A Consultant's Perspective on the Foreclosure Scandal

Could Six Sigma cure the broken foreclosure process?


After reviewing the deposition testimony of notaries (who might be better termed robosigners) Bryan Bly, Crystal Moore and Duarta Doko taken by the Forrest Law Firm and posted to YouTube, it is abundantly clear that the foreclosure “process” is broken. Anyone can see that.


The question is, how can it be fixed? Could the institutions involved in this business process (that is, the foreclosure process) take some lessons from the past? In particular, we’d like to take a look at GE Capital Services and how they employed Six Sigma tactics in the late ‘90s to improve a severely broken process.

Highlights from Crystal Moore's Deposition


Moore signs around 3,000 documents per day. Many of these she signs as a vice president for financial institutions including Citi Residential Lending and MERS. She doesn't know everyone she's signed for or even who she's authorized to sign for. When asked about Citi, she admitted that, like Bly, she'd never received a paycheck from Citi, had a boss there, an office there or any other contact with the bank.


On one document, she signed that she lived in California; in fact, she's never actually set foot in the state. She simply signed the document because she was "supposed to."


Like Bly, Moore testified that she notarized stacks of documents while in the same room as the people whose signatures she was notarizing. However, she did not watch them sign (which is what a notary does, by definition.) In fact, she couldn't possibly watch them sign from where she sits.


Unlike Bly, she has a computer at her desk. Yet Moore has stated that she never uses it to verify the information in the documents she signs.


Highlights from Duarta Doko's Disposition


Although Doko's testimony matched the others’ in many respects, one sharp difference involved the notarization process. According to Doko, the process was as follows: notaries would sit at tables while signers came and signed documents in front of the notaries.


Yet Doko testified that although she signed as a witness, she didn't actually witness the signatures. Instead, she received already-signed documents in batches and notarized them all at once.


Putting aside the question of whether she actually saw them sign the documents, Doko further insisted that she had signed these documents only as a witness. That is, until she was presented with a document that she had signed as a vice president of "Financial Freedom Funding Corporation." She explained by saying, "I don't pay attention," and "I just saw my name and signed."


Clearly, this system is flawed. A process is broken when it practically forces employees to lie about their credentials. A process is broken when people are signing off on things that are simply untrue.



Disturbing Dishonesty


Obviously, one of the most disturbing features of the Nationwide employees' testimony is how the employees are portrayed as "vice presidents" of financial institutions, when they are clearly not even affiliated with them.

Christopher Forrest, the attorney who took these depositions and posted them on YouTube, stated:


I'm concerned that they're representing themselves as vice presidents of these banks when it's clear that they don't work for these banks and in most cases don't have any direct contact with the banks. I think the only reason they are called vice presidents is to convey that they have knowledge that they don't have.


Forrest says the title is particularly misleading given how little the employees understand about the documents. "I was pretty floored," he says, "to realize that these people have no idea of the meaning of what they're signing or the impact that these documents have."


GE Capital Services and Six Sigma Initiatives


Like many engineering and design firms, General Electric underscores the importance of applying Six Sigma to many areas of its manufacturing process. Surprisingly, its capital services division has also decided that employingSix Sigma was help it become financial services organization in the world.


Capital Services is a diversified financial division of GE that offers comprehensive solutions to clients to help them increase productivity and efficiency. They have 28 independent business units in the areas of equipment management, consumer services and midmarket financing. They specialize in financing and insurance, offering a remarkable variety of services and products globally.


GE Capital Services’ commitment to using Six Sigma Breakthrough Strategy to reduce defects, control quality and increase customer satisfaction is unparalleled in the service industry.


In fact, GE Capital Mortgage Insurance won the USA Today Quality Cup in 1998 for service businesses. This award spotlights companies that have achieved exceptionally valuable improvements in a system or process for achieving customer satisfaction. In 1998, GE Capital Services generated over $300,000 in net income from the Six Sigma improvements, double the figures for 1997.


The person initially responsible for driving the Six Sigma initiative through GE Capital was the vice president and chief quality officer, Ruth Fatori.  Her first task in adopting six Sigma at GE was to establish a rigorous and robust training program for master black belts. Although production divisions tend to have plenty of quality improvement experts, there was a glaring lack of master black belts in the financial sector. Ms. Fatori expanded a training program to include a full complement of black belts, green belts and Six Sigma team members.


Knowing that in the financial services industry the bulk of customer contact occurs via telephone, Fatori created simple checklist allowing employees to keep a record of incoming calls. Her checklist is still in use today.  The idea behind the checklist was to create a list of “critical to quality characteristics” that could be statistically analyzed to determine whether or not customer service was meeting the high standards set forth by GE.


Mortgage Insurance, another GE Capital Services division, developed a flexible billing system that contributed very positively to customer retention and was instrumental in winning $60 million in new insurance business from one client alone. Black Belts in the Loan Work Out Consistency Team applied Six Sigma to the process of working with delinquent borrowers to find alternatives to foreclosure. By cutting defects in the workout process by 96%, GE capital was able to afford borrowers quicker solutions, while also reducing claim payments by $8 million. In Japan, Global Customer’s Finance, another GE capital services division, helped customers overcome payment difficulties associated with limited packing hours. They helped customers save money by establishing alternate payment methods through a network of 25,000 convenience stores now used by 40% of its customers.


If a company as complex and structured as GE can put efficiency methods like Six Sigma into place as rapidly as they have, almost anyone can do it. Practices like Six Sigma allow companies to measure their processes, seek areas for improvement and rapidly produce results that positively impact the bottom line. Six Sigma can help any company division, from financial services to compliance, avoid the types of mistakes that have put average employees’ everyday practices into a very unflattering spotlight.

The important questions to ask yourself are: “Would my company’s employees and processes hold up to the kind of scrutiny detailed above?” If the answer is no, you may want to consider how you can go about analyzing and improving your business processes so you can be more like GE.

After all, the Quality Cup is a much better way to earn press time than having your company’s depositions posted on YouTube.

2010-11-12 | Add a Comment
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Dave Howell | 2010-11-19 17:15:22 | reply
Notaries are symptomatic and causal at best. The root issue is bank failure due to greed, and poor investment decisions. This has all been compounded by the foolishness of our leadership, who borrowed another Trillion to refinance the bank failure. Go figure. You really have to ask if we'll take control of our Country again? Money supply and Government Control should be the watchwords, not Money Supply and Bank Control.
reply Scout | 2011-08-23 10:59:12 | reply
It's spooky how cveler some ppl are. Thanks!
Kameryn | 2012-12-30 07:35:17 | reply
That really captures the sripit of it. Thanks for posting.