Super Regional Bank: Major Mortgage Originator Improves Cost without Deploying Technology

Client Situation

Streamlining Mortgage Operations Through Knowledge Work Standardization

The recession and the regulatory issues were now in the past. For decades the bank had been the dominant home loan originator in its regional market. But significant cost cutting was needed to trim back staffing growth from new mortgage compliance guidelines. And the growing “online mortgage lenders vs. banks” battle created the need to increase knowledge worker productivity while achieving this cost reduction.

The internal operations consulting team had succeeded in applying process mapping, improvement and automation techniques for small-scale initiatives. However, they struggled with end-to-end process improvement. After a year of effort, they still had not fully documented the loan origination process. The CEO appointed a new president of mortgage with a simple mandate: “Speed this up—now.”

Client Description, Project Scope, Objectives

This Top 5 super-regional bank operates across 15 eastern states. Mortgage operations includes over 3,000 employees, excluding the loan originators in 1,500 branch locations. The operations group supports everything from the loan origination process through servicing, default and payoff. The president saw how The Lab’s non-technology improvement templates could accelerate the stalled cost management effort. 

The implementation effort began with a 6-week, Phase I analysis. This delivered a guaranteed, self-funding, non-technology improvement implementation plan—completed in 6 months.

Starting with the internal operations consulting team’s work, The Lab quickly standardized mortgage operations into a “knowledge work factory.” The group exceeded its cost cutting target by half while also improving cycle time and total customer experience. 

Mortgage Operations Transformation – Examples

The Lab implemented more than 250 non-technology mortgage process improvements. Examples:

Reduction: Loan Originator NIGO (Not-In-Good-Order) — Inbound NIGO volume averaged double the comparable industry rate for mortgage originators. The Lab implemented lean standard work templates to reduce numerous, conflicting retail branch origination forms and instructions. A single customer contact point was implemented to jointly increase productivity and service performance.

Knowledge Work Capacity Model — The Lab implemented simple productivity metrics within two weeks for measuring knowledge worker productivity. These indicated up to a seven-fold variance for identical, basic work activities. A capacity model measured the operational efficiency for each worker on these basic activities. The seven-fold, maximum variance (700 percent) was reduced to 50 percent in two months.

Mortgage Best Practices — The capacity model enabled consistent productivity measurement for each job position: loan originator, underwriter, servicing processor, closing administrator and more. The Lab’s “Daily Dashboards” provided quantitative support to guide continuous process improvement and measure individual employee productivity.