The Outsourcing Issue: Two Years Ago, Mortgage Banking Wrote about a New Trend to Outsource Back-Office Jobs to India. Recently, We Went Back to India to Check the Trend and Found a Second Wave of Mortgage Firms Going Overseas in a Big Way

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IT'S SPRING IN MUMBAI, INDIA (FORMERLY Bombay), and already the weather is turning hot, indicating a long, steamy summer ahead. No one seems to notice, as everyone scrambles to make a living in this bustling city of 15 million people--all squeezed onto a long peninsula with offset islands that define the city's core. To the north, the suburbs are expanding with shopping malls and modern business parks, the latter home to a burgeoning world of American companies--Citibank, American Express, JP Morgan Chase, Ocwen Financial and GE Capital.

Mumbai, like New York in the United States, is the country's financial center. When U.S. commercial banks, investment banks and, increasingly, mortgage banks decide to outsource to India, they usually look to Mumbai first and then to a lesser extent Chennai (formerly Madras) and Pune.

Not only is there a financial infrastructure in Mumbai, but the local universities graduate about 150,000 English-speaking students every year, says Abishek Kapoor, manager of corporate real estate services for Los Angeles-based CB Richard Ellis in Mumbai.

Kapoor works the business parks and call-center sector, and life these days doesn't slow down in the heat. When Mortgage Banking visited with Kapoor earlier this year, he said, "We have U.S. financial companies seeking about a half-million square feet of space right now. That's about 5,000 jobs."

In regard to outsourcing, the biggest news in town during the spring was the arrival of Calabasas, California-based Countrywide Financial Corporation. Anyone who was putting together outsourcing deals in Mumbai, from the processes to the real estate, was talking with the executives from. Countrywide, who were discussing a deal that would give them what was reported to be a call-center operation in Mumbai.

That information was difficult to confirm, however. Countrywide declined to discuss its plans in India.

This seems to be the grand dilemma. Just as the next wave of mortgage banking companies begins to open offshore operations, particularly in India, the political climate in the United States in regard to outsourcing has turned sensitive. Indeed, the Democratic Party under the John Kerry banner has tied together the loss of U.S. jobs with global outsourcing, and is putting the issue before the voters in the presidential campaign.

For the mortgage banking industry, however, even the most reluctant companies are discovering they have no choice but to find a low-cost solution to back-office processes and other routine services if they are to stay competitive.

"The pricing of our products was sliding downward, and we had no control of it due to the market," recalls Donald O'Neill, president and chief executive of Stewart Mortgage Information Co., Houston. "We saw a lot of price compression in postclosing |mortgage| document preparation and flood determinations. Market dynamics forced us to look at how we could reduce our costs," he says.

The answer was India, and in 2002 Stewart Mortgage outsourced its mortgage reconveyance work, and the flood determination business followed. Today, the company has a presence in Mumbai and Bangalore.

A short history

The first wave of mortgage companies to outsource happened in 2001 and 2002, when firms such as Stewart Mortgage; Ocwen Financial Corporation, West Palm Beach, Florida; GreenPoint Mortgage Funding Inc., Novato, California; and Bay View Financial Trading Group, Miami, began opening operations in India. It's difficult to establish how these outsource functions have done over the intervening years because Ocwen, GreenPoint and Bay View were not available for comment on the subject.

According to a September 2002 (when executives who outsourced were considered visionaries) Mortgage Banking article on the subject, Bay View employed a staff in Kolkata (formerly Calcutta) that did loan setup and outbound call work, GreenPoint was doing mortgage back-office functions and Ocwen told the magazine it had a strong interest in providing servicing support to U. …


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