Sub-prime crisis ‘bodes well for the Indian mortgage process outsourcing industry’

                                                                                         

BPO and IT firms in India have been under a magnifying glass after some of them reported a drop in earnings because of issues with their mortgage clients. Given the fact that banking, financial services and insurance are the primary focus of many Indian outsourcing firms, how prepared is the Indian mortgage market?

“The current crisis in US’ mortgage market bodes well for the Indian mortgage process outsourcing industry,” says Mr Prashant P. Kothari, CEO & Founder, String Real Estate Information Services (www.stringinfo.com), a Washington, D.C.-based offshore mortgage process outsourcer.

“It’s likely that mortgage process offshoring may slow down for now, because of the mortgage market turmoil in the US, because of the exit or closure of some existing clients,” he concedes. “However, in the long run, offshoring will grow exponentially. That’s because mortgage firms, which were not offshoring so far would realise that their very survival depends on lower costs and a variable cost structure, and will have no choice but to deploy offshore resources,” clarifies Mr Kothari, interacting with Business Line over the email.

Mr Kothari, a graduate from Loyola College, Chennai and an MBA from the UCLA Anderson, is the founder of the Indian Economy Blog (www.indianeconomy.org). And String, with its focus on the American real estate services industry, provides mortgage and settlement services processing.

“The American mortgage industry is the largest in the world with mortgage loans of $13 trillion, of which $8 trillion is for residential properties and $5 trillion for commercial,” mentions Mr Kothari.

“Even amidst all the doom and gloom that one reads about, more than $2 trillion in residential mortgages will originate in 2007 alone, with projections for 2008 and 2009 well north of that figure.”

The amount of mortgage-related processing from originations of $2 trillion is around $100 billion annually, of which at least $10 billion is offshorable, he reasons.

“However, the current value of all mortgage process offshoring is no more than $200 million per year. In other words, with market penetration of only 2 per cent, mortgage offshoring is still in a very nascent stage.”

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