Despite its obvious benefits, it is still not a common practice to opt for mortgage outsourcing services in the US. According to a Fannie Mae report, outsourcing is not the go-to option for lenders and 80% of them handle their origination processes in-house.
Yet, those who do choose to work with mortgage outsourcing companies can unlock outsized benefits. The report also found that 80% of those who outsource fully or partially are able to convert their fixed costs into variable costs, enjoying greater benefits of scale. So, what is holding back US lenders from adopting offshore outsourcing tactics? Mainly, they are wary of three pitfalls.
3 Reasons Why Lenders Shy Away from Mortgage Outsourcing Services
When lenders decide to control and operate 100% of their processes in-house, it is usually because of the following reasons:
1. Data visibility and compliance
Lenders could be uncertain about their customer and operational data falling into the wrong hands. In some cases, they may erroneously assume that an offshore outsourcing partner will house their data in a remote location outside of their control. In reality, leading mortgage outsourcing companies like Nexval make use of reputed cloud service providers to maintain fully secure and compliant data repositories. Lenders can view and access their data from anywhere in the world.
2. The cost of transferring operations
Lenders may also find the sheer cost of transferring operations to an outsourcing partner (i.e., the time and effort involved) prohibitive. But this is now easily addressed with the rise of modern integration and data migration technologies. For instance, we are able to retrofit a US mortgage provider’s existing system into a digital outsourcing platform without having to cause any major operational disruptions or build the system from scratch.
3. Uncertainty about the mortgage outsourcing company’s credibility
Even if you have found the perfect mortgage outsourcing solution for your business, you may be unsure about your future partner’s credibility. Are they compliant with US laws and regulations? Do they have sufficient experience, and can they adapt to the volatile market requirements of our time? By conducting a thorough assessment, it is possible to alleviate these worries before forging a partnership.
8 Questions to Ask Yourself Before Choosing an Offshore Outsourcing Partner
Before you shortlist the best mortgage outsourcing companies, here are the key questions to ask:
- Where is the company located? The country from which the offshore outsourcing partner operates can make a big difference in the value it can provide for you. Ideally, you should look for a location with a significant cost advantage, as well as a large pool of readily available talent.
- Can the company handle the end-to-end mortgage value chain? You might want to start by outsourcing origination or any other documents-heavy mortgage process, but you need a partner that can scale with you. Look for companies with expertise across the value chain, covering mortgage IT, risk & compliance, quality assurance, and title processes.
- Does the company provide a dedicated cybersecurity service? Cybersecurity is an increasingly important area of concern in today’s data-driven world. You need a partner with up-to-date threat intelligence on new and emerging risks, as well as the ability to conduct cybersecurity assessments and audits at regular intervals.
- Can the company help automate repetitive processes? The ultimate goal of mortgage outsourcing services is to offload and reduce non-core tasks. Ideally, the outsourcing partner shouldn’t just take the process off your hand, but they should also introduce long-term efficiencies through automation.
- How will you maintain visibility of tasks, processes, and outcomes? The offshore outsourcing partner will remain accountable for their outcomes, even if they take complete ownership. When choosing a company, ensure there is a platform or interface in place to monitor workflows, measure productivity, flag issues, and raise service requests.
- How many years of experience do they bring? The US mortgage industry has seen several ups and downs and regulatory changes in the last few years, and your partner should be closely familiar with them. As a rule of thumb, shortlist mortgage outsourcing companies with at least a decade of industry experience, starting from the post-2008 recession period.
- How conversant is the company with cutting-edge technologies? Artificial intelligence (AI), chatbots, DevOps, robotic process automation, and, eventually, blockchain can revolutionize how you process mortgage activities. Look for a partner with strong digital expertise so they can add value as you grow.
- Is the company compliant with state and federal laws? This is a make-or-break question to ask before choosing an offshore outsourcing partner. They must comply with CFPB, FNMA, FHA/HUD, USDA, VA, SCRA, MERS, and COVID-19-related norms in the US, no matter where they are situated.
Why Is It Necessary to Choose an Offshore Outsourcing Partner?
Currently, the US mortgage industry is grappling with inefficiencies. It costs $7000-$9000 to process the origination of a single loan, and it takes more than 45 days to obtain a mortgage. 4-5 underwriters touch every loan file, and a single full-time employee can close a maximum of 14 mortgages per month.
This means that, even if demand increases and the market turns bullish, lenders will be unavailable to provide the capacity to capitalize on these new opportunities. For example, delinquency rates are declining – do you have the labor force to make the most of it?
That is why mortgage outsourcing companies like Nexval offer bespoke solutions to offshore a part of or the entire mortgage process value chain. Our technology-enabled mortgage outsourcing solutions enable long-term efficiency gains with a significant improvement in your bottom line. Speak with our Tech Gurus today to discover how!