Getting to Total Quality with ‘Six-tistical’ Approach

by Lauren Bielski

Reprinted From ABA Journal, Volume XCV, Number 8, August 2003

It’s been years since GreenPoint Mortgage, Novato, Calif., began to weave quality processing into the fabric of daily operations.

Now, as the national mortgage banking company updates its origination, closing, and underwriting environment to achieve straight-through-processing (STP) linkages and reduce paper, it continues to rely on a series of Six Sigma-inspired applications from its San Francisco-based partner, Cogent Economics, for insightful quality control analysis.

Four Cogent quality control products - ProductionQC, PipelineQC, ServicingQC and ComplianceQC - are used by GreenPoint to generate a more useful and accurate statistical picture to pinpoint both the rate and sources of error.

Each was put into place as the Savings Bank gradually introduced its quality program, starting just after its acquisitions of Barclays American Mortgage Corp. and Headlands Mortgage in the mid-1990s.

The idea behind use of the tools is progress – not perfection. “Six Sigma (the quality control program developed by Motorola) is a good practice for us because you aren’t just chasing after less error in process for its own sake,” notes Mike Ellis, GreenPoint Mortgage’s vice-president of quality assurance. What he liked about Cogent was that it made the esoteric practical at a time when Six Sigma was really only being used, and understood, in the manufacturing and healthcare industries.

In general, there wasn’t much guidance about how to hit the Six Sigma benchmark of 3.4 defects per million opportunities.

At the same time, it was trying out an ambitious program of improvement, GreenPoint was coping with its growing pains. “With dramatic expansion,” says Ellis, “comes the need to meld disparate cultures and adopt uniform processes.” One aspect of the challenge, initially, was that Headlands had long incorporated a post-funding review process, while the more conservative (and originally smaller in origination volume) GreenPoint was used to pre-funding reviews. “We had to come up with a consistent, enterprise method that could accommodate everyone’s way of working.”

Enterprise tool

Ultimately, the post-merger company decided to maintain both approaches to quality control, with the staffs from each of the legacy groups retaining their former roles.

This is another reason why Cogent’s approach held appeal: the bank needed a common tool-set to work from and one that would let it sample fewer loans and yet get a handle on the performance of the entire loan base.

“The tools offer statistical sampling, analysis, and reporting and can generate concise, graphical reports of quality trends,” says Ellis. “The flexible reporting is a great feature because the pre-funding quality control group reports to the chair-quality control group while the post-quality control group reports to our risk management team.”

When ProductionQC was first put in place, loan volume had ballooned from 1,000 to 11,000 applications monthly. It’s since jumped to an average of 12,000-14,000 loans monthly and, once the new streamed STP system is in active production, may go significantly higher.

(Although Ellis is involved in an analysis of the new system performance, he did not directly work with the IT department in the choice or adoption of the system and could not comment on its specifics.)

“The trick is to be able to monitor this activity without getting in the way of the origination and underwriting departments who obviously have day-to-day deadlines on their mind,” says Ellis.

“If there is something systemic that is creating a problem with quality, it’s my job to help to figure it out.”

The progressive GreenPoint plans to add another quality officer to help production personnel act on suggestions made by Ellis and his team. As an incentive, management began to partially base the production units’ compensation on the quality of their originations. In 2002, the company won the Wharton Infosys Business Transformation Award.