New study says outsourcing becoming key component of lender business strategies |
| With the gradual decline in mortgage lending volume and profits, new research from TowerGroup finds that lenders looking to maintain a long-term competitive position in the marketplace have increased their focus on technology, business process reengineering, and offshoring in order to improve operational efficiency and lower unit costs. Offshoring has moved from being a leading-edge business strategy to being a required activity for lenders that want to grow or maintain their competitive position over the long term. According to TowerGroup, global sourcing of information technology (IT) services and business process outsourcing (BPO) has become a mainstream strategy in the United States and United Kingdom. TowerGroup estimates that as of December 2005, 15 of the top 20 US mortgage lenders and five of the top 10 UK lenders had captive or BPO offshore operations in India, the Philippines, or elsewhere. India, well known for its abundant supply of well-trained professionals with degrees in business, computer programming, and engineering, has seen a strong and growing army of trained, experienced staff in mortgage processing, customer service, and back office analytics. A recent TowerGroup visit to India found that the data centers maintain high security standards and that the quality of IT services and the level of education and training of staff are high as well. A new TowerGroup report titled, “IT Services and BPO Offshoring to India: From Leading-Edge Strategy to Mainstream Activity,” by Craig Focardi, research director for the Consumer Lending and Bank Cards research service at TowerGroup, reviews the business factors driving US and UK businesses to offshore outsourcing. The research also investigates the people, processes, and security standards that have made India the primary destination for offshoring by financial services institutions. At TowerGroup, Focardi’s research covers a wide range of process, strategic, and technical topics relating to origination, servicing, securitization and risk management. He also has expertise in business development roles for mortgage technology vendors, lenders and risk management firms. TowerGroup is a leading advisory research and consulting firm focused on the global financial services industry. Headquartered near Boston in Needham, Massachusetts, and with offices in North America, Europe, and the Asia-Pacific region, TowerGroup serves a global client base. Visit http://www.towergroup.com for more information. |
Everybody agrees that the housing market is drifting down from record highs. But is it coming in for a soft landing, or is it about to crash?
That’s what economists debated at the National Association of Home Builders’ spring construction forecast conference, held on Thursday in Washington, D.C. Attended by building-product manufacturers, builders and others involved in the housing industry, the semiannual event covered the likely trajectory of housing prices, starts and sales over the next year or two.
Although most of the economists on the panels have close ties to the industry, none was projecting a continuation of the five-year housing boom, which peaked last July. Nearly all described the housing market as “in transition,” although they couldn’t agree on how much favorable factors like strong overall job growth, low unemployment and moderate inflation will be able to mitigate the drag of rising mortgage interest rates, lack of housing affordability and wage stagnation.
Even the most optimistic panelists were guarded in their expectations for the coming two years. NAHB Chief Economist Dave Seiders predicted the rate of home-price appreciation would slow to 4% by the end of 2006, only a third of last year’s pace. In the first quarter of 2007, he expects new and existing single-family home sales to fall 5.8% to a total of 6.59 million units and single-family starts to drop 13.4% to 1.15 million units. “It will be a general cooling process, not a thud,” he says.
At least one major lender, Bank of America, has a totally no-cost loan on its drawing board, a BoA executive told a gathering of the country’s real estate writers in Charlotte, N.C., over the weekend. “I know it’s a revolutionary change, but I truly believe that’s where the market’s going,” Floyd Robinson said at the National Association of Real Estate Editors’ annual conference. Mr. Robinson, who is president of consumer real estate and insurance services at BoA, said the myriad of closing costs and fees now attached to home loans only serve to confuse borrowers, and promised that the bank’s no-fee loans would have the same annual percentage rates at those with fees so borrowers could readily see there would be no hidden charges. He also said the big Charlotte-based bank is considering offering to refinance its customers’ mortgages without charge. “All they’ll have to do is call the servicing department and it’s done,” he said. BoA thinks it has enough economies of scale and clout with service providers to offer no-cost loans, an executive with the bank said. But even if the bank has to take a loss to originate such a mortgage, he explained, it will be worth it to get customers in the door so it can start building banking relationships with them. NAREE can be found online at http://www.naree.org.
