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CL Testbed Data Project Redesign

D. M. A. E. C. CL Testbed Data Project Redesign. Topics. Define Charter History Current Charter Multi Generational Plan Measure Data Collection Plan Analyze Micro Problem Statement Engineering Solution Implementation Control Error Reduction Progress

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CL Testbed Data Project Redesign

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  1. D M A E C CL Testbed Data Project Redesign

  2. Topics • Define • Charter History • Current Charter • Multi Generational Plan • Measure • Data Collection Plan • Analyze • Micro Problem Statement • Engineering • Solution • Implementation • Control • Error Reduction Progress • Delayed Funding Error Progress

  3. Project Team ChampionGreg Geppert Process OwnerDan Cobb Core Team QAC: Robert Firestine Centralized Sales: Joe Scaggs IREP: Kim Belicose Jeanette Shaffer

  4. Team Charter - Problem Statement • Centralized Sales has experienced delays in funding as well as errors on documents that has resulted in a significant impact to our customers. • These errors have occurred internally as well as externally, with impact to funding, processing, and post close. On the average, over 24% of all loans funded have errors. It affects the entire business and decreases the customer experience, reduces sales and raises cost because of rework. • Errors on critical documents have to be corrected by IREP. There is additional time associated with how long it takes to re-execute the document • Document time frame is approximately 2 days • This increases the time in dealing with this situation internally as well as externally in dealing with re-executing documents • Document time frame is approximately 4 hours between IREP and Centralized Sales

  5. Timeline

  6. DMAIC - Measure What IREP and Direct Lending Data Told Us Data Source: IREP & Direct Lending Date Collected: January 1- January 31, 2006 Number of Loans with Errors: 85 Number of Loan Closed: 249 Number of Issues not shown 14 Overall Error Rate 34% Collection Method: Excel Spreadsheet Log 60 Document are executed incorrectly resulting in 24% error rate in 5 key categories

  7. DMAIC - Measure How Our Customer’s are Impacted Data Source: IREP & Direct Lending Date Collected: January 1- January 31, 2006 Number of Loans Delayed: 46 Number of Loan Closed: 249 Number of Issues Not Shown 10 Overall Error Rate 18% Collection Method: Excel Spreadsheet Log 26 Delayed funding errors resulted in 10% of monthly loans taking 2 additional days added to rescission in 4 key categories

  8. DMAIC - Measure How Often Do These Errors Occur? Data Source: IREP & Direct Lending Date Collected: January 1- Apr 30, 2006 Total Number of Errors: 250 Number of Loan Closed: 828 Number of Issues Not Shown 69 Overall Error Rate 30% Collection Method: Excel Spreadsheet Log Over the last 4 months, 181 documents were not executed correctly resulting in an average of 22% error rate

  9. DMAIC - Measure How Often Do Delays Occur? Data Source: IREP & Direct Lending Date Collected: January 1- Apr 30, 2006 Total Number of Errors: 91 Number of Loan Closed: 828 Number of Issues Not Shown 47 Overall Error Rate 11% Collection Method: Excel Spreadsheet Log Over the last 4 months, 44 delayed funding occurred resulting in an average of 5% error rate

  10. DMAIC – Analyze Y = f(x) Micro Problem Statement 1Y= Why are there errors on 24% of RE and PHL documents that are prepared and funded by Centralized Sales and IREP? X= Sales & Processing Input Errors X= ILC Document Execution Errors X= Poor Communication Between IREP with ILC & Centralized Sales with Customers Micro Problem Statement 2Y= Why was 3% or $3,317,945 of all loans funded delayed beyond the 3 day rescission period? X = Poor Communication by ILC in Loan Closing in Executing Documents X= Employee Input Errors Resulting in Error on DocumentsX= Signing and Dating Errors X = Reclosing Loans

  11. DMAIC - Improve What is the data telling us? ProcessSolution 1:Standardized Script for Scheduling Calls • IREP schedulers to call ILC to review checklist and confirm with closing agent HSBC expectations in meeting standards and guidelines • IREP schedulers to call ILC to review critical documents after closing prior to approving funding. • Centralized sales schedulers will confirm checklist with customer to review loan and critical documents prior to loan closing. ProcessSolution2:Updated Standards for Loan Agreement, Loan Summary, & Mortgage Statement • Policy and guidelines on handling of legal documents have been clarified to provide a better understanding of properly executing documents

  12. DMAIC - Improve What is the data telling us? ProcessSolution 3:Implement Error Report at All Touch points • Error tracking reporting will be put in place to report error that occur during Post Close of the loans process. This areas include Processing (Front & Back End Operations)

  13. DMAIC - Improve What is the data telling us? Technical Solution 1:IREP introduced OCR software • IREP uses OCR to scan and paste legal descriptions of properties onto titles to reduce spelling errors on title reports & other critical documents. Technical Solution 2:Error Tracking Enhancements • Introduction of an error tracking database that will allow for the tracking of a loan during its lifecycle. It will allow for the updating, changes and correction on the status of a loan as it relates to an error. This error tracking database also has a reporting feature built in. • Addition technical solutions will be implemented Approximately, Nov 7, 2006 by the systemic implementation of new form design that would result in an increased in accuracy.

  14. DMAIC – Improve Annualized Benefits of Process Solutions

  15. DMAIC – Improve Annualized Benefits of Technical Solutions * Benefits are not able to be calculated based on inconsistency of data provided

  16. DMAIC – Improve Implementation Timelines

  17. DMAIC – Improve Goals Process improvements will reduce error rate to 15% by correcting the following areas: • Incorrectly executed loan documents, • Errors in Sales, Process, Funding and IREP touch points • Reduction in internal and external man hours spent in resolving issues • Technical solutions will deliver an additional 5% reduction in • Prevention of error as it relates to scheduling and error prevention • Reduction in internal and external man hours spent in resolving issues

  18. DMAIC – ControlError Reduction Process Quality Snap Shot Process & Technical Solution Implemented

  19. DMAIC – ControlDelayed Funding Reduction Process Quality Snap Shot Process & Technical Solution Implemented

  20. Supporting Documentation • Business Case • Project Scope • SIPOC • CTQ • Process Flow Charts • Data Collection Plan • Pareto Root Cause • Fish Bone Root Cause • Y=f(x) Root Causes • Leveraging Best Practices • Scoring Solution Matrix • Cost Benefit Analysis

  21. Team Charter - Business Case • HSBC’s Strategic Business Objectives are at the core of driving Centralized Sales goals and objectives. Centralized Sales mission in driving a relative new business channel is to streamline the business through efficiencies, productivity & turn-time. Centralized Sales vision is to meet the strategic needs and goals of the business by reducing errors, improving processes & adding to the customer experience. • Centralized Sales & IREP have significant challenges in the execution of loan documents, value added customer experience, & a high degree of customers reclosing loans. This has resulted in poor communication between all stakeholders and has impacted the customer experience, IREP & Centralized Sales. • Error reduction within Centralized Sales & IREP will greatly reduce the amount of delayed funding issues and increase productivity within the Direct Lending Channel. These efforts will provide process improvement opportunities as well as increased sales through efficiencies. By streamlining this process and business channel. Direct Lending goal is to be a significant contributor to HSBC North America.

  22. Team Charter - Project Scope In Out • Eliminate delayed funding issues & reduce non-delayed funding issues in executing loan document as it relates to Centralized Sales and IREP • Increase accuracy of titles / appraisals to effectively secure HSBC interests • Identify Service Level Agreements and manage relationships to that expectation • Reduce internal & external errors by adding process and technical solutions • Action Plans for IREP. • Systemic changes to any existing systems • Changes in underwriting

  23. DMAIC – Define (SIPOC)

  24. DMAIC - Define (Critical to Quality) IREP Manual Error Tracking ILC Closing Call Checklist Effective Communication Daily Call with IREP Correctly Executed Loan Documents Post Close Error Databases Processor Error Database Error Resolution Sales Error Database Doc Prep Error Database

  25. DMAIC- Define (Process Flow- “As Is”) Mail RESPA’s Customer Docs Sales Team Prelim Review Admin Services/Correspondence Sales Team Right Fax Prelim Approval Create/Open File Clear Stips Underwriting Processing Team Processing Team Final Approval Final Approval Pre-Close Schedule Processing Team Underwriting Prepare and Print Docs Post Close Fund and Board Records Admin UM/QF File Review Mail Closing Docs ILC IREP

  26. DMAIC- Define (Process Flow- “Should Be”) Mail RESPA’s Customer Docs Sales Team Prelim Review Admin Services/Correspondence Sales Team Right Fax Prelim Approval Clear Stips Create/Open File IREP OCR Solution Underwriting Processing Team Processing Team Final Approval Pre-Close Error Tracking Database Final Approval Schedule Processing Team Prepare and Print Docs Underwriting Error Tracking Database Post Close Fund and Board Post-Close Records Admin Mail Closing Docs ILC IREP

  27. DMAIC - Measure Data Collection Plan

  28. DMAIC - Measure Data Collection Plan

  29. Appendix DMAIC - Analysis (Pareto Root Cause) 80 / 20 Rule – Finding Areas of Opportunity (Pareto Chart) In reviewing this project, the biggest issues that affects service level from an overall perspective between IREP and Direct Lending is identification verification, mortgage, and loan agreement.

  30. Appendix DMAIC - Analysis (Pareto Root Cause) When the errors are broken down into more specific area of responsibility, IREP continues to have the same challenges in the areas of identification verification, mortgage, and loan agreement.

  31. Appendix DMAIC - Analysis (Pareto Root Cause) When Direct Lending is specifically isolated, it is the HUD, identification verification and IN Tax worksheet that account for over 70% of the errors internally. The project that will be specifically work on will be to reduce funding related errors to zero. These error do have a significant impact to our customers and hinders their ability to meet their personal goals of refinancing as well as consolidating their accounts. Not resolving this issue will result in customers finding another finance company to finance with and significantly impact Direct Lending.

  32. Appendix DMAIC - Analysis (Pareto Root Cause) Breaks in the Process – Areas of Significant Impact (Histogram) In analyzing the business, it is important to note if the distribution of errors are normal or is there any areas that may give reason for concern. There are a great many areas that affect the business and causes the business not to fund loans or have delayed funding. The data presented is a normal distribution of errors, however, there are some reasons for concern because there exist some data outside the normal distribution. This is considered to be a special cause variation. What this means is that something is going on within the process and the issue that falls outside the normal distribution should be addressed and eliminated. Once that has occurred then reducing the normal distribution can be undertaken to eliminate those errors. For the purpose of this analysis, the areas of special cause variation include ID Verification and Mortgage. Those two areas fall out side of the normal distribution of occurrences and give rise to concern. These two areas should be addressed and eliminated first before any other areas of the process are considered. This is a combination of errors internally as well as externally.

  33. Appendix DMAIC - Analysis (Pareto Root Cause)

  34. Appendix DMAIC - Analysis (Pareto Root Cause) Direct Lending does not have the same type of concerns, their concerns are more related to the HUD statement than any other category. This specific area would also be considered a special cause variation and should be eliminated before any other area of the error process is considered. That will result in all of your data falling within a normal distribution of errors and will indicated that there are no outside factors that affect the process.

  35. Appendix DMAIC - Analysis (Pareto Root Cause)

  36. Appendix DMAIC - Analysis (Fishbone Root Cause)

  37. Appendix DMAIC - Analysis (Pareto Root Cause)

  38. Appendix DMAIC - Analysis (Fishbone Root Cause)

  39. Appendix DMAIC - Analysis (Pareto Root Cause)

  40. Appendix DMAIC - Analysis (Fishbone Root Cause)

  41. DMAIC – Improve Leveraging Best Practices Process Improvement Best Practices

  42. Appendix DMAIC - Improve Scoring Solutions – Effectiveness/Risk/Cost

  43. Appendix DMAIC - Improve Scoring Solutions – Effectiveness/Risk/Cost

  44. Appendix DMAIC - Improve

  45. Appendix DMAIC - Control

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