TheMReport — News and strategies for the evolving mortgage marketplace.
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cover story made similar moves, though their smaller size compared to Wells means a smaller number of layoffs. In addition to Wells Fargo, JPMorgan Chase said it would eliminate 3,000 mortgage jobs, part of a previously announced plan to cut the 15,000 jobs in the mortgage division by the end of next year. In July, Bank of America announced that it had cut 20,000 jobs from its Legacy Asset Servicing division over the last year. Smaller lenders have had similarly large (on a percentage basis) cuts, with entire offices closing down in the last few months. Yet many of these lenders still have some mortgage business, just not enough to justify the same level of personnel, so a BPO solution makes more sense, according to Seehausen. "Institutions are right-sizing their staffs," he said. Typically, though, LenderLive grows from adding new lenders that are seeking to grow market share and to scale up, rather than from those seeking to scale down staff. Due to growth in their businesses, LenderLive and ISGN have both increased the size of their staffs. Regulatory, Compliance Considerations O ne of the most recent trends in mortgage BPO is a move to more onshore solutions, largely as a result of the Secure and Fair Enforcement (S.A.F.E.) for Mortgage Licensing Act of 2008. The S.A.F.E. Act requires all individuals who perform mortgage origination services to acquire a license, meaning they need to be onshore. Although the S.A.F.E. Act is a federal law, it requires that each state implement its own mortgage origination 18 | The M Report Even if the technology to handle compliance (e.g., documentation, systems monitoring) is outsourced, it doesn't relieve the lender of compliance responsibility. licensing requirements. Because the S.A.F.E. Act requires that independent contractors who perform loan processing and underwriting services have a license, financial institutions that outsource their mortgage origination services must ensure their service providers also obtain a license. LenderLive and some other BPO providers specialize in domestic operations. There is still some BPO work (e.g., analytics), but only a little that can be performed offshore. Huber expects the offshore restrictions to be loosened a little, as the recent mortgage crisis falls further into the past. He says lenders can improve their return on investment by using overseas providers for BPO services where allowed. Whereas others lament the burdens of the S.A.F.E. Act and other regulation, as well as the unpredictability of future legislation, it provides some opportunity for BPO providers, according to Seehausen. In addition to the S.A.F.E. Act, there are other federal as well as state regulations. Few lenders have the size to warrant having experts for all of the nuances of the different laws, so they seek out BPO providers to help for compliant documentation and other services to keep up with the latest regulations. LenderLive in August rebranded its Document Services division as GuardianDocs. (LenderLive acquired Guardian Mortgage Documents in 2008). The division has more than 15,000 users accessing its document management and preparation platform with thousands of document preparation transactions processed each hour in batch and individual job requests. The document preparation platform is scaled to manage thousands of jobs each minute. Document requests for loan servicers or originators can be printed and mailed through the GuardianDocs print centers. The GuardianDocs document management platform is scaled to handle millions of images received daily and is used to create the outbound document. ISGN offers the CFPB Mock Audit, an end-to-end review, to help lenders understand the new Consumer Financial Protection Bureau (CFPB) rules and regulations. ISGN's CFPB Mock Audit is designed to help financial services providers prepare for CFPB exams, providing fair lending analysis and a review of policies, procedures, and practices to identify internal compliance-related deficiencies. The CFPB Mock Audit provides recommendations and ratings to help lenders in developing their strategy to meet new CFPB requirements. Even if the technology to handle compliance (e.g., documentation, systems monitoring) is outsourced, it doesn't relieve the lender of compliance responsibility. Huber says that the lenders should validate the vendor's compliance performance before signing a contract and over the course of any agreement. "There's probably no regulatory relief in sight in the near future," Seehausen said. "The primary and the secondary market are coming back into play. As that happens, the industry will continue to become more complicated. The more complicated it gets, the more help that they [lenders] need. I see that on the rise for many years to come." Even if a lender isn't outsourcing the compliance function itself, compliance is still a consideration for any process that is outsourced. With the need to cut compliance complexity and improve loan margins expected to continue for the foreseeable future, industry experts expect lenders' use of BPO services to continue to grow at a strong pace.