In the latest sign that U.S. mortgage companies are going global, Electronic Data Systems Corp. plans to start processing and subservicing loans for lenders in the United Kingdom.
EDS, which is sending mortgage veteran Michael A. Hyman to its U.K. office to lead the effort, is one of several U.S. companies that want to become the main outsourcer for the U.K. home loan industry. Others are Global Home Loans, a joint venture between Countrywide Credit Industries and Woolwich PLC; a joint venture between Alltel and Bradford & Bingley; and HomeSide Lending.
These companies will focus on working behind the scenes for existing U.K. lenders. They will handle back-office functions like the processing of mortgage applications and the servicing of loans, areas in which their technology and experience in the most advanced mortgage market in the world can reduce costs.
The United Kingdom appears to offer plenty of opportunity for companies looking to market cost saving services. Richard Beidl, a senior analyst at Tower Group of Needham, Mass., said his firm has found the annual cost of servicing a U.K. mortgage to range from $80 for someone at cutting edge to $250 at the trailing edge. This contrasts with U.S. loans, which are serviced for as little as $35 to $45 per year.
A lot of U.K. companies simply do not know what their servicing cost is because the mortgage process there is not broken down into many different pieces as in the United States. The numbers arent easily separable, Mr. Beidl said. They dont know where their biggest costs are.
Therefore, theres a huge opportunity for people who can bring not only the systems but the mechanics to help and change the systems over there, Mr. Beidl said.
Mr. Hyman, 43, was most recently a senior vice president at Wendover Financial Services Corp., EDS Greensboro, N.C., mortgage unit and the largest servicer of reverse mortgages, a type of home equity loan geared to the elderly. Wendover is also a leader in subservicing, or servicing loans for other companies that retain the servicing rights.
As he was packing up his Greensboro office last week, Mr. Hyman said in a telephone interview that his mission will be to add mortgage expertise to the existing menu of outsourcing services that EDS offers financial services clients in the United Kingdom.
Of the companys 14,000 U.K. employees, 1,000 are in financial services, Mr. Hyman said. It already offers a variety of third-party services in credit and debit cards and consumer loans, he said.
There are several prospective companies Ill be speaking with right away about outsourcing arrangements, Mr. Hyman said.
The Plano, Tex., technology company will face formidable competition from other U.S. companies that are promising to contribute their state-of-the-art systems and know-how to help reduce costs in the United Kingdom and eventually continental Europe.
Global Home Loans is now the largest third-party servicer in Europe, according to its chief executive, Richard S. Lewis.
The Dartford, England, venture took over the processing of mortgages from Woolwich last September and took over the servicing of its $40 billion portfolio in March, he said. It has not announced any other client but plans to, and has been studying continental mortgage markets.
EDS has a leg up because it is already in Europe, Mr. Hyman said. Because EDS already has a substantial presence, its a matter of taking the mortgage outsourcing concept and overlaying it on an existing support infrastructure that already assists financial institutions with their business support needs.