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Mortgage BPO, which stands for business process outsourcing, is when a bank or mortgage lender outsources the processing of its mortgage files. Some banks and lenders have in-house loan originators, loan officers, underwriters and closers. Banks and mortgage lenders that do not have these employees on staff outsource the process to third party companies.
One of the reasons that a lender would utilize mortgage BPO is that it can be a highly cost effective way of originating and processing mortgages. Since the mortgage company does not have to house all of these employees, the companies can save on rent and operational costs for running an office or commercial space. The outsourcing also allows the mortgage lender to save on salaries, health insurance, worker’s compensation and other insurance it would have to cover if it had full-time employees.
Mortgage BPO also permits the mortgage lender to only pay professionals when there are mortgage files to work. For example, during slow times in the mortgage business, employees of a mortgage company may be sitting around without much work to do, but will still be collecting their salaries. In an outsourcing situation, if there are not any mortgage files to process, then the mortgage company does not owe the outsourcing company any money.
This strategy is also used in overflow situations for mortgage lenders, banks and mortgage companies. For example, during high volume mortgage times, the mortgage lenders may not have enough staff to cover the volume of work it has. Rather than hire additional employees to cover the busy times and then have to lay them off when business slows down again, banks and lenders often turn to mortgage BPO to resolve the problem.
Employees of these companies have the same duties as in-house employees of a mortgage lender. These individuals typically conduct business from their own home office or office location of another business. Once a bank has a client apply for a mortgage, it sends the mortgage file to the outsourced loan officer. When the loan officer has worked the file, he or she then turns the file over to the underwriter that has been outsourced by the mortgage lender. The process continues until the mortgage file closes.
The only difference between mortgage BPO and in-house processing is where the individual professionals handling the file are. In this case, they are not employees of the lender.