Case Problem 5.1 Streamlining the Refinancing

Process

With mortgage rates at an all-time low, National Bank has been swamped with refinancing requests this year. To handle the increased volume, it divided the process into five distinct stages and created departments for each stage.

The process begins with a customer completing a loan application for a loan agent. The loan agent discusses the refinancing options with the customer and uses its online pre-approval program and customer- reported data to see if the customer qualifies for loan approval. If the numbers work, the customer signs a few papers to allow a credit check and goes home to wait for notification of the loan's approval.

The customer's electronic file is then passed on to a loan pro- cessor, who requests a credit check, verification of loans or mort- gages from other financial institutions, an appraisal of the property, and employment verification. If any problems are encountered, the loan processor goes to the loan agent for advice. If items appear on the credit report that are not on the application or if other agencies have requested the credit report, the customer is required to explain the discrepancies in writing. If the explanation is acceptable, the letter is placed in the customer's file and the file is sent electron- ically to the loan agent (and sometimes the bank's board) for final approval.

The customer receives notification of loan approval and is asked to call the closing agent to schedule a closing date and to lock in a loan rate if the customer has not already done so.

The closing agent requests the name of the customer's attorney to forward the loan packet. The attorney is responsible for arranging a termite inspection, a survey, a title search, and insurance and for preparing the closing papers. The attorney and the closing agent cor- respond back and forth to verify fees, payment schedules, and payoffamounts.

The loan-servicing specialist makes sure the previous loan is paid off and the new loan is set up properly. After the closing takes place, the bank's loan-payment specialist takes care of issuing payment books or setting up the automatic drafting of mortgage fees and calculating the exact monthly payments, including escrow amounts. The loan-payment specialist also monitors late payment of mortgages.

It is difficult to evaluate the success or failure of the process, since the volume of refinancing requests is so much greater than it has ever been before. However, customer comments solicited by the loan-servicing specialist have been disturbing to management.

Customer Comments:

I refinanced with the same bank that held my original loan, think- ing erroneously that I could save time and money. You took two months longer processing my loan than the other bank would have, and the money I saved on closing costs was more than eaten up by the extra month's higher mortgage payments.

I just got a call from someone at your bank claiming my mortgage payment was overdue. How can it be overdue when you draft it auto- matically from my checking account?

If I haven't made any additions to my house or property in the past year, you appraised it last year, and you have access to my tax assess- ment, why bother with another appraisal? You guys just like to pass around the business.

Ineverknowwhotocallforwhat.Youhavesomanypeoplework- ing on my file. I know I've repeated the same thing to a dozen differ- ent people.

It took so long to get my loan approved that my credit report, ap- praisal report, and termite inspection ran out. You should pay for the new reports, not me.

I drove down to your office in person today to deliver the attorney's papers, and I hoped to return them with your signature and whatever else you add to the closing packet. The loan specialist said that the closing agent wouldn't get to my file until the morning of the scheduled closing and that if she hit a snag, the closing could be postponed! I'm taking off half a day from work to attend the closing and "rescheduling" is not convenient. I know you have lots of business, but I don't like being treated this way.

I received a letter from one of your loan-payment specialists today, along with a stack of forms to complete specifying how I want to set up my mortgage payments. I signed all these at closingdon't you read your own work? I'm worried that if I fill them out again you'll withdraw the payment twice from my account!

1. Create a service blueprint of the refinancing process. Why do you think the bank organized its process this way? What problems have ensued?

2. Examine the process carefully. Look at customer/provider inter- actions. Which steps create value for the customer? Which steps can be eliminated? Construct a new blueprint showing how the overall process can be improved.