X190 Management Theory, Policy, and Process, Spring 2014
Instructor: Steve Keleman, Ed.D.

Case Study 2

Assignment: Identify the performance improvement steps and explain them.  Add any missing steps. Due before week 8. Email papers.

Company Project

– There is a lot of miscommunication with negotiators and management as far as what steps a negotiator needs to follow from start to finish, completing a modification.
– Management does not always have answers for associates, answers about what questions that they have about investor guideline changes.
– There are different guidelines for different investors, which in turn confuses the associates – All negotiators are working all different kinds of investors.
– Portfolios are too high, making it hard for negotiators to work files as required every 5 business days
– Verification of Income review is not controlled by the negotiators.  It is done by a third party vendor, which takes between 5-10 business days to be completed.
– Negotiators need more training with the modification process as well as investor guidelines since they are constantly changing.
– Negotiators sometimes do not have the proper access to programs or systems that are needed when researching or working on a file.
– Management approval is needed in certain cases to approve a modification but there is no management on the floor to obtain an approval.

Suppliers
– Upper Managers (Executives)
– Customers
– Vendors (FNMA, Urban Lending and Stewart)
– Department Management

Input (Data, Parts, application, raw materials)
– Financial documentation
– Income results
– Debt to income ratio
– Loan information
– Net Present Value results

Process
Step 1: (Starting Process) Borrower needs to call customer service to initiate the process
Step 3: Negotiator assigned loan
Step 4: Negotiators conduct Initial Review and determine status of Making Home
Affordable (MHA) government program and if any documents are needed
Step 5: If loan has not been reviewed yet by MHA, then negotiator will monitor the loan until an answer is provided. If declined then the in-house modification review can start.
Step 6: Negotiator will review loan for an in-house modification and if any documents are needed
–    Prepare the Loan Modification
–    Retrieve the Loan in HomeSaver
Postpone or Cancel Foreclosure
Verify Close and Bill Status
Verify Bankruptcy Status
–    Review Investor Delegation
PMI Delegation
Investor Delegation
Investor Approval
–    Contact the Homeowner
–    Review the Equity Position and Loan Purpose Code
–    Run a Credit Report
–    Document the Account
–    Approve / Decline the Modification
Step 7: Negotiator creates the Modification Analysis and will determine the Approval or decline
–    Complete the Loan Modification Analysis
–    Open the Modification Analysis Application
–    Review Fees and Ordering Reinstatement Figures
–    Review the Good Through Date
–    Order Reinstatement Figures
–    Review Reinstatement Figures
–    The Pay Fees Calculator
–    The Modification Fee
–    Determine the Property Gain or Loss
–    Find the Property Value
–    Run the Impact Analysis
–    Document HomeSaver
–    Answer HomeSaver Tasks
–    Determine the Escrow Shortage
–    Run the Escrow Projection
–    Check Delinquent Interest
–    Enter the Term and Partial Balance, determine best value for customer
–    Enter the Term for the Modification
–    Propose Balloon Loan
–    Verify the Amount in Partial Balance
Step 8: If approved then the borrower will be provided with a Trial Plan Period Modification for 3 consecutive months. During this time the negotiator will be monitoring the file.
Step 9: After the Trial Plan Period is completed, then negotiator will review financials once again for a Permanent Modification.
Step 10: Permanent Modification Agreements will be sent to the borrower to notarize and sign and will need to be returned to negotiator.
–    Complete and save the Modification
–    Print and send the documents
Step 11: Once the fully executed modification documents are received from borrower, completion of the loan modification will be updated in the system.
–    Save and print the Analysis Worksheet
–    Record the Modification
–    Perform a Title Search
–    Final Approval Steps
–    Verify the Fees and Codes
–    Verify the Sale Date
–    Update the Analysis
–    Follow up on the Loan Modification Documents
Outputs (Services, Products, Reports, and Raw data)
– Income Analysis (Review borrower’s income)
– Modification Analysis (Review the terms of the loan that best fits the borrower)
– Principal, Income, Taxes, and Insurance (PITI)
– Mark-to-Market loan-to-value (Value what the property is currently worth – to how much the borrower owes)
– Completed and approved loan documents

Customer
– Homeowner
– Management
– Investors (FNMA, Bank of NY, Wells Fargo, US Bank, ING, GMAC, Capital One, Act)
– Downstream process

Resources
–    Personnel: managers, negotiators
–    Automated systems: HomeSaver, Siebel, SharePoint

Controls
–  Government loan regulations
–  Bank loan policies and procedures
–  Investor guidelines

The bank started in 1904 in San Francisco for small farmers that came from Italy. In 1998 the bank was taken over by former NationBank, and this is how it became known as Bank of America. In 2008 the bank rose to number one position in the United Stated after taking over Merrill Lynch. Bank of America or BAC is one of the major commercial banks in the world. BAC’s headquarters are located in Charlotte, North Carolina. BAC and has about 19,000 ATMs, 6,100 retail banking offices and serves more than 50 million customers. BAC’s online services are used by more than 20 million customers. BAC is the second largest in terms of market capitalization, the largest financial service company, the largest bank by assets and the largest commercial bank by deposits in the United States. The bank has business relationships with more than 95% of the Fortune 500 Companies.

Within the modification department, the process of completing a modification is currently not working well. The modification process takes too long and needs to be reduced; also customer satisfaction needs to improve for the department.  Homeowners are not satisfied with the customer service they are provided.  The reports for the closings of modifications within a 45 day period is not where it’s supposed to be at and needs to decrease by 25-30% by the end of the first quarter after this process has been sent to the floor.

Root Cause: Negotiators do not have the proper training. Once they are hired they do not have an in-depth training course so they are basically learning as they go. This is a problem due to mistakes that can be prevented and delay the review process of the modification and in turn delays the closures and reports that management needs to look at how the department is performing. At the same time management does not realize this and keeps on ignored it.

– No prioritization for aged loans
– There is no attention as to following the guidelines for the MHA Programs – For example if the borrower is going through the MHA modification process negotiators try to have the borrower opt out of the MHA program to give borrower and in-house modification
– Management does not implement the training needed for the negotiators
– Not all negotiators follow through to document the systems with everything that is being done on the file; whether it is to notate that the borrower called in or that certain codes were updated depending on what the process is of the modification.

What are the conditions required for success?
– Support for training negotiators
– Focus on aged loans
– User-friendly automated systems
– Quality assurance process to ensure process for MHA mods is followed

– Negotiators follow the step-by-step system that will be implemented.
– Increase positive customer experience and include regulatory requirements. This will happen all throughout the process when dealing with the borrowers and being able to provide them with a modification in a shorter time than now.
– Incorporate both systems routines to include notes on the files – Every step in the process will require that both systems are notated properly and effectively in order for future negotiators could clearly understand what is going on with the file. This is important when doing the approval and closing process (Steps 8 & 11) because if it’s not done correctly problems will arise late in time which will increase the customer’s dissatisfaction.
– Give a more in-depth training to the negotiators in order to provide a great customer service and the best possible modification possible to the borrower.
– Ultimately improve the modification process as how each file is handled and how often it’s handled.
– To increase customer’s satisfaction in the modification process in comparison to current situation.
– Focus on updating the different investor guidelines appropriately when new changes come out and notify management so that negotiators now of changes.
– Provide negotiators with the proper access to the systems they need to research and work a modification.
– Management needs to know the entire modification process to truly understand the negotiators, the time frames and how to deal with customers to provide excellent service.
– The training itself also needs to be revised and updated to the changing guidelines for each specific investor. Although an in-depth training program will be time consuming in the early stages, it will lead to a higher number of modifications closed in a timely manner under the borrower’s perspective and customer satisfaction will also improve

Name of System: Loan Modification

New Actions that negotiator’s need to take:
1.    Manage your Siebel and HomeSaver pipeline by prioritizing the oldest loans first
a.    Ensure all loans are engaged and reviewed on a biweekly basis – every 5 business days
b.    Ensure all re-escalations are engaged within 2 hours of assignment
2.    Review loans for any inconsistencies to avoid the customers being on an aged or “exception” loan
a.    Partial balances, incomplete verification of income campaign codes, bankruptcy, warning codes/lockout codes, etc.
3.    Review loans for customer availability and time zone
a.    Utilize Microsoft Outlook to assist in managing customer appointments and expectations
b.    Address voicemail an return emails for escalations as appropriate
c.    Schedule follow-ups with customers based on loan priority (re-escalation, time zone, etc)
4.    Update Siebel and HomeSaver for every loan and customer engagement
a.    Set HomeSaver “Tasks” to effectively track the status of the loan
b.    Set HomeSaver “Follow-Up Dates” in comments to effectively manage your portfolio
5.    Utilize your Team Manager and/or On-the-Job Training for loans that require additional assistance
a.    Research the loan and review possible options with Team Manager/On-the-Job Training

New Routine to be followed by negotiators and management needs to monitor …
It includes actions and steps that would need to be implemented, responsibilities for negotiators and a schedule of what needs to happen.

– Clear voicemail at least every 24 hours
– Respond to emails within 24 hours
– Check all systems for expected incoming customer documentation
– Ensure all homeowner call backs were completed from the previous day
– Check for missing items letter expirations and ensure close of HomeSaver and Siebel (Bank Systems)
– Discuss any issues and questions with manager
– Ensure that all repeat escalations are addressed in SharePoint
– Check voicemail throughout the day and answer incoming calls as workload permits
– All HomeSaver tasks must be worked on and rolled to appropriate dates
– Strategize a work plan for the next day, appointments, meeting and calls.
– Ensure there are no sale dates coming up that will do to sale in error
– Acknowledge new Siebel accounts and cross documents HomeSaver
– Review and work aged inventory (45+days)
– Work cases and prioritize by foreclosure sale date then age date
– Ensure that all accounts are closed properly in both HomeSaver and Siebel
– Ensure that the overall portfolio is being worked every 5 days

Suppliers
– Upper Managers (Executives)
– Customers
– Vendors (FNMA, Urban Lending and Stewart)
– Department Management

Input (Data, Parts, application, raw materials)
– Financial documentation
– Income results
– Debt to income ratio
– Loan information
– Net Present Value results

Conduct training for negotiators

Conduct briefing for managers

Process
Step 1: (Starting Process) Borrower needs to call customer service to initiate the process, note in system
Step 3: Negotiator assigned loan, enter into system
Step 4: Negotiators conduct Initial Review and determine status of Making Home
Affordable (MHA) government program and if any documents are needed
Step 5: Prioritize loans by foreclosure date and then age – work aged inventories (45+days)
Step 6: Create daily work plan, including responding to voicemails, emails, etc., making callbacks
Step 7: If loan has not been reviewed yet by MHA, then negotiator will monitor the loan until an answer is provided. If declined, then the in-house modification review can start.
Step 8: Negotiator will review loan for an in-house modification and if any documents are needed
–    Prepare the Loan Modification
–    Retrieve the Loan in HomeSaver
Postpone or Cancel Foreclosure
Verify Close and Bill Status
Verify Bankruptcy Status
–    Review Investor Delegation
PMI Delegation
Investor Delegation
Investor Approval
–    Contact the Homeowner
–    Review the Equity Position and Loan Purpose Code
–    Run a Credit Report
–    Document the Account
–    Approve / Decline the Modification
Step 9: Negotiator creates the Modification Analysis and will determine the Approval or decline
–    Complete the Loan Modification Analysis
–    Open the Modification Analysis Application
–    Review Fees and Ordering Reinstatement Figures
–    Review the Good Through Date
–    Order Reinstatement Figures
–    Review Reinstatement Figures
–    The Pay Fees Calculator
–    The Modification Fee
–    Determine the Property Gain or Loss
–    Find the Property Value
–    Run the Impact Analysis
–    Document HomeSaver
–    Answer HomeSaver Tasks
–    Determine the Escrow Shortage
–    Run the Escrow Projection
–    Check Delinquent Interest
–    Enter the Term and Partial Balance, determine best value for customer
–    Enter the Term for the Modification
–    Propose Balloon Loan
–    Verify the Amount in Partial Balance
Step 10: If approved then the borrower will be provided with a Trial Plan Period Modification for 3 consecutive months. During this time the negotiator will be monitoring the file.
Step 11: After the Trial Plan Period is completed, then negotiator will review financials once again for a Permanent Modification.
Step 12: Permanent Modification Agreements will be sent to the borrower to notarize and sign and will need to be returned to negotiator.
–    Complete and save the Modification
–    Print and send the documents
Step 13: Once the fully executed modification documents are received from borrower, completion of the loan modification will be updated in the system.
–    Save and print the Analysis Worksheet
–    Record the Modification
–    Perform a Title Search
–    Final Approval Steps
–    Verify the Fees and Codes
–    Verify the Sale Date
–    Update the Analysis
–    Follow up on the Loan Modification Documents
Step 14:  Conduct quality control and check against system

Outputs (Services, Products, Reports, and Raw data)
– Income Analysis (Review borrower’s income)
– Modification Analysis (Review the terms of the loan that best fits the borrower)
– Principal, Income, Taxes, and Insurance (PITI)
– Mark-to-Market loan-to-value (Value what the property is currently worth – to how much the borrower owes)
– Completed and approved loan documents

Customer
– Homeowner
– Management
– Investors (FNMA, Bank of NY, Wells Fargo, US Bank, ING, GMAC, Capital One, Act)
– Downstream process

Resources
–    Personnel: managers, negotiators
–    Automated systems: HomeSaver, Siebel, SharePoint

Controls
–  Government loan regulations
–  Bank loan policies and procedures
–  Investor guidelines

By the end of September 2010, loan modification department improves customer service, as demonstrated by reducing turnaround times for 95% of the loans from 90 days to 45 days to complete an in-house modification without decreasing the quality of loan mods.

In conclusion, I strongly agree that applying this process and the system thinking model of SIPOC to the department will increase our reporting, decrease time spent on the modifications and ultimately increase the customers’ experience.  This procedure will provide the negotiators with a template / list of things with the procedures that need to be done to review the borrower and in turn approve or decline their loan modifications. By having the negotiators determine the best available solution and present this option to the customer the SIPOC diagram can quickly and easily be implemented as seen above, the current or “as is” condition of the organization and processes in question. It also brings negotiators, in this instance, together in a non-threatening way that builds teamwork and drive to the cause around the culture and learning about the process.

The SIPOC implementation allows the department to review all the processes in a manner in which the next step can be identified, and limited resources assigned during the phase of the roll-out of those processes with an objectively identified listing of the most critical project opportunities. By developing a negotiator guide for pipeline management strategy within the Modification Department will help decrease the aged loans that negotiators have in their ports and increase the productivity of the negotiators to be able to complete modification in a timely manner. Being able to do this for the borrowers will reduce customer dissatisfaction. Ultimate, there were changes made to the modification process.  These changes were done to improve the overall process and to expedite the modification much faster for the borrower. It will help the negotiator as far as doing the modification process step by step and provide better customer service to the borrower. Also, it will give an opportunity to management as far as getting involved with what is going on in the department and work better at improving any the problems which might arise.

To determine if we are making progress on this goal we would need to look at a few different points.
(1) Management provides weekly and monthly production reports that are done. The production reports are based on the loans that are being released to the associates for review: how many of those loans get modified and how long it takes for the associates to provide a modification?
(2) Performance appraisals. Even though this is on an individual basis, this provides how many modifications are being done per month and also how many loans are aged (meaning over 45-90days old). This can evaluate the negotiators as far as whether they are meeting the expectations with the department. The reviews will be done on a quarterly basis to check the progress of the negotiators. There will also be reports that that will be done by management to calculate all negotiators portfolios; see at how many aged files they have, and also if all files in portfolio have been worked on every 5 business days. The procedures will be monitored in the way that the voicemails will be checked by management on a regular basis and so will random loans that negotiators are working on. By doing this, management will have an idea of what how their team is doing and who needs help. There will also be a SharePoint which will provide management with the number of loans assigned to negotiators and what processes are those loan currently in.

Company Project Scoring Guidelines

Company Project Paper: Discrepancy-Based Model
Note: the points are based on correctly identifying the steps and providing explanation for each of those steps.  Fill in any missing information.
Points    Identification    Points    Explanations
1    Appropriate sequence    1    Discussion of reason(s) for sequence
0    1. Background information about company    0    Brief description of organization
1

1    2.  Problem, challenge, opportunity definition

Problem Importance/Impact    1

1    Definition of problem statement

Discussion of reasons for problem impact
1    3. List “theories of causes” and select most likely cause, verify cause through data collection and analysis
Tools: Cause & effect analysis,
5 Whys, Pareto Chart or other    1    Purpose for “theories of causes” and selecting most likely cause, verifying cause through data collection and analysis
Tools: Cause & effect analysis,
5 Whys, Pareto Chart or other
1    4. Set SMART goal    1    Purpose for setting SMART goals
1    5. List and explain solutions.  Apply decision-making tools to select “best solution”    1    Description of how solutions are identified and selected – application of decision-making tools to select “best solution”
1    6. List barriers to implementation and conditions required for success.      1    Purpose for barriers to implementation and conditions required for success.
1    7. Prepare implementation plan: actions, persons responsible and schedule.      1    Purpose and parts of implementation plan
1    8. Prepare method for monitoring and feedback    1    Description of questions asked for monitoring and feedback
1    9. Conclusion    1    Discussion of what conclusion is for