Compliance costs boost loan outsourcing
Banks exit mortgage business as new rules push up costs
Add BT as a preferred source[BOSTON] As banks lose money on mortgages and retreat from the business, PHH Corp, the biggest US outsourcer of home loans, is rushing to cash in.
PHH processes and originates mortgages on behalf of small banks and some of the world's largest financial firms, including Morgan Stanley and HSBC Holdings plc. PHH chief executive officer Glen Messina is so convinced he can make money where others can't that in July he sold the company's cash-producing fleet management unit and plans to plough the proceeds into mortgages.
Lenders are backing away from home loans as an array of new regulations in the aftermath of the housing crash push up compliance costs. Banks lost an average US$194 a mortgage in the first quarter, according to the Mortgage Bankers Association. The losses may spur banks to increase outsourcing of home loans by US$180 billion a year while keeping their brand name on the mortgage, Mr Messina said on a July 8 call with analysts.
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