Tax Cert Sales

Define Phase Tollgate

Green Belt Candidate: Audrey HopkinsProject Manager: Tom Steinker

Date: March 1, 2012

Lean Six Sigma Green Belt Training 2

Agenda

Produce a Project Charter

Document High level process

Conduct VoC

Next Steps

Lean Six Sigma Green Belt Training 3

Project Charter: Bank Loan Process ProjectC I A MD

Business Case: Project Goal Statement:

The Bank may lose lien position on properties for secured Home Equity accounts whose tax certificate is bought at auction. We were at risk of losing $13 million in property values last year in one HOST system alone. The total value of taxes and associated expenses incurred was $4.2 million.In the last month we lost $221,567.58 in account balances. Additionally, there are OCC foreclosure procedures impacted by this process.

Goal 1: Reduce the number of times the bank incurs a property loss by 80% from a average of 5/month to 1/month.

Financial Impact: Estimated annualized lost value of account balances based on year to date is 2.65 million.

Benefit Category: Cost Avoidance.

Problem Statement: Project Timeline:

If the property owner does not redeem the property by paying the back taxes, fees, assessments and penalties owed before expiration of the redemption period, and the investor chooses to proceed with foreclosure action, the property will be sold at auction for the amount of tax liability or some minimum value as placed by the Taxing Authority. In 2011, the bank paid out 1.1 million dollars in taxes and fees for 148 accounts in one HOST system (FDR) alone.

Define2/2/12–2/29/12

Measure3/1/12-4/1/12

Analyze4/1/12-4/15/12

Improve4/16/12-5/1/12

Control5/1/12-5/15/12

Project Risk Assessment:

Identified Risks: Possible causes outside of department and influence; multiple geographic locations; and lack of data.

Risk Mitigation Plan: Include stakeholders in the project; use SMEs from multiple geographic locations; and we have already started to collect data.

Project Scope: Team Roles:

Current Scope: Limited only to loss by tax sale noticeSecured home equity accounts serviced in Brecksville.

Out of Scope: First Mortgage (Miamisburg)

Project Sponsor – Steve Cory, SVP, Executive Sponsor, Tom Steinker, VP Default Management, Working SponsorProcess Owner – Kathy Prorock, Manager Real EstateGreen Belt – Audrey HopkinsMentor – Janet MaleckiCore Team Members – Emily Kinzig, Vahn KnightSubject Matter Experts (SMEs) – Pat Wickham, Mary Lucyk, Rhonda PhelpsStakeholders – Steve Cory, EVP Lending Services, Adam Vidmar, Finance PM, Default Management

Lean Six Sigma Green Belt Training 4

Project Risk Assessment - Bank Loan Process

Areas of highest risk involve “possible causes outside of department and influence”, “multiple geographic locations”, and lack of data.

Mitigation for “out of department” causes is to include both up and downstream stakeholders in the project.

Mitigation for risk associated with multiple geographic locations is to have one representative from representative location assigned to the project as subject matter experts.

Mitigation for lack of data is to establish ongoing data collection mechanism which will continue through Control

C I A MD

Lean Six Sigma Green Belt Training 5

Supplier Input Process Output Customer

• Tax Lien Investor (usually through attorney)

• Branch Office

• Loan Centers

• County

• US Post Office

• Legal Notice (US mail, Branch office)

• Equity Analysis

• Equity analysis decision

• Customer Letter

• Satisfy taxes and/or fees on behalf of customer

• Bank

• Loan Borrower

• County

C I A MD

We are at risk from external Third Parties because part of the process resides outside our control

SIPOC - Bank Loan Process

Final DecisionPerform equity

analysis

Contact the Borrower

Research validity of cost

and fees

Receive summons & complaint or sales notice

County arranges for

sale

Borrower goes

delinquent on taxes

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CUSTOMER VOICE DATA PRIORITY CTQ SPECIFICATION

Default Management

I want to reduce amount of times we lose property

Y Secure lien position No more than 1 missing notice/month impact

Default Management

I want to avoid third parties buying the taxes

Y Receive notification prior to sale

Real Estate Foreclosure Team

I want to receive notice of sale on time

X Timely notification Have at least 1 week’s notice before the sale

Real Estate Foreclosure Team

I want minimal FTE impact

Not Critical To Project

Staffing level 0 new hires

C I A MD

Voice of the Customer CTQs - Bank Loan Process

Reduce the number of times the bank incurs a property loss

Lean Six Sigma Green Belt Training 7

Next Steps

Measure Phase

Create detailed current state process

Conduct Measurement Systems Analysis

Determine Baseline (Y)