Bank of America Corp (NYSE:BAC) looking eastwards to outsource
Bank of America Corp (NYSE:BAC) has opened a home-valuation reports review unit in India. The idea behind the move is not a new or novel one. India and other Asian countries has been the hub for outsourcing companies for over a decade now. BAC and other leading international banks have been seeking to cut costs on their home ground and rebuild their shares in the U.S. mortgages market. The staff at the Bangalore office follows preset checklists and determines if all the appraisals are complete. The bank has also cut jobs of licensed American workers in its appraisal division, the LandSafe, a division that made $78.7B in loans.
One of the major issues in the mortgage business is the amount of paperwork involved, and knowing how to engineer and reduce all the bottlenecks is a humungous task. Offshoring has its distinct issues but when cost-cutting is of prime importance, those issues have to be worked upon and around.
Around the world, lenders have vowed to curb costs and boost revenue, to offset new regulations and declining growth. BAC spent over $45B towards dispute settlements linked to foreclosures and defective mortgages is one of the most aggressive cost-cutters and Brian T. Moynihan, the Chief Executive Officer plans on saving $8B a year. Last year, BAC slipped to fourth place, from its top spot mortgage lender position in 2008.
A catch22 situation is what American banks are facing. On one hand the best way to cut-costs is to outsource to countries like India where labor costs are relatively low. But U.S consumers are not happy about the fact that banks have been moving vetting tasks to India. In a bid to mitigate the chorus of protests from American consumer groups, Indian companies have said that they will only be ensuring that all the documentation is in place and that the final foreclosure will be coming straight from the U.S setups.
The foreclosure processes are now more stringent, and this has led to increased staffing requirements but the banks do not have the capacity to accommodate more staff. The one concern that banks have always had is that the third party vendors are slack with supervision. US consumer advocates are of the opinion that it is tougher for banks to ensure that the work takes place at the standards that are required by them.