Second Mortgage Lenders (SML) was established in 1985 for the purpose of writing home equity loans, often referred to as second mortgages. For example, if a homeowner's property has a market value of \(\$ 250,000\) with a mortgage balance of \(\$ 180,000\), the homeowner would have \(\$ 70,000\) in equity ( \(\$ 250,000-\$ 180,000\) ). Second Mortgage Lenders would lend a homeowner up to \(85 \%\) of the equity value for home improvements, college costs, or other personal needs.

The process of writing second mortgages involves an interview, credit history evaluation, financial analysis, property appraisal, loan committee meeting, and closing. At the interview, an SML loan officer would initially screen potential clients and provide a loan application packet. Upon receipt of the loan application, the loan officer would conduct a credit check and analyze the financial information provided by the applicant. Variables such as annual salary and employment history are considered. Next, a real estate appraiser is hired to estimate the property value. Following the appraisal, the loan committee meets to make a decision after considering all of the inputs. If the loan is approved, a meeting is scheduled to sign papers that close the loan agreement.

A typical loan package requires approximately two weeks from the initial interview until closing. SML wants to be more responsive to its customers by providing more rapid loan decisions. The following times are estimates based on past transactions.

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A. Why does SML want to reduce the time required to approve (or reject) a loan application?
B. Where is the bottleneck process?
C. What is the value-added time required to produce and to close a mortgage?
D. What is the non-value-added time associated with the loan process?
E. What recommendations would you make to SML?