The objective of the lean engagement was to
- Review and document the processes in ops
- Identify opportunities for consolidation and standardization
- Identify best practices from within the organization and from the industry
- Make recommendations for improvements through process optimization, technology adoption and leveraging third-party providers for cost reduction
Our specialized analyst team spent close to 8 weeks at the client location, meeting with and shadowing operational personnel, and documenting their workflows and procedures. We collected the client’s financial and operational data and utilized a lean-value stream model to derive the recommendations.
From the visit, here are some general findings from the engagement.
- Lack of collaborative interface for Lenders & Agents (Order Origination)
- Lack of integrated communication through the title production software between teams
- The manual effort involved in updating order info, generating CPL, generating CD, preparing closing package & emailing the respective parties
- Lack of automated email notification triggers based on task completion
- Outlook calendars used for scheduling
- Skewed Load leveling, as the orders are not auto-assigned by the system
- Lack of performance reports at team level for better personnel management
- Manual indexing & uploading of post-closing documents to file scan
- The manual effort involved in generating a shipping label, pulling relevant CD information, printing required checks, uploading the closing package, notifying closer & updating the status of the file
As we embarked on our lean analysis, we clearly defined what is value-add and what is non-value add. That helped us identify what was adding value and what was generating waste.
Here are examples of what represents a waste
We went through a detailed exercise, jointly with the client to
- Identify non-value added (NVA) processes and ‘wait’ times. We also spent time capturing local process variations and intra-organizational best practices.
- Quantify time and money spent on each of the NVA processes
- Prioritize NVA processes to be addressed
- Implement short, mid and long-term potential solutions
This was done through a detailed value stream mapping exercise. Across the company, we found the overall efficiency to be 74.82%, and non-value added activities to be 25.18%.
In terms of efficiency, Pre-Closing (79.10%), Doc Resolution (77.75%), Post Closing (60.16%) & Order Entry (69.54%) appeared to be low.
Among the major NVA activities, we found that the company was using Manual Data Entry into the Workflow Systems. There was a lack of integrated communications between teams. The lack of System Integrations was hurting. Most of the indexing was being done manually. Also, within the enterprise, there was no knowledge sharing portal of any kind.
We then went through a savings projection profile across functions like order entry, abstract, Title exam & QC, Pre-Closing, Doc resolution, Post-closing, Recording-Final policy. We also did a detailed operational cost analysis across these functions.
Based on the entire exercise, we had recommendations to make on six important parameters, and this is what they looked like :
1) Investing in System Integrations
- System integration for final policy creation with the underwriter
- System integration needed for managing work with the abstractor
- Scheduling of activities and tasks on Outlook calendars and integration with the title production platform
The benefits of these will be
- Increase in data reliability/accuracy
- Improved process efficiency
- Reduced QC/Audit footprint
- Shorter cycle times
2) Automation of tasks and activities using Robotic Process Automation
Application of RPA to ordering, tax certs, and title search, generating CPL, CD and preparing the closing package, generating shipping labels
- Reduced operating cost
- 24/7 availability
- Improved consistency and accuracy
- Improved process efficiency
3) Analytics and business intelligence with dashboard and analytics
This will be needed to get into more accurate resource allocation. It was also necessary to have interactive dashboards for key executives
- Improved decision making due to information available readily
- Successfully track KPIs
- Improved visibility
4) Introducing Electronic (Digital) signatures
It was proposed to integrate with DocuSign to introduce digital signatures
- Faster processing time
- Secured documents
5) Improved collaboration and knowledge base with enterprise social networking
Set up a knowledge base and discussion board. Also, use social enterprise networking with tools like Yammer/ Office 365
- Always available knowledgebase
- Offline availability
- Controlled security
6) Invest in a comprehensive digital document program with auto-indexing and data entry
- Auto-indexing/ uploading of documents
- Auto data entry in the title production platform
- Post-closing audit and maintenance of trailing docs
- Investor specific package delivery
- Reduced turnaround time
- Improved accuracy
- Improved process efficiency
For these recommendations to make sense for our client, it was necessary to also translate them into an action plan spanning short term, medium-term, and long term. We did this next and presented to the client a detailed plan showcasing how these initiatives will make an impact on their business operations.
As you can see, with the lean analysis engagement, we came up with some interesting findings.
Are you facing some of these challenges? Would you want our help in helping you identify areas of improvement through a lean analysis? Feel free to get in touch with us, and we can get you started.
Alok Bansal is Managing Director of Visionet Systems Inc. and has 21 years of experience in managing strategy and global BPO operations. He excels in optimizing and leading the growth of financial services companies who are looking to take their mortgage operations to the next level.