MBA releases study on lender perspectives of FHA

MBA releases study on lender perspectives of FHA

November 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
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
• Geographical targeting of mortgage BPO is currently
localized, but that is changing as vendors are expanding into new
• Customers want mortgage BPO vendors to help them convert
fixed costs to variable costs in order to deal with fluctuating
• 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
• 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.
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