Quality in mortgage servicing requires a precise approach to ensure accuracy, compliance, and efficiency across diverse functions like escrow management, investor reporting, foreclosure processing, and more. Dr. W. Edwards Deming’s 14 Points for Management, though traditionally applied in manufacturing, serve as a powerful framework for quality improvement that’s equally relevant to the mortgage servicing industry. By adopting these principles with a technical focus, we can streamline operations, minimize risks, and improve service delivery in complex, compliance-driven environments. In this article, I will explain Deming’s 14 quality management principles with examples in a representative area of mortgage servicing.
1. Create Constancy of Purpose Toward Improvement
Establishing a culture focused on continuous improvement means prioritizing long-term optimization over short-term fixes. For instance, in escrow management, maintaining accuracy in account reconciliation and disbursements requires automated validation and auditing processes. By implementing a purpose-built automation solution, teams can reduce human error, ensure compliance with regulatory timelines, and ultimately improve customer satisfaction and operational efficiency.
2. Adopt the New Philosophy
In mortgage servicing, a proactive, tech-driven quality philosophy is crucial. In investor reporting, for example, traditional manual processes can lead to data inaccuracies and delays. Adopting real-time data validation techniques and automated workflows ensures accuracy and timeliness, improving transparency and reducing manual effort. This philosophy minimizes the risk of inaccuracies and builds stronger investor relationships through reliable data reporting.
3. Cease Dependence on Inspection Alone
Reliance on end-of-process inspections can introduce costly delays if errors are identified late. In foreclosure processes, integrated, in-process checks and validation are essential. This approach involves embedding compliance checks at each stage—such as validating property valuation or legal documentation early—reducing the risk of rework and associated costs. Automation platforms with configurable checkpoints can streamline this process, ensuring that regulatory requirements are consistently met without adding manual burden.
4. End the Practice of Awarding Business on Price Tag Alone
Vendor selection based solely on price can lead to compromised quality and security, especially for sensitive processes like document custody. Selecting vendors with proven data security, strong SLAs, and advanced integration capabilities ensures that sensitive borrower information is protected and managed efficiently. By prioritizing vendor quality, mortgage servicers reduce risks associated with data breaches, mismanagement, or delays in document handling.
5. Improve Constantly and Forever the System of Production and Service
Mortgage servicing requires continuous system improvements to remain compliant and efficient. In payment processing, automated communication and error-checking mechanisms help teams respond promptly to borrower inquiries and minimize the risk of missed or misallocated payments. By consistently refining processes, servicers can reduce borrower complaints and improve cash flow, all while staying aligned with regulatory standards.
6. Institute Training on the Job
Maintaining a high standard in quality requires ongoing training, particularly in complex areas like delinquency management. Regular, role-specific training in compliance, risk assessment, and customer interaction prepares teams to handle sensitive cases accurately and empathetically. Incorporating automated training modules and scenario-based learning in the servicing platform can keep team skills up-to-date with evolving regulations and industry standards, reducing both compliance risk and customer churn.
7. Institute Leadership
Effective leadership in mortgage servicing is crucial for guiding teams through compliance-heavy and often sensitive operations. In default servicing, leaders must establish clear protocols and ensure team members understand and follow them rigorously. By integrating leadership dashboards that display real-time performance metrics, team leads can make informed decisions and direct their teams effectively, ultimately reducing errors and fostering a culture of accountability.
8. Drive Out Fear
Encouraging an environment where employees feel safe reporting potential issues is essential in mortgage servicing. In compliance-sensitive areas like loan modifications, open communication channels allow teams to report regulatory concerns without fear, enabling quick, proactive adjustments. An automated system that facilitates anonymous feedback and tracks issue resolution can help organizations address compliance risks early and prevent penalties.
9. Break Down Barriers Between Departments
Effective mortgage servicing relies on seamless communication across departments. For instance, loss mitigation and collections teams often need to coordinate closely to offer borrowers consistent, compliant solutions. A centralized platform with cross-functional access to borrower data and compliance insights fosters collaboration and ensures all teams operate from the same information, reducing the risk of inconsistencies or miscommunications.
10. Eliminate Slogans and Exhortations
Generic slogans don’t drive performance. For example, rather than encouraging teams with “Zero Defects” without actionable support, providing customer self-service tools and responsive communication channels offers employees tangible ways to enhance the borrower experience. By focusing on concrete solutions, servicers can reduce error rates and elevate customer satisfaction.
11. Eliminate Numerical Quotas for the Workforce
Quotas can drive teams to prioritize speed over quality. In loan servicing quality reviews, for instance, focusing on qualitative rather than quantitative metrics allows for a thorough review process that captures critical errors and compliance gaps. By shifting performance metrics to emphasize compliance and accuracy, servicers can reduce costly errors and regulatory issues.
12. Remove Barriers to Pride of Workmanship
Employees in roles like payment reconciliation need the flexibility to suggest process improvements that enhance accuracy and efficiency. Empowering staff to refine reconciliation workflows—such as by introducing AI-driven error detection—reduces mistakes and improves accuracy, fostering a work environment where employees feel a sense of ownership over their contributions to quality.
13. Institute a Vigorous Program of Education and Self-Improvement
In a field as dynamic as mortgage servicing, continuous education is essential. For instance, staying updated on regulatory changes in fair lending practices can be challenging without structured learning programs. By offering resources and continuous training on these updates, servicers can ensure teams are knowledgeable and confident in handling new requirements, reducing compliance risks across the board.
14. Put Everybody in the Company to Work Toward Accomplishing the Transformation
Quality management should be a company-wide effort, not confined to individual departments. In investor compliance, aligning every team with quality objectives fosters a shared commitment to compliance and operational excellence. A unified quality platform that allows all departments to access critical data and participate in quality initiatives helps create an organization-wide focus on continuous improvement.
