A mature market for offshore mortgage processing?

Author:Paola, Francesco
Position:Viewpoint essay

In the years since the first brave mortgage banks initially ventured offshore, business process outsourcing (BPO), and particularly offshore BPO, has generated a significant amount of attention within the mortgage industry. As greater numbers of mortgage banks sought partnerships with offshore BPO providers or established their own "captive" delivery centers in offshore locations, interest intensified in the trend toward a global service delivery model. But has the mortgage BPO industry changed or matured significantly in the past few years? The answer is definitively yes--for both providers and buyers.

BPO providers -- increased expertise and reliability

The number of mortgage BPO providers has increased over the past two years, and, at the same time, some industry providers have begun to consolidate in order to offer more comprehensive services and to capture larger market shares in the United States. In a July 2006 report, Needham, Massachusetts-based TowerGroup, a financial services research and consulting firm, estimated the 2005 direct cost base of the U.S. mortgage industry was $44 billion--and half of this cost was attributable to labor expense.

Given these numbers, it is not surprising that providers based in lower-cost areas have grown to fill the demand for labor that is highly skilled, available and cost-efficient. An April 2006 TowerGroup report showed that as many as 18 India-based BPO providers were then serving U.S. mortgage banks. The number has surely increased since then, and as the number of offshore BPO providers has grown, the best of these firms also have matured into more knowledgeable and reliable service providers.

The mortgage BPO industry has significantly enhanced its knowledge base to deliver processes of more breadth and depth from outside the United States. The employees of both captive and third-party offshore mortgage operations have cultivated more specialized knowledge and are now equipped to handle complex mortgage processes. Much of this knowledge has been acquired through rigorous employee training and career-development initiatives. These programs focus on teaching employees skill sets specific to a vertical industry such as underwriting or loan-pool pricing, rather than training them across a horizontal process such as customer service or basic data entry. Additionally, offshore BPO operations leverage online and multimedia training programs such as those offered by the Mortgage Bankers Association...

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