Bank of America has joined the growing trend of financial institutions offshoring mortgage BPO to cut costs, according to a new report.
Bank of America has opened a unit in India to review home-valuation reports as it seeks to rebuild share in U.S. mortgages at a lower cost, according to Bloomberg reports.
Workers in the new Bangalore office follow checklists to determine if appraisals are complete, several people who requested anonymity told Bloomberg. The firm also eliminated jobs of licensed U.S. workers in its LandSafe business, the appraisal division of the Charlotte, North Carolina-based company, which made $78.7 billion in loans last year, the people said.
In February, BofA cut about 5% of LandSafe employees, saying they weren’t needed as overdue loans fell. Licensed reviewers, who check the accuracy of appraisal valuations and can earn more than $100,000 a year, were among those who lost their jobs, according to reports.
The trend to move mortgage BPO offshore is largely driven by banks’ need to reduce costs, and the labor cost in India is, depending on skill level, approximately 50% less than in the U.S., according to Judy Wheatley, senior vice president of compliance for Indecomm Global Services, a consulting and outsourcing company.
Lenders are under greater pressure than ever to reduce costs because demand for refinancings, the biggest source of volume for the firms, is falling amid surging mortgage rates.
“The mortgage industry is cyclical with ups and downs, so what outsourcing allows companies to do is to staff internally at a certain level, and utilize outsourced resources to flex up their volume and meet consumer demand faster,” Wheatley said.
Bank of America, once the biggest U.S. mortgage lender, spent more than $45 billion to settle disputes tied to defective mortgages and foreclosures, so it may come as little surprise that the company has plans for an aggressive cost-cutting scheme, with CEO Brian T. Moynihan planning to save $8 billion a year.
Other firms have added staff in lower-cost cities. Goldman Sachs Group saw headcount in places including Bangalore and Salt Lake City almost double since 2007 to 22% of employees, CEO Lloyd Blankfein said in November.
Bank of America, which doesn’t disclose how many workers it employs outside the U.S., had 262,812 employees as of March 30, or 5.7% fewer than a year earlier.