What’s Behind the Mortgage Reshoring Trend?
Nora Caley

DENVER, Colo., June 05, 2017 - This article orginially appeared on the website Mortgageorb.com

Banks and other financial entities are increasingly announcing that they are opening call centers in the U.S. and creating domestic instead of offshore jobs. Some industry experts say this has been a trend for several years and is due to several factors, from regulatory pressure to cost savings to bad publicity.

In June, Dallas-based Nationstar Mortgage announced it had moved its international call center operations back to the U.S., creating 500 new jobs in customer service call centers in Dallas; Longview, Texas; and Chandler, Ariz., (with the majority of the new jobs in the Longview facility) and bringing customer service closer to Nationstar’s more than 3 million customers. The mortgage servicing, origination and transaction services company noted that it had begun moving all call center operations onshore in 2016, with the opening of a call center in Longview, Texas.

In its press release, Nationstar did not offer specifics about where its international call center operations had been, but in its 2016 annual report, Nationstar noted this in the “Other Risks” section: “We currently have operations located in India and expect to grow those operations, and we have reduced our costs by contracting with certain third parties with operations in India and the Philippines.”

The annual report noted that these countries are subject to political upheaval, social unrest and natural disasters. Another risk: “The political or regulatory climate in the United States, or elsewhere, also could change so that it would not be lawful or practical for us to use international operations in the manner in which we currently use them.”

Also in the annual report, Nationstar noted that on Dec. 31, 2016, among its primary facilities was a 68,722-square-foot leased space in Chennai, India, to support its Xome technology and data segment. For its part, a spokesperson from Nationstar noted, by email, that the facility in Chennai is not a customer service call center, but a technology and operations center, and that facility is not closing. Also according to Nationstar, the overseas customer service call center operation was located in Manila and was operated by a third-party vendor.

Still, the June press release did not mention these risks. Instead it emphasized that customers had noted that speaking with a U.S.-based representative made their service experience better, and that the onshoring was part of a rebranding by Nationstar.

Other mortgage servicers are likely seeing the advantages of U.S.-based customer service. The Mortgage Bankers Association (MBA), in its surveys of the largest mortgage servicers, found that in 2008, more than one third of servicers indicated they did have incoming call center operations in offshore locations. That number decreased over the next few years, and in the 2016 survey, less than 15% indicated they had incoming call center operations in offshore locations.

Marina Walsh, vice president of industry analysis for MBA, says there are several reasons for the decrease.

“It is a trend that started a long time ago, after the crisis,” she says. “Servicers were trying to get control over their customer-interfacing operations.”

Many organizations were under consent orders and were responding to complaints to the Consumer Financial Protection Bureau (CFPB). These organizations were becoming more selective about which functions to have located offshore.

Also, Walsh says, production margins are compressing, as there are not as many refinancing loans now.

“There will be an effort to have servicing operations be profitable given the fact that net production income in 2017 is expected to be lower than in 2016,” she says.

In fact, the MBA reported in its Quarterly Mortgage Bankers Performance Report that independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $224 on each loan they originated in the first quarter of 2017, down from a reported gain of $575 per loan in the fourth quarter of 2016.

Other experts say call centers are moving to the U.S. for several reasons.

“Generally, the most important reason is an increased understanding of the total cost of offshoring,” says Harry C. Moser, founder and president of Kildeer, Ill.-based Reshoring Initiative. “Companies are starting to quantify the impact of dissatisfied customers, more errors, more time (even if at a lower cost/hour), turnover, etc.”

In a 2016 report, Reshoring Initiative indicated that from 2010 through 2015, the total number of manufacturing jobs brought from offshore to the U.S. totaled more than 338,000. While the nonprofit focuses on manufacturing jobs, some of the reasons that companies cited for reshoring jobs – such as rising wages, loss of control, poor communications and employee turnover – are likely applicable to other sectors, There were also some positive reasons for reshoring the jobs, such as government incentives, proximity to customers and impact on domestic economy.

Lenders are onshoring both customer-facing and back-office activities, says Debora Aydelotte, chief operating office of Altavera Mortgage Services, based in the Denver area.

“We’ve seen a real shift in how potential clients speak about their needs,” she says. “Credit unions and even national retail lenders are turning to onshoring for partners that deliver more than just speed and price. There is a focus in 2017 on ‘right fit’ partnerships that emphasize cultural fit and trust.”

Also, the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) affects how the mortgage industry works with some third-party services. According to the HUD website, the SAFE Act is designed to enhance consumer protection and establishes minimum standards for the licensing and registration of state-licensed mortgage loan originators. If an employee that performs work related to mortgage origination is not U.S.-based, that could be tricky for state licensing compliance.

Employers are still doing some offshoring, says King R. White, CEO of location advisory firm Site Selection Group LLC in Dallas.

“There is definitely an overall trend in the industry to where domestic operations are very active, but there is still a shifting of jobs to offshore markets,” he says.

For example, in the Philippines, he says, the attrition rate of employees went from 20% to 30% five years ago to 60% to 70% today.

“That’s causing labor problems,” he says. “That’s what’s driving a lot of companies back to domestic.”

On the other hand, minimum wage increases in the U.S. are causing long-term issues. For example, in Arizona, the minimum wage is set to increase in increments to $12 an hour by 2020.

“Phoenix was a hot bed for call centers,” White says.

White sees a definite desire among companies to move call centers and non-voice, or back office, centers onshore. Still, banks are opening operations in other countries.

“Unless there is some kind of government change that requires it, I just don’t see a ton of companies making the shift to onshore,” he says. “Money is not flowing like crazy right now.”

Nora Caley is a freelance writer based in Denver