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MBA releases study on lender perspectives of FHA

National Mortgage Professional
Nov 20, 2006

Study says lenders looking to BPO to control costs and riskMortgagePress.comBusiness process outsourcing,BPO NelsonHall, an independent business process outsourcing (BPO) analyst firm, has announced the availability of its latest research report, titled "Mortgage BPO Industry Assessment and Forecast," authored by Andy Efstathiou, research director at NelsonHall. The report is a comprehensive assessment of mortgage BPO services globally, containing recommendations for vendors in addressing the market. 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." The seven distinct findings revealed in the NelsonHall research report are as follows: • 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) and 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. • Risk control and reduction are becoming increasingly important, as the mortgage market continues to deteriorate in mature markets. • 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. NelsonHall's research also 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. Customers are outsourcing origination and default management services, to improve the management of these critical processes. "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 Efstathiou. 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. For more information, visit www.nelson-hall.com.
Published
Nov 20, 2006
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