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Power marketing for commercial loans

Jun 26, 2006

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 brokers include: • Lead generation Offshore-generated exclusive telemarketing leads generate the same return as onshore telemarketing leads and at normally a very nominal cost. • Processing 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
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