US banks sending sensitive mortgage, foreclosure jobs to India
As the US government rolls out tougher rules for home loans, banks have added new financial-verification hurdles, and many of them are outsourcing vetting to Indian outsourcing firms rather than hiring more people in the United States.
New York: American consumers aren't too happy that US banks are now outsourcing mortgage and foreclosure processing work to India to pare down costs and keep up with the growing regulatory demands created since the 2008 financial Armageddon.
As the US government rolls out tougher rules for home loans, banks have added new financial-verification hurdles, and many of them are outsourcing vetting to Indian outsourcing firms rather than hiring more people in the United States, reported The Wall Street Journal.
This year, Indian outsourcing firms will bring in $316 million in mortgage work, double the revenue from such work in 2009, according to estimates from HfS Research, an outsourcing consulting firm. The Journal said the move is creating a new revenue stream for Indian outsourcing firms and Tata Consultancy Services and Wipro Ltd are getting a lion's share of the work.
In the years after the 2008 global financial crisis, the US government flayed every facet of the mortgage business, from how US banks decided who got a loan to how borrowers in default were harangued. Banks were also faulted for sloppiness, which, the government said, contributed to the wave of foreclosures that sank the US housing market. As a result, the Obama administration has demanded changes to every aspect of the mortgage and foreclosure process. Beleaguered US banks are now outsourcing to meet the changing rules and demands.
In a bid to deflect the chorus of protest from US consumer groups, Indian companies say they won't be giving final approval for banks to foreclose on loans. Instead, they will only make sure that the documents are in order so the banks can sign off.
"We never judge the cases," Abid Ali Neemuchwala, vice president for business-process outsourcing services at Tata Consultancy Services, told the Journal.
"What we do is make it easy for the banks to make that final decision by putting together all the information and letting them know their checklist is complete."
Tata Consultancy has expanded its mortgage-business revenue by about 40 percent over the past two years, and added 2,000 staff members, to a total of 7,000 people who work on mortgages. Wipro has also built a foreclosure unit, and it expects to generate $4 million to $5 million by helping US banks close out bad loans.
"The foreclosure process has become much more stringent, and that scrutiny has created a lot more volume for foreclosure teams [at banks]. But they don't have the capacity," Arjun Raman, a business-development manager at Wipro, says.
US regulators have been concerned that there is poor supervision by banks of third-party vendors. And US consumer advocates say it will be harder for banks to be sure that the work is done properly.
"The lack of oversight so far away may be too much for these banks to handle, considering how badly they've handled overseeing their own staff," said Ira Rheingold, executive director of the National Association of Consumer Advocates.
Despite US consumer reservations this trend is here to stay. Raman Roy, managing director for Quatrro Global Services, in New Delhi says he plans to double his mortgage staff to around 2,000 to handle the boom in the home-loan business over the next year. Analysts at Quatrro rate potential US borrowers as "very favorable" or "highly questionable" after ploughing through hundreds of scanned pages detailing the borrower's salary and credit history.
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Politicians, bureaucrats, big builders and the land mafia control the real estate market to the point where nobody can afford to buy a home. And it is this nexus that ensures prices do not crash as it would wipe out the value of their slush funds.<br /><br />