Case Study 2

Mortgage Approval Time Study

 • A major financial services company wishes to better understand its mortgage
approval process. In particular, the company is interested in learning about the
effects of credit history (good versus fair), the size of the mortgage (<$500,000
versus >$500,000), and the region of the United States (western versus eastern) on
the amount of time it takes to get a mortgage approved. The database of mortgages
approved in the last year is accessed, and a random sample of five approved
mortgages is selected for each of the eight combinations of the three variables. The
data are shown in the table
•  
• Mortgage Approval Time Study     

Problem •
•
Credit History    Mortgage Size   Region             Approval Times (Days)
Good                <$500,000        Western            59        50        64        62        47
• Fair                  <$500,000        Western            81        58        69        65        74

Statement •
•
Good                >$500,000        Western            38        52        58        60        65
Fair                  >$500,000        Western            146      159      133      143      129
• Good                <$500,000        Eastern             28        26        38        41        21
• Fair                  <$500,000        Eastern             42        53        40        50        64
• Good                >$500,000        Eastern             49        31        49        42        38
• Fair                  >$500,000        Eastern             106      115      126      118      138
 
 DOE
Credit History Mortgage Size Sample Sample Sample Sample Sample Standard
Run (X1) (X2) Region (X3) X1X2 X1X3 X2X3 X1X2X3 1 2 3 4 5 Average Deviation
1 Good (-) <$500,000 Western + + + - 59 50 64 62 47 56.4 7.503332593
2 Fair (+) <$500,000 Western - - + + 81 58 69 65 74 69.4 8.734987121
3 Good >$500,000 Western - + - + 38 52 58 60 65 54.6 10.38267788
4 Fair >$500,000 Western + - - - 146 159 133 143 129 142 11.78982612
5 Good <$500,000 Eastern + - - + 28 26 38 41 21 30.8 8.408329204
6 Fair <$500,000 Eastern - + - - 42 53 40 50 64 49.8 9.602083107
7 Good >$500,000 Eastern - - + - 49 31 49 42 38 41.8 7.661592524
8 Fair >$500,000 Eastern + + + + 106 115 126 118 138 120.6 12.07476708
   
Sum+ 381.8 359 243 349.8 281.4 288.2 275.4
Sum- 183.6 206.4 322.4 215.6 284 277.2 290
Avg+ 95.45 89.75 60.75 87.45 70.35 72.05 68.85
Avg- 45.9 51.6 80.6 53.9 71 69.3 72.5
Effect 49.55 38.15 19.85 33.55 -0.65 2.75 -3.65
 Regression Coeffients

b0= 141.35
b1= 24.775
b2= 19.075
Computation
b3= 9.925
b4= 16.775
b5= -0.325
b6= 1.375
b7= -1.825
 Model Equation and Interpretation
Y-intercept

Factors’ Interactions
• Where β represents coefficients
• Where Ŷ final approval time

• Ŷ= 141.35+24.775X1+19.075X2+9.925X3+16.775X1X2-0.325X2X3+1.375X2X3-1.825X1X2X3
Using the model complete the interpretation and importance
 Interactions Graphs and Interpretation
Credit History Low High Mortgage Size Low High Region Low High
Good (-) 30.8 56.4 <$500,000 30.8 69.4 Western 54.6 142
Fair(+) 49.8 142 >$500,000 41.8 142 Eastern 30.8 120.6

Credit History/High Low Chart

Mortgage Region
Axis Title

250
150 300
200 142
250
100 150 200
150
50 100
41.8 69.4 100
50 50
0 30.8
Low High 0 0
Low High Low High

Good (-) Fair(+) >$500,000 Eastern

<$500,000 Western
 Analysis of the Sample Size

Read Page 284 to understand the effect of sample size. Use

the Internet to research more and support your analysis.
 Other Variables to Study in the DOE
Understanding Interactions between factors and DOE
with 3 Factors Experiment. Pages 292-303
Recommendations and Conclusion of the DOE
Use the background of DOE and Strayer Library to research
and support your recommendations and conclusions.
References