Mid-Size Government Agency Success with a Meaningful Lean Pilot

Transcription

1 Mid-Size Government Agency Success with a Meaningful Lean Pilot Department of Housing and Urban Development Lester Sutherland Sunrise Coast Process Improvement Ocqueoc, Michigan

2 US HUD Federal Agency Founded in 1965 Legislation Employees Headquarters Washington, D.C. Hubs/Homeownership Centers across U.S.A.

3 US HUD Who Are We? Home Equity Conversion Mortgages for Seniors Community Development Block Grants Lower-income Rental Assistance Indian Housing Loan Guarantees Supportive Housing for the Elderly Supportive Housing for Persons with Disabilities Community Development Block Grant Disaster Recovery (CDBG- DR) Assistance Mortgage Insurance for One- to Four-Family Homes (Section 203(b)) New Construction or Substantial Rehabilitation of Nursing Homes, Intermediate Care Facilities, Board and Care Homes, and Assisted Living Facilities (Section 232); Purchase or Refinancing of Existing Facilities (Section 232/223(f))

4 So What Were Our Drivers to do Lean? With the global financial crisis of 2007, the FHA and HUD came under serious stress HUD was trying to maintain the availability of loans for the Office of Residential Care Facilities (ORCF) Section 232 loan program The focal point of the first wave of BPR initiatives was to be the Multifamily Residential Care Facilities Section 232 loan program. There were 51 field offices with little standard work The ORCF loans became a crisis point for the administration because the healthcare and assisted living residents were more vulnerable to the loss of continuing care than typical apartment dwellers. The Section 232 origination process had a process time of 146 to 547 days per application (average 270 days), and 57 independent process steps

5 Before We Start Uniqueness of Government Not driven by profit Limited competitive pressure Freeing resources translates into less power Decreasing cost can mean decreasing budgets Difficulty in getting Value Stream Managers concept is difficult for the stakeholders to agree to..

6 A Vision and Case for Change How can we increase our product flow with limited resources? Perhaps Lean will work here. 6

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9 Where We Started HUD had no standard method across it 51 offices for how to underwrite Healthcare facility loans [1] We had MANY handoffs We did not know the status of applications It was not clear what our metrics were nor visibility how we were doing Lots of non-value added steps 1. GAO, 2006, Residential care facilities mortgage insurance program: opportunities to improve program and risk management, GAO : Published: May 24, Publicly Released: May 24, 2006, 10 May 2016, < >

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12 Lean Tools Utilized q Worker cross training and flexibility q New position -- Underwriter q Mistake Proofing q Lender Narrative Template q Standard Work q Punch lists to Assess Risk in the beginning then TWI type standard work q Parallel Processing q Legal Review will begin Day One q Consistency q Communication / Transparency q Visual Management 12

13 Changing customer requirements & expanding customer volume Portfolio Mix 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 Q1 FY 12 Small Portfolios/One-offs Medium/Large Portfolios 14

14 Residential Care Application Volume OHP M/F Compiled from FHA Annual Management Report. 16

15 Adjust: Relentless Kaizens - Customer Focus Loan Committee Review (Risk Mitigation) FY 2009 Rejects: 2 YTD FY 2010 Rejects: 28 Dedicated Lean Counsel Portfolio Review Service Lanes Green Team Closing Team New Construction Team

16 Created Service Lanes Average Days from Receipt to Close New Construction 223(f) Regular 223(f) Green Team Average Lead Time 223 A(7)

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19 Going Electronic Getting to Ideal e-submission Virtual processing/load Leveling Reduce lead time Mistake proof Stabilization Manage the Queue Visual Management Respond to customer needs

20 Why Go Electronic? Better Data Tracking Ability to do root cause analysis Lender feedback on common mistakes Reduce risk Eliminate duplicate data entry Increase data integrity, reduce rework Ideal Future State: automated underwriting

21 Automated Punch list

22 Loan Committee Memo

23 Receipt of Application to Close Days Lori Michalski, Director, OPPAD HUD, June 11, 2009, AME presentation, Calgary Canada. 25

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25 HUD s productivity and specific senior care industry knowledge has expanded exponentially under the Lean program, contributing to the soundness of the program with lasting benefits to its stakeholders. 27

26 As a long time stakeholder in the HUD 232 program, we were skeptical of another programmatic change; however, the implementation of the Lean processing model has been far more successful than we ever anticipated. HUD has been extremely successful in improving efficiency and standardization. Adoption of the Lean process has not only substantially increased production, but has changed the corporate culture within HUD, has positively effected the strategic planning of many lenders, and has greatly enhanced the reputation of the program within the long term care industry that it serves. 28

27 2014/2015 Improvements Published Section 232 Program Handbook. The Section 232 Program had long lacked a comprehensive handbook to guide the industry. Section 232 policies were dispersed among many different publications spanning many years. This year ORCF published a comprehensive guide to the Section 232 Program covering all aspects of production and asset management. Published in May, the handbook sets forth various policies and protocols, including those reflected in the Final Rule of September 7, 2012 (the Accountability Rule ), as well as various documents, in mortgagee letters, and in other publications. The Handbook became effective September 1, Published Mortgagee Letter on Section 232 Portfolios and Master Leases. Many owners and operators have interests in more than one facility and wish to obtain FHA financing. Insuring multiple facilities in a portfolio can concentrate risk; accordingly, ORCF has long taken steps to manage such concentrations. ORCF published Mortgagee Letter 14-06, Portfolio and Master Lease Guidance setting forth FHA s policy with respect to operational, financial and legal information needed for a portfolio review. This mortgagee letter also provided formal guidance on the use of master leases, which allow ORCF to manage portfolio risk by making cash flow available from performing facilities to other facilities in a portfolio when needed to meet debt service requirements. 29

28 2014/2015 Improvements Continued Implemented Pay.gov. In fiscal year 2015, OHP successfully implemented the U.S. Department of Treasury s Pay.gov platform, to allow lenders to make online payments of Section 232 and Section 242 program fees. Use of this application allows for better funds control and provides automated processing for FHA and its lender partners. Prior to implementation, paper checks along with paper receipts, were received and processed. Implementing Pay.gov allows for improved financial controls, reporting, and reconciliations of financial accounts. Additionally, it enables OHP to utilize staff more effectively in other high-risk mitigation activities. Improved Risk Management Data Collection. OHP is implementing improved information technology solutions to better manage portfolio risks and monitor healthcare facilities. In the Section 242 program, Moody s Risk Analyst software is being deployed to capture portfolio financial data and provide enhanced analytics support for risk management. In the Section 232 program, a Web Portal has been developed to collect financial data from portfolio facilities. This information is essential for monitoring financial performance of facilities to manage risks and prevent claims. 30

29 What continues to drive us? Budgets are decreasing while service levels and demands are increasing Organizational Knowledge resources are retiring limited transfer of knowledge Expectation is to expand services with less resources Customer expects/demands improved quality of services Focus on improved Quality Reduction of risk is a priority.

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31 Questions? Questions 33