Bank Of America To Send Property Reviews To India
Bank of America Corp. opened a unit in India to review home-valuation reports as it seeks to rebuild share in U.S. mortgages at a lower cost, said four people with knowledge of the move.
Workers in the new Bangalore office follow checklists to determine if appraisals are complete, said the people, who requested anonymity because they weren't authorized to comment. The firm also eliminated jobs of licensed U.S. workers in its LandSafe business, the appraisal division of the Charlotte, North Carolina-based company, which made $78.7 billion in loans last year, the people said.
"One of the biggest problems in the mortgage business is all the paperwork involved, and how do you engineer it to reduce the bottlenecks," said Bert Ely, an independent banking consultant in Alexandria, Virginia. "With offshoring, the potential for problems is always there, but it's hard to be critical for trying to minimize costs."
Lenders around the world have vowed to boost revenue and curb spending to make up for sluggish loan growth and new regulations. Bank of America, which spent more than $45 billion to settle disputes tied to defective mortgages and foreclosures, is among the most aggressive cost-cutters with chief executive officer Brian T. Moynihan planning to save $8 billion a year. The firm slipped from being the biggest U.S. mortgage lender in 2008 to fourth last year.
Other firms have added staff in lower-cost cities. Goldman Sachs Group Inc., the New York-based investment bank, saw headcount in places including Bangalore and Salt Lake City almost double since 2007 to 22 percent of employees, CEO Lloyd Blankfein said in November. Barclays Plc said Friday that it planned to move 4,000 more jobs overseas and to lower cost locations by 2015 to save as much as $381 million.
LandSafe has more than 2,000 associates in the U.S., according to the Plano, Texas-based firm's website. In addition to appraisals tied to new home loans, it also conducts valuations on Bank of America's portfolio of delinquent loans, of which the company had 667,000 on March 31. In February, the lender cut about 5 percent of LandSafe employees, saying they weren't needed as overdue loans fell.
Licensed reviewers, who check the accuracy of appraisal valuations and can earn more than $100,000 a year, were among those who lost their jobs, the people said.
Bank of America's program prevents paperwork errors from delaying loan applications, said Terry Francisco, a spokesman for the second-biggest lender by assets. The overseas completeness checks, begun in August, don't replace in-depth reviews done by licensed U.S. staff, he said.
"The overall consideration isn't necessarily cost, although cost can be an element," Francisco said. "What we're looking for is if there are patterns in certain areas where it looks like the reviews aren't necessarily needed anymore."
The U.S.-based reviewers, who typically had at least five years of experience as appraisers, are required to confirm accuracy by doing independent assessments that conform to industry standards, the people said. The checklists in India cover 17 items such as whether the appraiser remembered to sign the report and include photographs of rooms, according to a copy obtained by Bloomberg.