A leap of faith.

Author:Anthony, Sallie S.
Position:James Madison Mortgage Co. adopts team processing

Overcoming fear and loathing in the branches, a mortgage company embraced team processing and cut loan approval time dramatically. Many loan officers balked, but today the program is paying big dividends.

On February 21, 1995, James Madison Mortgage Company had the closing papers ready for settlement on the Bradleys' new home - a property in Washington, D.C. At midafternoon, the Bradleys' real estate agent contacted James Madison Mortgage to say the deal was off. The Bradleys had pulled out of the contract. A problem had arisen with a survey that indicated that restriction lines had been violated on the property the Bradleys were planning to purchase.

The Bradleys immediately put out a contract on another house. They needed to settle on the new property in two days. On February 21, James Madison canceled the loan and immediately began processing the paperwork for another mortgage with the new loan amount, new property and new program. Corresponding by fax and Federal Express, James Madison approved the loan package on February 22.

On February 23, the Bradleys closed on the new property they had placed under contract only 48 hours earlier. In front of real estate agents and other parties, the Bradleys applauded James Madison's services as worthy of the Guiness Book of World Records. The quick settlement allowed the Bradleys to save money on the transaction and avoid a hotel stay because of an expired lease on their apartment.

In today's market, every deal counts. To better accommodate unique situations like the Bradleys - which are becoming more commonplace - and to better process loans coming through in the normal course of business, James Madison changed its mortgage origination process. Formerly, a typical, decentralized, mortgage processing company, with segments of the loan process performed in its branches and others at its corporate office, James Madison set out to streamline the loan process to meet consumers' demand for quick service and low cost.

In previous years, the company had centralized its underwriting, closing and postclosing departments in its corporate office. The structure still led to multiple "handoffs" between branch processors and between corporate departments. There was no ownership of a file, and the ball could still be dropped from department to department.

To improve service and eliminate duplicate steps, James Madison organized around the process instead of the function and streamlined all operations so they could be handled by a single team. Each team member was cross-trained to individually handle all facets of a loan file from credit analysis to closing and shipping of the loan package. The team approach took months of careful planning, scheduling and effort to overcome skepticism. Since November of last year, James Madison Mortgage Company has been successfully using this approach, receiving favorable response from its employees as well as from borrowers, Realtors and builders.

Times are changing

Since 1940, James Madison Mortgage Company has been an active player in the mortgage banking industry in the Washington, D.C., metropolitan area. James Madison Mortgage is a full-service lender with its corporate headquarters in Fairfax, Virginia. The company has five retail branches in Maryland and Northern Virginia, as well as wholesale branches that serve the mid-Atlantic and Carolina regions. Its parent company, First Commonwealth Savings Bank FSB, in Alexandria, Virginia, is the oldest thrift in Virginia and is highly rated by VERIBANC.

In 1993, the mortgage banking industry had an unprecedented year manifested by record volume. James Madison Mortgage produced $802 million in business that year and was ranked by the Washington Business Journal as the fastest growing mortgage company in the Washington, D.C., metropolitan area. Quick decision making and problem-solving became a business necessity.

But rates began to climb in the second half of 1994, and the mortgage business slowed. James Madison became aware that in the new business environment Realtors expected more. Consumers, too, had become better educated and demanded better service at lower prices. New technology and automated underwriting systems from Fannie Mae and Freddie Mac loomed on the horizon, as well as computerized loan originations (CLOs) and controlled business arrangements (CBAs). These industry factors forced the mortgage company to alter the way it did business to stay on top of the demands of the marketplace.

James Madison took advantage of the production slowdown to look for innovative solutions to meet the changing needs of the mortgage business. "James Madison's business approach was archaic. We had to take a step back and assess the way we did business. We had to adapt or we would not survive," explains James Madison Mortgage President Michael Carr. This assessment resulted in an aggressive cultural change.

One step at a time

James Madison's change to team processing was the result of an evolutionary process that began in early 1993. James Madison initially adopted an individual development program (IDP) as part of its overall plan to modernize its traditional top-down management style. James Madison worked with a management consulting firm to conduct IDP workshops for all staff that revolved around the premise, "It is okay to make mistakes - we all make mistakes. Don't be afraid to try something different. Step outside of the box."

In March 1993, IDP sessions, two to three days in length, were conducted off site and consisted of a variety of exercises that centered on team building and illustrated the importance of each individual's contribution to team success. The workshops focused on the changing workplace (the trend toward bottom-up management) and the individual's role in this significant undertaking. Managers were instructed in the importance of guiding and how to become coaches.

After completing the workshop, the entire staff, regardless of role, was directed to create goals and plans for individual development. The staff members shared their development strategy with their coaches. As a team, the coach and staff member worked together to implement the plan. IDP allowed employees to challenge each other, accept responsibility for their own development, probe the processes they were performing and be accountable for their performance.

Carr notes, "With the evolution of the industry, we knew change was coming. To remain competitive we had to break from the traditional paradigm regarding career path and work environment and train our staff to grow sideways rather than by the hierarchical pyramid approach. James Madison's employees began to learn skills sets rather than being a specialist in one area. IDP fostered a corporate culture that embraced change and encouraged the staff to eliminate the phrase 'that's not my job.'"

Bouncing back and forth

IDP started the ball rolling. After probing and examining the way the company did business, James Madison discovered many unnecessary steps were being performed and sometimes duplicated under the current process. Typically, a loan would bounce needlessly from department to department.

Once a loan...

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