Mortgage, Outsourcing
Housing downturn increases mortgage outsourcing
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Somebody’s misfortune is often another’s big chance.
Rising interest rates and shaky property prices have made life harder for homeowners and mortgage lenders in the United States and elsewhere. Many mortgage providers are responding by outsourcing processing work to specialist firms.
According to NelsonHall, a consultancy, the total annual value of such outsourcing contracts around the world is about $10.9 billion, with about a third of that in America alone. As yet, only a small proportion is being sent offshore. But as costs mount, says Sunil Mehta of NASSCOM, the Indian outsourcing industry’s lobby, mortgages are "ripe for offshoring."
India in particular is poised to benefit from a huge rise in "mortgage-process outsourcing" in the next few years — worth anything from $100 million-$150 million a year to $3 billion-$7 billion.
Big lenders are now using their own "captive" operations in India for many mortgage processes, and independent "third-party" business-process outsourcing firms are also on the hunt for work.
One force driving this, as usual, is cost. Higher interest rates eat away at the money-spinning business of refinancing outstanding mortgages, slash business volumes and squeeze margins. So the attractions of a low-cost destination, such as India, increase.
But Andy Efstathiou, of NelsonHall, says that the main impulse behind outsourcing in the industry as a whole is not so much cost-cutting as shifting from a fixed cost base to a variable one: the contracts give companies more flexibility to scale up and down as volumes vary.
Mortgages, moreover, involve a whole range of processes ripe for outsourcing. At "origination," they might include telemarketing, data entry and document verification. "Servicing" a mortgage can be performed remotely.
Source: The Chronicle Herald
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