Eastern Financial Florida Credit Union

Gaining a Competitive Advantage for Mortgage Lending

Eastern Financial Florida Credit Union (EFFCU) is the largest credit union in South Florida, and among the top 35 in the United States. EFFCU is a full-service financial institution with $1.8 billion in assets and more than 183 members nationwide.

The last three years have been the most intensive for refinancing mortgages, with rates dipping to their lowest in 40 years. During this time, 92% of mortgage holders had economic reasons to refinance.

Because of these historic rates, EFFCU’s mortgage department was faced with the problem of having more loan applicants (purchase and refinance) than they were able to process in a timely manner.

Among the issues that needed to be addressed:

• Unable to commit to a closing date until late in the process
• A lot of work in process in the system
• Lead times were too long
• Priorities were constantly being shuffled
• Too much expediting
• A very stressful work environment
• Difficult to respond to urgent member requests
• Overtime doesn’t increase profits
• Outsourcing doesn’t solve the problem

EFFCU needed help. A conflict in how work flow was managed was identified. In December 2002, the company decided to implement TOC’s Drum-Buffer-Rope and Buffer Management to create an environment in which commitments to members could be met without disrupting work flow.

To achieve this, a design team comprised of representatives from each step in the mortgage process was created. The team received DBR training and subsequently used TOC’s Five Focusing Steps to design the new work flow.

They identified the constraint to be in the underwriting department. In order to exploit the constraint, they strategically provided enough work in process files to protect the system deliverables (closing date to members, delivery date to the investor). They also ensured that underwriting is never starved and always covered by protecting it with work in process files and providing cross training and backups to the department.

In subordinating everything else to the underwriting department, protective capacity was provided for all resources in relationship to underwriting’s capacity. Files are now released into the system such that they accumulate only where they have planned for protection. Finally, multi-tasking was replaced with the “Relay Runner” work culture, which involves “single tasking” and clean handoffs after each step.

As part of this implementation, EFFCU determined the desired behaviors for the employees working in the First Mortgage area, and ensured that their measurements were aligned with these desired behaviors.

Training in DBR was also key to this implementation, with all employees involved in the First Mortgage process receiving appropriate and necessary training.

Results
EFFCU’s TOC implementation began in March 2003. Three months later brought the lowest mortgage rates in 40 years. Despite the rush to refinance, EFFCU is now equipped to meet the market demand.

Three goals were established when implementing the TOC solution at EFFCU:

• Improve member service
• Create a better work environment for the staff
• Increase profitability

These three goals were achieved.

On-time delivery has greatly improved. Closing dates are now met at a rate of better than 99%. Those that are not delivered on time are late due to outside circumstances. Member complaints due to expired rate locks have disappeared. EFFCU is now able to accommodate member purchases (when other institutions are not), even at the peak of the refinance wave.

With the improved work flow, the need for employee overtime has decreased. Employee stress has been significantly reduced.

Profits have risen due to the 24% increase in monthly loan closings, the elimination of outsourcing, and the decrease in overtime expense.

The company also made the strategic decision to add resources to double the system’s capacity. EFFCU is now launching a new First Mortgage Product Offering. DBR will be implemented in their Home Equity Lending Area. They plan to continue to work on the Process of Ongoing Improvement to further shorten lead time through the system and to continue to improve member service.

These results were presented by Kendrick Smith, EFFCU's Chief Financial Officer, at TOC World^® 2004. The presentation is available on DVD or video (JCT-02).