An operational framework for mortgage supply chains

Abstract

Operations management in the mortgage banking industry requires a strategic framework that takes into account the industry's volatility, operational complexity and unique customer model. The foundation of this framework begins by (re)defining the mortgage lender's customer to include the capital markets. This paper proposes a novel model for managing mortgage banking operations, a model that uniquely reveals two different but intricately related supply chains in mortgage operations. The proposed dual-direction supply chain model offers speed and flexibility with one supply chain and integration and market knowledge with the other – the combination of which is critical to developing an effective hedge against uncertain demand. In addition, the paper incorporates legislation recently passed by Congress and its implications to our models. The paper offers concrete suggestions on how to apply various improvement strategies within the proposed model for efficient yet responsive operations in the mortgage banking industry.