Process Improvement for Your Mortgage Operations

Have you ever heard the phrase “if you’re not evolving, you’re dying?” In business operations, not having a process improvement mindset to evolve with changing customer expectations can be detrimental.

Process improvement is a serious yet necessary undertaking in the mortgage origination space. In a contracted market, we look for efficiencies to reduce cost and in an expanding market, we look for efficiencies to keep up with volume.

Today, we’re in an expanding market where loan originators are looking for more efficiencies to keep up with loan volume without sacrificing quality and without significantly increasing staff levels. Over the last several years, the focus has become ever more concentrated on the quality of the loan file and information verification. To maintain quality, we need to find more ways to automate low-return tasks (such as income verification) so individual contributors can spend more time focusing on the quality of other key verification points.

Process improvement does not just apply to the underwriting or audit side of the business. Loan officers can also benefit from thinking in a process improvement mindset.

In this post, we’ll provide three strategies to find new efficiencies in your various processes whether you’re dealing with loan officers, underwriting or auditing. But first, a note on incremental improvements.

Baby Steps Are Key

Instead of thinking about needing to make huge gains in time efficiencies, think about making incremental steps that will help you save more time as time progresses. For example, you might find that if you could improve your underwriting operations by 10%, your organization could save significant money. However, you don’t have to find one efficiency to make that 10% jump. Instead, find several smaller changes that lead up to 10% in aggregate.

Three Strategies to Find Process Efficiencies

Encourage Team Ideation

Cost: Low – Medium

Effort: Medium

Starting with the people who are in the process day in and day out can be where you get some of your most useful information.

To do that, you’ll need to get team buy-in. You need the team to understand why they’re looking for parts of the process to optimize. The answer is simple – when mundane or low-value tasks can be automated or get a time reduction, LOs, processors, underwriters, auditors, whomever, can focus on more complex tasks. When you can use that time better, you add more value for your customers and to your business.

Once you have buy-in, take the approach of QUEST – Question, Understand, Evaluate, Suggest, Test. QUEST will take you through a progression like this:

1. Question why we do things a certain way/why a process is set up as it is.
2. Understand that process fully.
3. Evaluate where efficiencies can be found.
4. Suggest solutions.
5. Test the efficacy of those solutions.

In addition to asking team members for their ideas, another way to identify process improvement opportunities is to watch team members in action. Individuals may have different ways of navigating through similar tasks and may not be aware that their process is a team best practice. This is particularly true for virtual teams. By having managers “ride along,” opportunities can be cataloged and shared with the entire team.

Once new solutions have been tested, roll them out widely to relevant teams. You should roll out changes one at a time to ensure they’re fully adopted and that team members don’t get overwhelmed. In some cases, associates may be asked to change a process they’ve been following for years and as such they will need time to adjust to the new way of doing things before moving onto the next opportunity.

Finally, remember to continue to test the quality of the work that comes out of the process to ensure the enhancements don’t lead to a dip in quality.

Leverage Existing Technologies

Cost: Medium – High

Effort: Medium – High

Another approach you can take is to check with your technology vendors to see if they have any available add-ons that you can leverage to make processes more efficient. For example, if you’re working with Freddie Mac’s Loan Product Advisor®, you can leverage their Asset and Income Modeler, which is a third-party validation service that can improve your underwriting turn times.

Even if your tech vendors don’t have add-ons that can help you, speaking to them on a regular basis can help them uncover ideas for new product features that could be developed and rolled out later. Bring up things that you think their platform doesn’t do well along with things you wish it could do. If they can make their software more efficient, it can lead to efficiencies for you.

Odds are if you have suggestions for an improved user experience, your vendor likely has other customers who would also benefit from the changes.

One other thing to ask your tech vendors is if they can review their best practices for how to use the software. It’s possible that you and your team missed something along the way or that a new release made the old best practices inefficient.

Redesign the Process

Cost: High

Effort: High

Redesigning your whole process is not something any team should enter into lightly as it is the most time-consuming and costly of these options.

If you need to go down this path, you should engage an outside resource such as a consultant or consulting firm to assist you. Before engaging a consultant, be sure to have all your processes mapped out so you and the consultant know where you stand on those processes. Also, write down the kind of time you hope to gain back through process efficiencies and parts of the process that cannot be changed due to technological constraints or regulatory/legal reasons.

Final Thoughts on Process Improvement

Improving your internal processes does not need to be overwhelming. Asking tons of questions, being observant, and breaking the process out into its defined steps will help you pinpoint where your team is expending unnecessary effort and losing time.

Whichever strategy your team uses, remember to always get employee buy in on the process, explain the benefits to them, the company, and the customer, and roll changes out slowly. Doing so will ensure a smooth process adoption and encourage better use of time.

Thanks to special contributor, Sheila Klostermann. 

Sheila leads the Quality Assurance team at Enact. She has over 25 years of experience in mortgage lending in both the mortgage insurance and correspondent lending arenas. She has held various positions ranging from underwriting and third-party risk management to quality assurance. Sheila has an MBA from DePaul University and is a Certified Mortgage Banker.

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