Most mortgage companies are still feeling the brunt of the mortgage implosion a couple of months back. It seems that for most players in the industry, it is a choice between "playing it safe and wait until things get better" or "close down shop and move somewhere else". The mortgage industry may still be reeling in the slowdown, but there are other options .
Here are some ways how outsourcing can help you stay ahead at these times and position yourself for a better market condition.
1. Outsourcing boosts your profits.
As with most industries, cutting costs can mean saving your business. Outsourcing some of the back office work such as processing, quality support and clerical or analysis functions can reduce your manpower costs by an average of 40 percent. If you factor in other overhead costs such as office space and utilities, the savings will simply be bigger. It doesn't mean however that you should go out and look for the cheapest outsourcing provider as they will reduce your cost the most.
Many companies get burned with outsourcing deals simply because they chose to stick with the cheapest deals instead of those that can provide the best value and service. The bottomline is to increase your return of investment and focusing single-mindedly on reducing costs will doom your outsourcing endeavors from the start.
2. Outsourcing increases your productivity.
There are those who say that outsourcing may save you some money, but will lead to a loss in productivity. This may be true in some cases as a number of companies suffer losses in the transition stage. However, as a number of outsourcing providers and clients can testify, if outsourcing is done properly it will lead to an increase in productivity. The increase is attributed to the client's mindset and approach towards outsourcing.
3. Outsourcing updates your capabilities and experience.
Having a partnership with an experienced outsourcing provider will open your business to new technologies and bits of knowledge that would otherwise be unavailable to you if you simply work on your own. The mortgage industry in general is relatively a late-bloomer when it comes to technological integration, which has been proven to boost efficiency and productivity. Other sectors especially in the financial services have been reaping the benefits of new technologies and innovations, but quite a number of small and medium sized mortgage companies are still far behind, some even perform the entire loan process manually.
In processing loans, some of the bigger lenders who do it manually, e.g. submitting loan applications and underwriting packages via transboxes and overnight. One major reason is the high cost of technology that small and medium sized mortgage companies simply cannot afford especially at this time. Setting up a secure server running your database and programs, getting connected with decent internet providers and service, and having an IT person in charge of it can easily cost you tens of thousands of dollars in set-up and maintainenance.
It is an imperative for outsourcing providers to run this kind of set-up and to be updated in all aspects of it.
4. Outsourcing expands your marketing network
It is a fact that the mortgage industry thrives on connections with people from other industries. When was the last time that you've closed a loan for a client who is someone within the mortgage industry? More often than not, as a mortgage professional, your client is a friend, referred by someone, or a stranger who works in a different field. It is a part of your daily routine to seek new prospects and expand your network. You've probably sent out emails, made some cold calls, have lunch with a friend's friend in search of a fresh lead.
One route that hasn't been explored much is the outsourcing partnerships. An outsourcing company, as a service provider, is by nature connected to a diverse field of industries.
5. Outsourcing allows you to focus on other core aspects of your business.
It is a common dilemma of most small and medium sized mortgage companies how they are going to split their time, effort and resources between marketing and processing, and not to mention the administrative work such as maintaining an office and managing your people. It is almost an accepted fact that one of the two would have to tale a hit in favor of the other. I've seen a number of mortgage companies who have grown accustomed to shifting their focus between marketing and processing depending on what the current market situation is. This strategy may work, but being able to focus on all core aspects of your business 100% of the time is a key factor in growing your business.
Outsourcing strategies will allow any mortgage company to allocate 100% focus on all aspects of their business. You can focus on your marketing drive while simply supervising the processing operations while the outsourcing provider takes care of the administrative work. Or you can simply coordinate with Infinit-O your expected processing results while you work on getting new applications. The possibilities are limitless but you can have one that suits your style and needs.
Thursday, July 24, 2008
Monday, July 21, 2008
A Glass Half-full: An optimistic view of the US “mortgage implosion”
The recent "mortgage implosion" has shaken the confidence of a lot of players, big or small, in the mortgage industry. With the number of lenders closing down their operations increasing by the day, and reports of growing percentage of foreclosures across the United States, it is no surprise that a dark cloud of uncertainty looms over the head of any mortgage professional.
Though these may be trying times for the industry, all is not lost. It is just a matter of finding the silver lining in these clouds of uncertainty. For instance, in a blog by Todd Carpenter in Lenderama (the official mortgage industry blog),
To add, it is a fact that most people in the United States would need to refinance or purchase a home regardless of the market conditions.
If you take a minute to reflect on these points, you'll see that the key in surviving the “crisis” is by developing and adopting strategies that will fit the times.
Just to pick up from the points cited above, if one would accept that interest rates at 7-8+% are "normal" (as they really are, the lower ones may be the ones considered as “unusual”), concentrate on the 85% of the US population that have above 600 credit score, market traditional loans programs such as the conforming loans and fixed rates and submit loans with full documentation (w/c will not only get your borrower a better rate, but will ensure that they get a loan that fits their financial capacity). On top of that, with the Mortgage Bankers Association estimating the 2007 Mortgage originations at $2.4 Trillion dollars as of their August 24 2007 report, things do not look that "doom and gloom" as all the hype suggest. Gone are the days when loan programs are handed out on silver platters. The current situation calls for more work on the part of the mortgage professional. It is, however, definitely worth the extra effort if it will lead to putting the mortgage industry back on the right track.
An increasing number of mortgage professionals have also taken a bold step by outsourcing part of or their entire mortgage loan processing . Some did so even before the implosion, and the current situation gives more reasons to do so. This approach may also be employed by other industry professionals.
- As a loan originator whose business is centralized around marketing and increasing sales in terms of quality loan applications, one can save precious time away from the laborious task of pushing papers and instead concentrate more on your clients' needs and demands.
- As a mortgage broker, one's capacity to process loan applications is exponentially increased while saving. Imagine processing more loans in less time, and reduce operational costs while at it!
Although one may be hesitant to outsource the tedious but crucial function of mortgage loans processing for varying reasons from efficiency to distance, these concerns will be alleviated when a mortgage professional works with an experienced outsourcing company with an exposure to mortgage processing , backed with the latest in information and communication technology.
Though these may be trying times for the industry, all is not lost. It is just a matter of finding the silver lining in these clouds of uncertainty. For instance, in a blog by Todd Carpenter in Lenderama (the official mortgage industry blog),
"Most homeowners in today's market have had a 7% or maybe even an 8%+ loan in their past, and I'm not talking twenty years ago either. You are likely more freaked out about this then they are.
If May foreclosures DOUBLED in your state, that likely means they went from something like .2% of all loans, to .4%. It's bad, but jeez, a little perspective is in order.
Most homeowners have good credit. If half your loans are for clients with sub 600 credit scores, then half your clients are in the bottom 15% of all borrowers. Think about that.
Stated Income loans are not the most popular type of loan originated. Neither are Option ARMs, or sub prime loans, or 100% financing."
If May foreclosures DOUBLED in your state, that likely means they went from something like .2% of all loans, to .4%. It's bad, but jeez, a little perspective is in order.
Most homeowners have good credit. If half your loans are for clients with sub 600 credit scores, then half your clients are in the bottom 15% of all borrowers. Think about that.
Stated Income loans are not the most popular type of loan originated. Neither are Option ARMs, or sub prime loans, or 100% financing."
To add, it is a fact that most people in the United States would need to refinance or purchase a home regardless of the market conditions.
If you take a minute to reflect on these points, you'll see that the key in surviving the “crisis” is by developing and adopting strategies that will fit the times.
Just to pick up from the points cited above, if one would accept that interest rates at 7-8+% are "normal" (as they really are, the lower ones may be the ones considered as “unusual”), concentrate on the 85% of the US population that have above 600 credit score, market traditional loans programs such as the conforming loans and fixed rates and submit loans with full documentation (w/c will not only get your borrower a better rate, but will ensure that they get a loan that fits their financial capacity). On top of that, with the Mortgage Bankers Association estimating the 2007 Mortgage originations at $2.4 Trillion dollars as of their August 24 2007 report, things do not look that "doom and gloom" as all the hype suggest. Gone are the days when loan programs are handed out on silver platters. The current situation calls for more work on the part of the mortgage professional. It is, however, definitely worth the extra effort if it will lead to putting the mortgage industry back on the right track.
An increasing number of mortgage professionals have also taken a bold step by outsourcing part of or their entire mortgage loan processing . Some did so even before the implosion, and the current situation gives more reasons to do so. This approach may also be employed by other industry professionals.
- As a loan originator whose business is centralized around marketing and increasing sales in terms of quality loan applications, one can save precious time away from the laborious task of pushing papers and instead concentrate more on your clients' needs and demands.
- As a mortgage broker, one's capacity to process loan applications is exponentially increased while saving. Imagine processing more loans in less time, and reduce operational costs while at it!
Although one may be hesitant to outsource the tedious but crucial function of mortgage loans processing for varying reasons from efficiency to distance, these concerns will be alleviated when a mortgage professional works with an experienced outsourcing company with an exposure to mortgage processing , backed with the latest in information and communication technology.
Friday, July 18, 2008
Outsource and Survive
With such turmoil in the world economies and with daily news around the world talking abut the credit crunch, mortgage crisis, food shortages and inflation rising, I thought it would be good to share with you an interview between Suresh Yannamani and Outsourcing Institute entitled OUTSOURCE AND SURVIVE which is in line with a number of presentations that I have made over the last 3 years and what I personally feel is even more pertinent for SMB’s in today's environment.
We are entering a new stage in business process outsourcing (BPO) automation. The drivers of this next stage are not technological changes per se, but changes in competition and how businesses operate and execute their strategies. The internet may be the agent of change, but the engine of change is the need to cut costs and improve core business processes in increasingly competitive global markets. As we look to the future, there are four distinct outsourcing drivers to consider.
Globalization
The first of these is globalization. To remain competitive and to spur top-line growth, large companies are increasingly seeking to enter foreign markets. To effectively serve local markets, businesses face increasing pressure to work with ever increasing numbers of home-grown producers, suppliers, government agencies and supply chain partners.
For low-cost producers to exist in the global economy, they must rely on outsourcing. Look no further than the steel industry. In the 1960s, the USA was home to the dominant steel companies. As steel became cheaper to produce in Korea and Taiwan, US steel jobs went from 600,000 in 1960 to 230,000 in 1999, although even with the reduced workforce, US steel companies make roughly the same amount of steel.
Internet Infrastructure
The second major driver is the internet. The global sourcing model is further evidence of the fundamental transition from an industrial economy to an information economy.
The Internet also enables very sophisticated remote monitoring in offshore locations, as a result of new CRM technology. Technology as a whole is enabling outsourcing to be successful, and with that success, quality and added value are getting better.
The BPO trend will require a major infrastructure build-out that includes broadband connectivity, databases, hosting, security tools, application integration tools, web-enabled ERP applications, application integration modules, supply chain management, content management, dynamic pricing suites, payment and settlement -- the list goes on. The pundits who are predicting the demise of the IT industry might be surprised by the growth in infrastructure spending.
Core and non-core
Another driver is the distinction being made between core and non-core processes. Companies today are taking a close look at their business process and determining what processes are core and non-core to their business, and realizing that most non-core processes are good candidates for outsourcing.
Initially low-skilled jobs in manufacturing, call centers and computer coding were shifted abroad. But as more companies expand their offerings into outsourcing, new functions – such as human resources and knowledge skills in areas such as technology -- are also being outsourced. As the globalized labor market continues to grow, more high-skilled jobs, in areas such as accounting and engineering, will probably move to low-cost areas of the globe.
Offshoring outsourcing
The final driver is offshoring. In the 1970s, many Western companies began manufacturing products in offshore locations such as Japan, Korea, Thailand and Taiwan. Despite the relatively high cost of transporting the goods by sea and air, it was cheaper to manufacture these goods in the Far East (and in Mexico after the NAFTA treaty) than to keep manufacturing in the US or Europe.
Most companies are now accustomed to manufacturing offshore. And what took place in manufacturing is now occurring in backroom processing and services. With the advent of reliable, cheap global communications and the internet, and with the abundance of skilled labor forces in many developing countries, offshore service centers have become both feasible and a reality.
The main driver of outsourcing has always been cost savings. Since cost is such a priority, it makes sense that one of the biggest trends in outsourcing is offshoring. Countries such as India have a large, highly educated, English-speaking resource pool from which to draw. By outsourcing functions such as call centers or accounting, operational expenses can be reduced by at least 50 per cent.
The bottom line
With outsourcing's next wave gathering momentum, businesses that don't find a way to surf this wave will forfeit significant competitive advantage. Yet, as with all management tools, BPO will continue to reflect the ability of forward-thinking managers to anticipate and adapt to change and to use outsourcing effectively within an overall framework of continuous improvement.
We are entering a new stage in business process outsourcing (BPO) automation. The drivers of this next stage are not technological changes per se, but changes in competition and how businesses operate and execute their strategies. The internet may be the agent of change, but the engine of change is the need to cut costs and improve core business processes in increasingly competitive global markets. As we look to the future, there are four distinct outsourcing drivers to consider.
Globalization
The first of these is globalization. To remain competitive and to spur top-line growth, large companies are increasingly seeking to enter foreign markets. To effectively serve local markets, businesses face increasing pressure to work with ever increasing numbers of home-grown producers, suppliers, government agencies and supply chain partners.
For low-cost producers to exist in the global economy, they must rely on outsourcing. Look no further than the steel industry. In the 1960s, the USA was home to the dominant steel companies. As steel became cheaper to produce in Korea and Taiwan, US steel jobs went from 600,000 in 1960 to 230,000 in 1999, although even with the reduced workforce, US steel companies make roughly the same amount of steel.
Internet Infrastructure
The second major driver is the internet. The global sourcing model is further evidence of the fundamental transition from an industrial economy to an information economy.
The Internet also enables very sophisticated remote monitoring in offshore locations, as a result of new CRM technology. Technology as a whole is enabling outsourcing to be successful, and with that success, quality and added value are getting better.
The BPO trend will require a major infrastructure build-out that includes broadband connectivity, databases, hosting, security tools, application integration tools, web-enabled ERP applications, application integration modules, supply chain management, content management, dynamic pricing suites, payment and settlement -- the list goes on. The pundits who are predicting the demise of the IT industry might be surprised by the growth in infrastructure spending.
Core and non-core
Another driver is the distinction being made between core and non-core processes. Companies today are taking a close look at their business process and determining what processes are core and non-core to their business, and realizing that most non-core processes are good candidates for outsourcing.
Initially low-skilled jobs in manufacturing, call centers and computer coding were shifted abroad. But as more companies expand their offerings into outsourcing, new functions – such as human resources and knowledge skills in areas such as technology -- are also being outsourced. As the globalized labor market continues to grow, more high-skilled jobs, in areas such as accounting and engineering, will probably move to low-cost areas of the globe.
Offshoring outsourcing
The final driver is offshoring. In the 1970s, many Western companies began manufacturing products in offshore locations such as Japan, Korea, Thailand and Taiwan. Despite the relatively high cost of transporting the goods by sea and air, it was cheaper to manufacture these goods in the Far East (and in Mexico after the NAFTA treaty) than to keep manufacturing in the US or Europe.
Most companies are now accustomed to manufacturing offshore. And what took place in manufacturing is now occurring in backroom processing and services. With the advent of reliable, cheap global communications and the internet, and with the abundance of skilled labor forces in many developing countries, offshore service centers have become both feasible and a reality.
The main driver of outsourcing has always been cost savings. Since cost is such a priority, it makes sense that one of the biggest trends in outsourcing is offshoring. Countries such as India have a large, highly educated, English-speaking resource pool from which to draw. By outsourcing functions such as call centers or accounting, operational expenses can be reduced by at least 50 per cent.
The bottom line
With outsourcing's next wave gathering momentum, businesses that don't find a way to surf this wave will forfeit significant competitive advantage. Yet, as with all management tools, BPO will continue to reflect the ability of forward-thinking managers to anticipate and adapt to change and to use outsourcing effectively within an overall framework of continuous improvement.
Thursday, July 17, 2008
5 Biggest Failures in Outsourcing Contracts
Outsourcing is recognized worldwide as a key business strategy. However, a lot of companies are still hesitant to join the bandwagon. It is thus not uncommon to hear the sentiment that "as many as half of outsourcing deals fail".
Let us look at some facts. A study by KPMG conducted early this year shows “ 89 percent of respondents expect to maintain or increase current sourcing levels while only 14 percent claim to have had a significant misalignment of financial and commercial expectations between provider and client.” These would show that the majority still see the great value of outsourcing as a business strategy.
What would be beneficial for us is to learn from where others have failed. It is a source of wisdom that would otherwise come at a great cost. Simply avoiding a strategy that had a red mark seems contradictory to the entrepreneurial nature of today's business world.
Here are the five top reasons why an outsourcing contract fails.
Client's Lack of Company Vision.
Before you even think of outsourcing, you should have a clear idea on what your core functions are and what your business is all about. No one knows your business better than you. If you can not determine your company's main focus, what more can you expect from an outsourcing provider? A simple but very insightful advise from any outsourcing insider: “You can outsource anything that is immaterial to your focal point.”. Outsourcing success will naturally follow.
Lack of a Formal Strategic Measurement Framework.
According to a recent study, almost half of the companies who entered into an outsourcing contract are clueless whether their endeavor was successful or not. Why? They did not bother to establish a measurement framework to test it. They fare no better than someone attributing his business success to a solar eclipse. Having a measurement framework from day one would allow you to know the exact impact of the outsourcing contract, address any potential issues, and enhance your outsourcing potentials.
Lack of Vendor Management.
A common misconception about outsourcing is that you will simply be getting someone else to do your job while reducing your costs at the same time. This mindset leads to an outsourcing nightmare. Layers of misunderstanding are rooted from passively waiting for the results. Outsourcing is a partnership between your company and your outsourcing vendor. This means that you need to manage the relationship if it has any chance to flourish. Again, you know your business best. Help your partner help you.
Heavy SLA.
At the end of the day, the bottom line of outsourcing is results. You reduce costs, you increase your productivity, you enhance the quality of your product or service. Service Level Agreements or Requirements (SLA or SLR) ensures that you and your provider are on the same page about the success of your business. Sometimes, the bottom line is lost and both parties are stuck at the SLA, trying to make the most out of the deal. This commonly leads to SLA's that are ridiculously improbable that they look like a prelude to disaster.
People.
Outsourcing is primarily about people. You don't normally outsource something that you can already automate. Finding the right people is almost an imperative for success. It is therefore not a surprise that it tops the list of difficulties encountered in outsourcing. Dealing with your outsourced team and the outsourcing provider dictates your day to day operations. Finding the right cultural fit, compatible language, and hiring qualified people, should be given due consideration to ensure a smooth relationship. Conflicting values and language barrier easily spells doom for any outsourcing contract.
Let us look at some facts. A study by KPMG conducted early this year shows “ 89 percent of respondents expect to maintain or increase current sourcing levels while only 14 percent claim to have had a significant misalignment of financial and commercial expectations between provider and client.” These would show that the majority still see the great value of outsourcing as a business strategy.
What would be beneficial for us is to learn from where others have failed. It is a source of wisdom that would otherwise come at a great cost. Simply avoiding a strategy that had a red mark seems contradictory to the entrepreneurial nature of today's business world.
Here are the five top reasons why an outsourcing contract fails.
Client's Lack of Company Vision.
Before you even think of outsourcing, you should have a clear idea on what your core functions are and what your business is all about. No one knows your business better than you. If you can not determine your company's main focus, what more can you expect from an outsourcing provider? A simple but very insightful advise from any outsourcing insider: “You can outsource anything that is immaterial to your focal point.”. Outsourcing success will naturally follow.
Lack of a Formal Strategic Measurement Framework.
According to a recent study, almost half of the companies who entered into an outsourcing contract are clueless whether their endeavor was successful or not. Why? They did not bother to establish a measurement framework to test it. They fare no better than someone attributing his business success to a solar eclipse. Having a measurement framework from day one would allow you to know the exact impact of the outsourcing contract, address any potential issues, and enhance your outsourcing potentials.
Lack of Vendor Management.
A common misconception about outsourcing is that you will simply be getting someone else to do your job while reducing your costs at the same time. This mindset leads to an outsourcing nightmare. Layers of misunderstanding are rooted from passively waiting for the results. Outsourcing is a partnership between your company and your outsourcing vendor. This means that you need to manage the relationship if it has any chance to flourish. Again, you know your business best. Help your partner help you.
Heavy SLA.
At the end of the day, the bottom line of outsourcing is results. You reduce costs, you increase your productivity, you enhance the quality of your product or service. Service Level Agreements or Requirements (SLA or SLR) ensures that you and your provider are on the same page about the success of your business. Sometimes, the bottom line is lost and both parties are stuck at the SLA, trying to make the most out of the deal. This commonly leads to SLA's that are ridiculously improbable that they look like a prelude to disaster.
People.
Outsourcing is primarily about people. You don't normally outsource something that you can already automate. Finding the right people is almost an imperative for success. It is therefore not a surprise that it tops the list of difficulties encountered in outsourcing. Dealing with your outsourced team and the outsourcing provider dictates your day to day operations. Finding the right cultural fit, compatible language, and hiring qualified people, should be given due consideration to ensure a smooth relationship. Conflicting values and language barrier easily spells doom for any outsourcing contract.
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