Mortgage Loan Processing

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Wednesday, August 09, 2006

Mortgage BPO is on the Rise!

Check out this good article we found on the internet...

Mortgage BPO Market Putting More Emphasis on Cost and Risk Control, Says NelsonHall

NelsonHall - August 3, 2006

Mortgage organizations, caught in a rapidly changing market, are setting higher expectations for their mortgage process outsourcing (mortgage BPO) vendors, says NelsonHall. "Mortgage organizations want an improved process compared to their in-house capability. Vendors that try to provide only standard services at some cost savings will not succeed in this market," said Andy Efstathiou, a research director at NelsonHall.

NelsonHall, a leading independent business process outsourcing (BPO) analyst firm, recently released a comprehensive assessment of mortgage process outsourcing (Mortgage BPO) services globally and recommendations for vendors in addressing this market.

Given the pressing need for mortgage lenders to respond aggressively to a rapidly changing marketplace, NelsonHall forecasts that the global mortgage BPO market -- including both elemental services and multi-tower contracts -- will double in size over the next five years to reach $22 billion by 2010.

NelsonHall's research supports the conclusion that deteriorating economic conditions are leading customers to want better control over cost and risk. "Customers want their mortgage BPO providers to tie cost of processing to volume of processing, so that costs can be better matched to business volumes," said Efstathiou. "Moreover, customers need to employ better risk and credit processes to avoid costly portfolio deterioration in the current environment," he added.

Other findings from the NelsonHall research include:

Mortgage BPO contracts differ significantly by geography, with U.S.-based contracts typically limited to one of four towers (origination, mortgage servicing, default management, or securitization services), but non-U.S. contracts typically covering multiple towers.
The most rapidly growing segments of mortgage processing services are origination services and default management services.

Geographical targeting of mortgage BPO is currently localized, but that is changing as vendors are expanding into new countries.

Customers want mortgage BPO vendors to help them convert fixed costs to variable costs in order to deal with fluctuating volumes.

Vendors need to be able to manage rapid scaling of workforce size, while maintaining and increasing worker product knowledge.

Mortgage BPO utilizes very little offshoring of delivery services. However, offshoring is growing much faster than the market as a whole.

Efstathiou commented, "Vendors need to be able to manage rapid scaling of workforce size, and still maintain and increase worker knowledge of increasingly complex mortgage products. All geographies are experiencing rapid change in the mortgage products serviced and established markets are changing the mix of products as a result of changing consumer demand. Furthermore, emerging economies are increasing the usage of mortgages."

About the market research study

NelsonHall's report, "Mortgage BPO Industry Assessment and Forecast", uses a combination of user interviews and vendor research to address topics such as mortgage processing issues and challenges faced by organizations, organization usage of external mortgage processing services and the benefits sought from external mortgage processing services and vendor selection criteria. The report was written specifically for market managers developing strategies to target segments of the mortgage processing outsourcing market and executives researching vendor capabilities before making purchasing decisions.

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