EXECUTIVE GUIDE Profit Retention Strategies for Quality Control Operations Consumer banks improve loan manufacturing, lower defects and increase earnings through QC automation
EXECUTIVE SUMMARY Today’s consumer lending landscape is unlike anything we’ve previously experienced. From the sudden shift to remote working, lenders were exposed to greater risk in the form of rising critical defects and a wide range of manufacturing defects. As a result, lenders are absorbing a backbreaking amount of increased compliance and regulatory costs, and a QC program’s inability to contribute to lowering costs literally means lower profit margins for the lender.
Top Strategic QC Challenges Meeting defect rate targets Optimizing the QC function’s productivity and impact
“We have greater insight into what’s happening and the ability to justify what we’re doing through documentation thanks to ACES. In the event of an audit or exam, we have a tool that seamlessly drills into the specifics of our procedures and how they are being followed.” JENILLE FAIRBANKS VP Lending Compliance Mountain America Credit Union
Preparing for internal and external audits Keeping up with regulatory requirements
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THE COST OF DEFECTS: QC’S CONTRIBUTION TO THE BOTTOM LINE
REALIZED RESULTS Only ACES Quality Management, the pillar of next generation risk management, improves and preserves profits. Conduct Reviews Faster Through Automation
Consumer lending review times
ACES Quality Management estimates that every significant defect costs a lender, on average, almost 7% of the loan amount, and on non-performing loans, that number is even higher. Improve Analyst Productivity
CASE STUDY – COST ANALYSIS (1 year)
1000 Defects found within a year across all loans
Lower Your Per File Cost $
5
HOURS
COST OF DEFECT
75 FASTER %
Estimated time to review/remediate one defect
$
500K Cost to rework 1000 defects for that year
40
$
80
$
120
Before ACES
Before ACES
With ACES
With ACES
An effective and profitable QC investment provides returns well beyond the actual file reviews. In fact, it’s an immediate source of actionable business intelligence that improves the bottom line.
160
165/File
$
$
10/File
4 VIEW ACES IMPACT ON ROI
Moderate defects, or manufacturing defects always involve costly rework, delays, and a poor customer experience. Not addressing moderate defects leads to repeated mistakes on future loans. ACES sees lenders’ QC units reporting up to a 10% moderate defect rate, and our models suggest each moderate defect subtracts 5% of the loan balance from profit margins.
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“CUT MANUAL REVIEW TIMES FOR COMPLEX LOAN DECISIONS BY 50%” RENEE CORDREY Consumer Lending Oversight Manager Fulton Bank
CREATING QC OPERATIONS THAT DRIVE INCREASED PROFITABILITY
HIDDEN RISKS OF USING “OTHER” QUALITY CONTROL METHODS Forward-thinking lenders realize investing in QC as a real-time feedback mechanism drives continuous improvement to both revenue and cost. Shifting the mindset from QC as a “no news is good news” role to a powerful, proactive source of improvement may separate profit winners and losers. With ACES Quality Management and Control, consumer banks can leverage a single platform to obtain a holistic view of loan quality and gain valuable insights across all consumer lending channels.
HIGH RISK
MODERATE RISK
In-House Manual Process
Outsourced Provider
“Other Auditing Software”
• Time Consuming • High Error-Rate • High Risk Defects
• • •
• Inflexible Technology • Inadequate Compliance Tools • Unresponsive Customer Support
Hidden Costly Fees Delayed Remediation No Control Over QC Process
QC Technology’s Return On Investment ACES Quality Management is the leading supplier of QC technology for a reason. Only ACES enables consumer lenders to evaluate the data required to identify and capture the accuracy and productivity of loan creation.
“IMPROVED MANUAL REVIEW TIME EFFICIENCY FOR LESS COMPLEX LOAN DECISIONS BY 75%” RENEE CORDREY Consumer Lending Oversight Manager Fulton Bank TRACK PRODUCTIVITY ACROSS YOUR ENTIRE TEAM
Rather than sampling and reporting on compliance, the more advanced reporting tools from ACES can be mined for endless insight into company operations. ACES partners with a consumer lender’s QC team to generate improvement ideas, gather market intel, stop overkill and prevent mistakes. An optimized and targeted QC function also drives ROI that would be the envy of any capital project. ACES harnesses file review data that opens a window not only into defects, but also into how effectively an entire business operates.
ACES’ Two Strategic Components: Ensuring a compliance and control environment that meets regulatory standards and prevents catastrophic loss; and
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A one-of-a-kind source of business intelligence into how loans are being manufactured driving continuous improvement across the enterprise.
Report shows defects by underwriter, which can help improve performance and enforce a culture of quality.
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ACES offers solutions for each point in the loan lifecycle from pre-funding to post-closing to servicing.
IMPORT
SAMPLE
REVIEW
COMMUNICATE
REPORT
Report shows defect exceptions by category, which can assist with action planning and remediation.
LEARN MORE ABOUT ACES REPORTING
ACES CUSTOMER SUCCESS STORY
FULTON BANK Founded in 1882, Fulton Bank strives to deliver the best banking experience for its customers. Today, as part of Fulton Financial Corporation, a $26 billion financial services holding company, Fulton Bank offers a broad array of financial products and services in Pennsylvania, New Jersey, Maryland, Delaware, and Virginia.
CHALLENGE Fulton Bank sought to replace its internal system with a third-party audit platform that could: - Ensure accurate and complete data pulls from its lending system; - Eliminate manual “stare and compare” data reviews; - Improve efficiency in recognizing regulatory and compliance related trends; - Enable the bank to increase review volumes, if required, without additional FTE needs; - Meet enhanced audit monitoring, results and reporting expectations from the bank’s Consumer Credit Management team; and - Be deployed across the entire organization to help the bank’s lending risk management and quality control teams work smarter, not harder.
RESULTS By investing the time up-front to fully implement and test the system, Fulton has been able to reap the benefits of automation like never before. With ACES, Fulton Bank has: - Cut manual review times for complex loan decisions by 50%; - Improved manual review time efficiency for less complex loan decisions by 75%; and - Decreased its reporting turn times by 50%, with additional efficiency gains expected as its team becomes more familiar with Business Objects.
“What I like about ACES is that not only does it give you what they have available, but you also have the freedom to basically set up your own questions.” RENEE CORDREY Consumer Lending Oversight Mgr. Fulton Bank
READ FULL CASE STUDY HERE
FLEXIBLE AUDIT TECHNOLOGY
CUSTOMERCENTRIC APPROACH
BUILT FOR THE ENTERPRISE
IMPROVE PRODUCTIVITY, EFFICIENCY AND QUALITY WHILE CONTROLLING COST
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