Genpact, an Indian outsourcer partially owned by General Electric Co., is buying the fast-growing MoneyLine Lending Services Inc. to move deeper into mortgage outsourcing, a business Countrywide Financial Corp. appears to have soured on.
Regina Paolillo, a senior vice president at Genpact, said it sees an immediate opportunity to cross-sell its nonmortgage services for financial institutions to MoneyLine's clients, as well as a fuller set of services to its own clients.
Genpact also sees mortgage services as a good way to land clients at a time when many financial players are looking "to unhook themselves from the fixed overhead" involved with the business, she said. "Financial services is one of the handful of industries we want to be deep in."
Her New Delhi company did not say what it would pay for the privately held MoneyLine, which has focused on community banks. The deal, announced Monday, is expected to close this month.
MoneyLine, of Irvine, Calif., has more than 50 clients, including 10 that have signed up this year. Long-standing clients include two banks owned by Zions Bancorp. One of the latest to sign up is Temple-Inland Inc.'s Guaranty Bank, once a major mortgage player.
Both Ms. Paolillo and Evan Gentry, the founder and chief executive of MoneyLine, which would become part of Genpact Mortgage Services, hinted the deal is already paying off. In separate interviews, each said recent joint sales presentations to large financial companies are expected to yield new clients, in part because of the broader range of offerings and in part because of MoneyLine's strengthened financial position.
"Whether we're able to announce it or not, we expect to enter some key relationships in the very near term," Mr. Gentry said. His outfit has gotten calls recently from some of "the top 25 mortgage producers."
Since "the softening of the market has driven even the largest companies to start looking for outsourcing solutions, we've had to grow up to meet their needs," he said. (Also, unlike in the past, the outsourcer has begun to accept not just "end-to-end" contracts, but also deals to handle a piece of a client's mortgage business.)
Genpact, formerly GE Capital International Services, dates back to 1997. GE sold 60% of the unit on Dec. 31, 2004, to two private equity firms. Wachovia Corp., which announced a seven-year contract with Genpact in December, also later took a stake.
It employs 25,000 in India, China, the Philippines, Hungary, Romania, Mexico, and the U.S.
Genpact's work for financial companies includes the origination and servicing of commercial and consumer loans and leases. It also does private-label credit-card outsourcing for major retailers.
Ms. Paolillo said her company would supplement some of MoneyLine's operations with foreign ones where it is cheaper to do so, but keep other operations solely in the U.S. in areas where "subject matter experts" and customer interaction are important.
In a 2004 interview, Mr. Gentry called outsourcing to offshore locations a "hard sell" when talking to community banks. On Monday he said MoneyLine would continue to offer U.S.-only options, as well as cheaper alternatives involving offshore operations.
Last year another big Indian outsourcer, WNS Global Services Ltd., bought an upstart mortgage offshorer, Trinity Mortgage Services of Tucson.
In a report issued Monday, the Boston research firm NelsonHall said the global mortgage business process outsourcing market should double in revenue by 2010, to about $22 billion. The growth will be spurred by "extreme cost pressures in the market, due to declining volumes and high levels of competition;" the "appealing economics of offshoring mortgage processes;" and "industry migration to image-based documentation storage, enabling geographically distributed processing."
Nevertheless, executives at Countrywide, which once touted its potential as an outsourcer, were singing a different tune on its earnings conference call last week.
"We're not very bullish on the prospects for material growth in the mortgage outsourcing area of our business," an executive on the call said. "It's been our experience that that activity and volume tends to pick up during refinance booms" and then drop "during periods of low refinance activity."
Also, "very few banks" have strong purchase loan business to outsource, and most prefer to keep home equity lines, which Countrywide would want, instead of selling them to outsourcers, he said.
But this year Mr. Gentry has sounded only excited about the prospects for mortgage outsourcing, especially since two big rivals - Nexstar Financial Corp., which Bank of America Corp. picked up in its acquisition of MBNA Corp., and ABN Amro Mortgage Group Inc. - have quit the business.
"We have had significant growth here in the last six months," he said Monday. "Our business development pipeline is the strongest it's ever been." Ms. Paolillo said MoneyLine's clientele could "easily" expand 30% a year, "if not more," and European institutions would be a new target audience.
