Mortgage BPO: helped by technology

 

ABA Banking Journal senior editor Lauren Bielski interviewed Adrian Sharp, vice-president and head of global financial services solutions at Patni Computer Systems, Inc., a software development and offshore outsourcing company, with U.S. headquarters in Cincinnati. She queried Sharp  about decision support, workflow, and business process management tools that support the business process outsourcing for mortgage processing.

While not yet a dominant trend today, outsourcing more complex services like mortgage processing is emerging as a realistic alternative. Sharp talks about the technology under the covers that supports such work and why some banks are sharing their workload.

 

Narratives around outsourcing are pretty consistent. The media tend to discuss how outsourcing and offshoring each threaten the wallet of the domestic worker.  Or we hear the story that these contracts need extensive managing to be effective. Are there other trends, or narratives, worth noting?
Sure. Basically, the BPO industry has gotten better at delivery work for banking clients. We’ve learned that how a process is organized, what kind of analysis goes into the mapping aspect—along with use of underlying workflow and rules engines—can make all the difference in the result. A sound process is easier to manage and gets the work done correctly. Maybe execs focus on the cost benefit of outsourcing but there also should be a process improvement benefit. I’ve heard others mention this but it remains an important message to be emphasized: you should improve the process you outsource. Most of the time, there is something that can be done differently.

The idea that mortgage processing could be outsourced sort of surprised me, I confess. I think of it as an essential banking activity.

Well, first of all, clerical aspects of mortgage processing can be outsourced and have been. Certainly, many banks that are outsourcing mortgage-related tasks are getting certain application completion tasks, fact checking, or other administrative work done in other places during our night hours so they can run, in effect, a 24-hour operation.

Secondly, though, is the fact that many outsource providers have picked up sophistication and have a deep knowledge base to draw from. Increasingly, more offshore workers have the skills to operate as true stand ins for their bank clients. You see this for capital markets—equity research and fixed income research, for instance. In the case of mortgages, these experts can help with the credit evaluations or do other value- added process work. The intellectual bar has been raised. So increasingly, banks have more sourcing and can transform fixed costs into variable costs.

It’s been said mortgage providers are very picky about their service level agreements. What are your thoughts?
Well, it makes sense, doesn’t it? The mortgage industry is regulated. In the mortgage work that we do, offshore and otherwise, we are very scrutinized and deal with a variety of mixed performance metrics, anything from standard IT performance metrics to more process oriented metrics of the Six Sigma sort such as number of defects per million. Now, with recent fallout surrounding the subprime area, there is more scrutiny generally surrounding this area.

Many banks are broadening their outsourcing commitment, despite any remaining stigma...

Sure. The need to drive costs down is a big reason why. I’d say that the top 25 banks, and all global banks, have some sort of evolved global sourcing capability in a variety of areas. Certainly, investment banking firms have a good decade’s worth of experience with outsourcing all sorts of processes and have learned about the management challenges associated with the work. Now, more banks see it as an option.

You wrote a white paper about how business process management supports business process outsourcing.
That’s right. One of the themes is how outsourcing can be an incremental affair. there isn’t a “one size fits all” approach to either sourcing or project management. Being successful is all about coping with many details and evaluating the particular situation.

So, there’s no reason why it has to be an epic, top heavy, tough-to-manage engagement. You can start with discrete steps and grow into having deeper, more complicated contracts. Another point that appears in the paper has to do with business transformation. Traditional methods of process analysis have been labor intensive, manual, and slow. The newer technologies allow you test out theories about workflow, test out assumptions, and build process—in effect—by using a mapping tool on an electronic interface. It links your process map with the underlying rules and workflow that will help you automate it, and it can be powerful.

What can BPM do for mortgage work?

The processes that define the retail mortgage industry are highly fragmented across multiple entities and involve significant amounts of paper. A typical loan file will include from 25 to 50 different documents in multiple formats. Typi-cally, errors in documentation aren’t detected until closing. The right automation in an outsource arrangement can help to flag problems sooner. We’ve measured improvements of 25% (quicker turnaround times). Processes designed with this technology can be reorganized to help a bank respond to new strategies.  With BPM, geek speak is at a minimum. Processes are defined in business terms. This is an advantage with something like mortgage processing.

What else should we know about BPM and its relationship to business process outsourcing?
The technology can help a BPO provider be transparent. It makes the process easier to manage. It makes the process easier to revise when it comes time for revision. 

 

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