Summary of Analysis of Delays in Loan Processing in Emporia Mortgage Company Using Statistical Process Control Method

 This paper is about analysis of delays in loan processing times in the Emporia Mortgage Company (EMC) by using statistical process control method to find out the problems lied under the long mortgage processing times. The Emporia Mortgage Company (EMC) is a medium-sized mortgage lender and it expanded its mortgage refinancing and home remodeling credit operations to two shifts. This rapid expansion to a full two-shift operation, the pressure to produce higher volumes, and the push to meet requests from high-profit customers were suspected to be the major causes of the breakdown in their quality.

According to the description of the company, the company passed the economic downturn in the mortgage lending industry because of its clients and well-trained employees. Because of its dedicated employees, the company was well-known for its completion time for loan process which took only around 2-3 work days. After the expansion of its business in mortgage refinancing and home remodeling credit operations, the problems and complaints arose in loan processing time. The reason why these problems happened would be the requirement of a lot of additional workers and extra working hours to meet the customers’ demand for the expansion. Although the company hired additional workers and increased working hours, there were delays in loan processing times because of the inefficient and inexperience new employees. To find out whether the company is facing a serious problem or not, analysis on each loan worker’s processing time using statistical process control methods becomes necessary.

The results from the following analysis show that there are assignable causes in processing which are necessary to identify and eliminate to improve the processing times. The company might eliminate these problems by discussing the employees in group, providing them an intensive training or reducing working hours.

The analysis is done by the application of various techniques in statistical process control methods. These include variables control charts, evaluation of the process capability and the fraction of nonconforming. In this case, x-bar and range (R) will be used as variables control charts as the sample size (n=5) is less than 10.

Analysis

Firstly, 30 sample data consisting of five observations (n) are selected randomly from the 100 days’ data collected for all shift to construct x-bar and range charts by using Excel formula.

Table 1.1 Calculation of x-bar and range (R)

 Table 1.1 shows the calculation of x-bar and range (R).

In Figure 1.2, one point (number 22) is above the upper control limit while others lie within the control limits. Therefore, there are out-of-control signals on both charts which indicate the process is out of control. 

Conclusion of Analysis of Delays in Loan Processing in Emporia Mortgage Company Using Statistical Process Control Method

The initial control charts, which are x-bar chart and range chart, show that the process is out of control and there might be an assignable cause which is needed to identify and eliminate. Also, the process capability indexes show us that the process is not capable of meeting the nominal specification. We can conclude that the quality of the company’s processing operation does not meet the company’s specification for its customers. Therefore, I think EMC is facing a serious problem that it needs to address. I would recommend the company that reducing some of the shifts and providing the employees effective training would be a solution to eliminate the problems of slow loan processing. It seems like additional employees hired for expansion don’t have enough experience to perform their jobs well. In addition, increasing working hours and the pressures to produce higher volumes make them unable to meet the company nominal specification. Standardizing the working procedures, discussing in group meetings and providing intensive trainings would be the best solutions for the company to eliminate the slow processing times.