Coal-to-Coast Building Society Mortgage Crisis - Case Study Example

CCBS MORTGAGE CRISIS by Student’s name Code+ course name Professor’s name University name City, State Date Introduction The cost of house rent in Australia and beyond is rising annually. As households grow in size the cost of renting spacious household is extremely high (Dodson & Sipe 2008). Therefore, households across the world are experiencing high spending rate over the last decades. Many people are nowadays considering owning their own homes to avoid paying rent (Valadkhani 2013). Mortgage is one of the most flexible home owning methods that many people in Australia prefer (Wang et al 2008). This paper provides an analysis of the mistakes of Coal-to-Coast Building Society (CCBS) in serving its customers and a .comprehensive proposal on how the firm can improve its services. CCBS is an Australian home loaning company offering services for decades. The case study states that CCBS experienced a boom in 2013 when Australian economy was experiencing a slowdown. The case study reports indicate that CCBS experienced customer boom following the economic crisis. Existing customers sought refinancing of their home loans to accommodate the rising cost lifestyle (Crossney & Bartelt 2005). On the other hand, new customers were searching for cheaper mortgages that CCBS is known for. It is interesting that while the rest of the economy was shrinking, CCBS experiencing increased customers. CCBS introduced a new loan process which later customers deemed inappropriate Literature Review Loan refinancing refers to the replacement of the existing loan with another loan whose terms are different from the first one. Refinancing terms differ from one country or even state to another depending on the prevailing economic factors (Huang & Liu 2012). Loan refinancing is necessary in case of better interest rates, changing loan risk, changing loan risk, debt consolidation and reducing monthly repayment amount (Nelson et al 2013). Loan applicants experiencing financial difficulties may apply for debt consolidation, reduction of monthly repayment, and freeing up cash loan refinancing options. These plans help such individuals reduce on the loan repayment amount on monthly basis (Chikolwa & Chan 2008). Australia experienced economy decline in 2013. The decline led to low prices in key trade commodities used in international trade like coal and iron. Australia highly depends on the two minerals for its national income. Statistics show that Australia economy depends on trade hence closure of mining industry was a major blow in the country economy (Wang et al. 2008). The recession also led to inflation of basic commodities across the country. Therefore, households spent more money on household goods leading to reduced money available for loan repayment (Harris 2013). The economic situation of a country influences mortgage borrowing and repayment rate of its citizens. It is obvious that economic turn down in Australia greatly affects saving and mortgage rate of these households. A recent study revealed that most Australians prefer variable mortgage plans as opposed to fixed mortgage rates as in USA (Karamujic 2011). The study further indicated that more than a third of Australian households have a mortgage loan. Therefore, most Australian families sought for loan resurfacing to accommodate the rising cost of living (Rooney & Cuganesan 2009). Mortgage firms are important in handling economic recession. Clients who applied for variable mortgage plans opt to revise their rates for longer payment duration. This helps reduce monthly payment rates leaving the families with more disposable income to cater for increased cost of living (Nelson et al. 2013). Research shows that mortgage firms receive numerous new and existing customers during this period. Mortgage firms therefore continuously come up with new practice models to deal with the increased customer. In most cases, the customers do not embrace the new methods and may necessitate the firms to revise the procedures (Liu & Skully 2008). Financial institutions use service-profit chain to solve problems associated with loan refinancing. Service-profit chain relates customer satisfaction and loyalty to the organization’s profitability. The philosophy states that customer loyalty is the principal factor in achieving organizational profit (Chikolwa & Chan 2008). Research articulates customers become loyal to certain organization if they are satisfied. Therefore, customer satisfaction is subject to the customer loyalty (Rajapakse 2005). On the other hand, customer satisfaction is influenced by the customer’s perception on the quality of goods and service that an organization offers. Gorp and Turnquest (2008) argue that customer satisfaction and loyalty determines the value of goods or services which an organization offer. Therefore, an organization providing loan refinancing can use the philosophy to maintain and attract new customers. Service blueprinting is an effective method of reviewing loan-refinancing disputes. Service blueprinting is a service innovation technique that aims to improve service delivery. The blueprint defines several aspects that a certain service requires for comprehensive innovation (Harris 2013). Process in the blueprint includes definition of customer actions, support processes and physical evidence required for effective innovation. Front stage actions involve a direct conversation between the clients and the staff. On the other hand, backstage actions involve remote contacting of the client by the staff. A typical example of backstage actions is a telephone call to establish better innovative techniques (Marks 2008). Study Question Reference The 2013 economic turn down in Australia caused reduced deposable income of the Australian households. Loan surfacing or a cheap mortgage plan was the most prudent method of dealing with the economic situation among most households. CCBS is one of the most reputable mortgage or home loan provider in the country. Consequently, it received multiple customers during the recession seeking for loan resurfacing or for cheaper mortgages. CCBS developed a new loan processing procedure to meet the new demand. The society management was assured that the new method would improve efficiency in customer service delivery. Secondly, they hoped that the service would maintain its asset security by the end of the economic recession. New departments to handle the process were designed with different loan application stages received experts to handle them. CCBS management created five departments to facilitate the application process. The five departments include application, processing, closing, new account establishment and loan repayments departments. Loan application department is the starting points for the registering customers. Here, the customer completed application forms with assistance from the loan agent. The loan agent calculates refinancing eligibility depending on the provided data. If successful, the customer signs the loans forms authenticating credit checks. He or she goes home to wait for approval as the loan proceeds to the next stage. Loan processing department was the second stage after loan application. The loan processor receives a credit and facilitates credit checks, loan or mortgage verification from financial institution, appraisal of the customer’s property and employment verification. The loan processor consults with the loan agent in case of any question in the process. In case credit reports contain information not in the application process, the customer was expected to explain. The file is included in the customer file if the explanation is acceptable. The next stage in the application process is loan closing. The closing agent should send the customer a letter of loan approval. The letter asks the customer to contact the closing agent to agree on loan closing date. Loan rating may also take place if the customer had not indicated this before. Secondly, the closing agent liaised with the customer’s lawyer to perform termite and building valuation, a survey, mortgage paper preparation, title search and insurance. The two also verifies payment schedule, fees and payout amounts. If successful, the loan is ready for proceeding to the next stage. The fourth stage is establishment of new account. The loan-servicing specialist who ensures the previous loan is correctly paid off does this. He or she also facilitates setting up of the new loan. Loan repayment setup is the last stage in the new CCBS loan application process. This entails loan repayment specialist issuing payment books and automatic withdrawal mortgage fees. The specialist is also responsible for calculating monthly payments which depends on the loan amount and the repayment period. Problem Identification The above application process is what the new and existing CCBS customers used to apply for the loan. CCBS management hoped the procedure would improve efficiency and maintain securities effectively. However, a customer comments analysis discovered several complain regarding the application process. Some customers expressed dissatisfaction over the process. They assert that the new process is not achieving efficiency and effectiveness in loan application process. There were several complains on the efficiency of the new system. A customer stated that he or she had refinanced with CCBS which was the same institution holding his original loan hopeful that it will save money and time. CCBS took two months to process his loan than what other bank would take. In addition, the cost he saved on closing cost was derailed by extra mortgages high payment rates. Another customer reported that he had received a call from CCBS that his mortgage was overdue. He wondered how the loan could be overdue if CCBS withdrew it automatically from the cheque account. The third customer complained over mode of communication that CCBS used. He asked why CCBS did every communication in either writing or mail. He suggested the company could call him to ask questions they wished to instead of the writings. He was of the opinion that things would be easier that way. A different customer claimed he had not added anything to his house for the last one year. He wondered why CCBS insisted it must appraise again yet they held his tax assessment. He accused CCBS for enjoying trespassing people’s property. Ana angry customer complained on the number of CCBS staff handling his file. He question how many people must he deal with during loan processing. He claimed he had to repeat information to dozens of staff on a similar manner. Another customer complained his loan approval was delayed over claims that his documents had expired. He suggested CCBS should pay for the new reports but not himself. I have been appointed the new Retail-banking manager at CCBS to deal with the above complaints. My mandate is to review the loan application process. Taking customers problem into consideration, I should redesign the process to come up with a new process that will be customer friendly, efficient and protective of the CCBS asset. Then I should provide the report to the CCBS CEO. In my review, I used service blueprinting and service-profit chain approaches to come up with a redesign. In addition, I was keen on increasing value-adding steps and cost-reducing steps in the redesign. I came up with the following recommendations that states how the new application process should look like. Recommendations Customer loyalty and satisfaction is important for profitability any business. Therefore, businesses must ensure that their current customers are satisfied with their goods or services if they have to maintain them and attract new ones. About this case study, CCBS ought to maintain its loan clients and the new ones. Loan resurfacing customers following the economic meltdown is however proofing otherwise. Recently, CCBS introduced a new refinancing application process which customers term controversial. Several customers have complained over several anomalies in loan application, processing, awarding and repayment procedures. As the CCBS new Retail Banking Manager at CBS, I would revise the existing loan application process to suit customer needs. I will maintain the existing five stages in loan application process but include major changes to accommodate customer’s concern. I will use service blueprint and service-profit chain concepts to come up with a reliable strategy that will improve customer satisfaction and loyalty. Stage 1: loan application process: customers will fill loan application from a loan agent. Previously, the agent calculated refinancing eligibility from the data provided by the client. If the customer qualifies, he or she signs the necessary forms and waits loan approval. Several customers get disappointed when they discover they do not qualify for loan. To improve customer satisfaction on the process, I recommend the company introduce a loan resurfacing online calculator in their websites. The customers will fill major details then the system performs calculations for eligibility. In addition, the calculator will output the eligible amount and the new repayment rate. This will save customers’ time in application of loan refinancing. Stage 2: loan processing: loan processor performs credit checks, external loan or mortgage verification, property appraisal, and client’s employment details. In case of any problem, the customer may be required to explain or consultation with loan agent advisor is done. Customers have previously complained over double appraisals. In the new process, property appraisal report done within the past one year will be authentic. Secondly, other customers have complained over long processing. CCBS would employ more loan processor to handle loan application verification in the shortest time possible. This way, the customer’s will be satisfied the CCBS application process is fast hence creating loyalty. Stage 3: Loan closing: some new customers have known CCBS for cheaper loan closing. However, customers complained the amount they saved on loan closing was eventually consumed by extra monthly mortgage rate that CCBS charge. To improve customer satisfaction in this stage, the new process will incorporate several changes. The closing agent will call the customer and plan the closing date together. The customer would then receive the loan approval letter during the closing to avoid time wastage in the previous procedure. The client will be required to provide their lawyers loan packets during loan application. This will avoid the closing agent following up the packet at this stage which wastes a lot of time. Closing agents will be encourage to organize verification session of the clients early enough to avoid delay. Finally, CCBS will waive any hidden charges in mortgage loans to avoid reduce loan closing savings. Stage 4: establishment of new accounts: at this stage, loan-servicing specialist inspects and monitors loan repayment status of the client. He or she ensures that the previous loan is paid off effectively and the new loan is set up properly. Loan specialist will call the clients instead of regular mails which some customers complained as ineffective in communication. Stage 5: loan payment setup: CCBS loan-repayment specialist will issue payment books to the client. They will also calculate mortgage withdrawal fees and monthly payments. Furthermore, the specialist will monitor lateness in mortgage payments. In the new process, the specialist will be contacting the client and informing them of the setup status and completion date. This is contrarily to the previous style where the clients used to check from time to time whether the documents are ready. Finally, CCBS staff will sign performance contract to guide their working rate. Some customers have complained that they spend several days to have their documents signed by the CCBS staff. This is an indication that some staff are absent from their workstations. CCBS human recourse manager will ensure that each stage of loan process has enough employees to avoid absenteeism. CCBS will also prioritize front stage blueprint methods especially telephone or mobile calling. This is after customers have complained that backstage blueprint actions like writings and mailing to be ineffective. Some customers have complained several CCBS staff handles their files. This is an acceptable practice in any organization. However, customer asserts that they end up explaining their concerns to multiple people hence customer dissatisfaction. CCBS should then consider allocating specific customers to specific staff. This will not only improve efficiency but it will also improve staff work efficiency. The staff will have tangible history of the client’s files hence easy to track various concerns arising from the loan process. Conclusion The cost of house rent is continuously rising. Many households in Australia and beyond are opting owning their own homes. Mortgage is the home owning plan that most households are opting of late. However, economic recession creates inflation leading to high spending rates among the households. Many people therefore approach mortgage-lending firms for loan surfacing. CCBS is an Australian mortgage firm that registered increased lending rate in the economic turn down which took place in 2013. The firm received many new and old customers seeking for the services. However, several customers criticized the loan application and processing procedure that the company uses to serve its customers. This paper is a report on how CCBS would apply to improve its services. The society introduced new loan application process which was marred by customer critic. As retail banking manager, I have redesigned the process using service blueprinting and service-profit chain techniques. If CCBS apply the redesigned version, it will have the most friendly, effective and efficient loan application process. 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