First 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 performs quick calculations based on 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 file is then passed on to a loan processor, who requests a credit check, verification of loans or mortgages 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 to the loan agent (and sometimes the bank’s board) for final approval.

The customer receives a letter 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 correspond back and forth to verify fees, payment schedules, and payoff amounts.

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, thinking 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 automatically from my checking account?

• How come you do everything in writing and through the mail? If you would just call and ask me these questions instead of sending forms for me to fill out, things would go much more quickly.

• 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 assessment, why bother with another appraisal? You guys just like to pass around the business.

• I never know who to call for what. You have so many people working on my file. I know I’ve repeated the same thing to a dozen different people.

• It took so long to get my loan approved that my credit report, appraisal 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 closing—don’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!

Q1   Examine the process carefully Look at customer-provider interactions Which steps create value for the customer Which steps can be eliminated Construct a new blueprint showing how the overall process can be improved