Recipe for a new age mortgage brokerRamit AroraMortgage lead generation
The refinancing boom of 2003 helped the mortgage industry
considerably in increasing originations. However, the waning
refinancing boom has posed a significant challenge for the mortgage
industry, and brokers need to do some innovative thinking in order
to improve originations and reduce operating costs. The larger
mortgage brokers and lenders have already undertaken steps to
improve their competitiveness. But, there needs to be a serious
effort by mid-sized and small brokers to capture a bigger share of
the shrinking origination pie.
Outsourcing is a tool that has been used only sparingly by
mortgage brokers, because of insufficient information or lack of
available bandwidth for senior management to work on any strategic
initiatives. However, outsourcing has become imperative for all
brokers if they want to remain competitive and stay in business for
the longer term.
The first driver that outsourcing financial services provides is
the opportunity to scale up operations quickly with relatively
little investment. Despite frequent product innovations, the retail
mortgage business is firmly in the commodity category. This
squeezes margins. Companies are seeking to bolster margins by
engaging in process innovations, such as providing better and
longer hours of service to clients, cutting down processing time
and costs, and providing existing customers with more customized
products based on their buying patterns and demographics. This
requires significant investment, which can especially drag down
publicly listed companies. A large retail financial services player
in the United States estimated that it needed an investment of
around $100 million for an onshore call center expansion to support
its growing customer service needs. Since the company operated
partly at the low-end, low-margin end of the market, it had
relatively low average customer margins and revenue streams.
Offshoring helped the company scale up their customer service
operations in line with their business expansion in the United
States and provide faster turnaround times, as more personnel were
deployed to provide call center support. All of this was done while
reducing the upfront investment. In essence, these third party
offshore call centers worked as force multipliers that
substantially enhanced their service offering without a
corresponding need for investment.
The second driver lies in the opportunity to evenly spread out
cyclical operations. The retail financial services industry
operates on cycles, and companies in this sector are often caught
between having too much or too little capacity. This is
particularly true in the mortgage processing industry, where
interest rates affect the market and there are sharp peaks and
troughs. Companies need the flexibility that outsourcing to
third-party centers can provide.
A recent survey of senior mortgage industry executives conducted
by Ocwen Financial also revealed that 42 percent of the senior
mortgage executives realize the importance of offshore outsourcing
as an important tool for reducing costs and improving process
efficiency. Some of the mortgage banks that have experienced good
results from offshoring include GreenPoint Mortgage and IndyMac
Bank. Both of these banks outsourced their voice and back office
processes to India and leveraged an abundant labor pool and labor
arbitrage to reduce costs.
Some of the key activities that can be outsourced by mortgage
• Lead generation
Offshore-generated exclusive telemarketing leads generate the same
return as onshore telemarketing leads and at normally a very
Processing of loans is also an activity that is ripe for
outsourcing. After the borrower's documents have been collected,
the processing of files can be offshored and activities such as
ordering of title services and other verification activities can be
easily performed from a remote location.
• Inbound application taking
A lot of companies have also offshored the inbound application
filing process and have leveraged inbound call centers, where
inbound calls from borrowers can be handled by call center agents
sitting in remote locations. This has helped mortgage brokers in
providing 24/7 support for their marketing activities.
Some innovative brokers have even tried the concept of virtual
loan officers, where their employees from offshore locations do
lead generation and then also complete the form 1003. The credit
check is run by the U.S. office, and then the other fields on the
form are completed by the loan officers at offshore locations.
After the form is completed, even the preliminary underwriting is
performed by licensed underwriters offshore and sent to mortgage
lenders for further processing. If this concept works out as
expected, then this could greatly help mortgage lenders reduce
their costs and improve customer service. The mortgage lenders can
also leverage offshore resources to find new customers and process
a major portion of the loans offshore.
In a tough business environment, mortgage companies need to
think outside the box and align themselves with outsourcing
partners who can provide innovative solutions to leverage the full
benefits of global sourcing.
Ramit Arora is with Ann Arbor, Michigan-based iTria LLC, a
provider of integrated origination and processing solutions to the
mortgage industry. For more information, visit www.itria-inc.com.