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Send  Share  RSS  Twitter  18 Feb 2011

FINANCE: Improving Efficiency for Smoother Mortgage Operations

 





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The mortgage industry is often described as one of feast or famine, where when the economy is strong mortgage lendings are high, but when recession hits these organisations struggle with low volumes. During profitable times inefficiencies and high internal costs are hidden by the large volumes of mortgages being processed, but during a crisis these inefficient practices come to the fore, increasing the negative impact of the famine cycle.

The subprime meltdown in the United States was something of a wakeup call to lenders across the globe, serving as a warning that ignoring operational efficiency and prudent lending practices could cause major problems in the long term. The fact is that improving the mortgage process can do more than trim budgets and control costs- it can lead to significant savings, reductions in turnaround times and ultimately a substantial competitive edge.

In the South African market particularly, the mortgage industry involves a lot of paper-based processes due to the lack of investment in front office technology, meaning that all paper based applications need to be passed on to the back office for further processing. This leads to inefficient processes and a lot of duplicated effort, not to mention the propensity for human error to creep in at some point. Overseas the trend has been to invest in technology to capture front office information electronically, which is then sent to the back office in this format -a far more efficient end-to-end process.

There are several benefits to be gained from improving operational processes, not least of which is vastly improved efficiency. Improved processes mean less duplication so turnaround times can be greatly reduced, which in turn improves the cost effectiveness of lending operations. From a customer perspective, improved efficiency in turn improves customer satisfaction, as the lenders are more likely to ask the right information and get the process right the first time.

Looking at improving efficiency from a customer's point of view is a very important step in bettering operational processes. If these processes are improved with a specific focus on the the customer view, the experience will be that much better for the client. Some of the areas that can be examined in order to do this are to communicate more effectively with the customer at every stage of the process (e.g. self-service internet tracking), and also to cut out unnecessary delays between receiving the information and getting the offer out.

In order to improve operational efficiencies the first step is to conduct a detailed baseline analysis to identify opportunities and optimal courses of action to take. Conducting a baseline of costs sets targets for improving efficiency and effectiveness and also allows organisations to measure progress and performance over time. A baseline will also help to identify root causes for cost efficiency failures.

Once a baseline is in place it enables a far more forward planning approach and also allows for predictive modelling to be utilised, which is the key to any operational efficiency improvement programme. A baseline, once set, will also allows lenders and mortgage enterprises to begin benchmarking against peer organisations to identify performance gaps from an industry perspective.

A baseline provides a starting point on the journey towards improved operational efficiency and can help organisations to identify points of failure. One of the most common operational failures is the accuracy of information collected at various branches. Often the applications that come in from the front office are not fit for processing as they have been incorrectly completed or there is information or supporting documentation missing. This causes huge delays as the documents have to be sent back and forth until all of the appropriate information is received.

Technology can help to solve this problem as well as speed up a number of other processes and cut down on paperwork and duplication. Having a front end system with proper validation in the form of mandatory fields that must be completed will ensure quality control and reduce the number of applications that cannot be processed. A level of automatic adjudication can also be put into place, taking into account the risk profile of the individual, to dramatically speed processes along.

Other aspects where technology could benefit is through the use of imaging software to cut down on the amount of paper-based processes, application tracking systems in branches and online, and generally improving the customer facing processes to enable customers to access information and have a speedier, more pleasant experience.

While technology is not the be all and end all, as it is not possible to automate all processes due to risk and the need for controls; there are intelligent ways for lenders and mortgage operators to harness technology to improve efficiency and as a result improve productivity and profitability.


 
 
 
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