Ranieri’s Sock Mill Bucks Mortgage Firms Moving OffshoreLorraine Woellert and Clea Benson
Brandy Hussey lost her job at a sock factory a decade ago when North Carolina’s textile companies left for China and Mexico in search of cheaper labor. Today, one of those abandoned mills houses a financial firm where Hussey is managing multimillion-dollar mortgages -- and bucking a new offshoring trend.
Her employer, Situs Holdings LLC, processes commercial property loans out of -- yes -- an old sock factory in Robbins, North Carolina. While the town of 1,100 about 80 miles from Charlotte might seem a world away from Situs customers on Wall Street, it’s not India or the Philippines, where many servicers are expanding operations.
“They gave me the opportunity that no one else would,” Hussey, 30, said. “I was really grateful for that.”
Situs, a project of mortgage bond innovator Lew Ranieri, the company’s chairman, is betting that investment in training and a higher-cost domestic workforce will pay off. It’s a counter-intuitive strategy. Many of the nation’s largest servicers, including Wells Fargo & Co. and Warren Buffett’s Berkadia Commercial Mortgage LLC, cut costs by using offshore workers.
Servicing companies collect loan payments, modify troubled mortgages and foreclose on delinquent borrowers. The work can require considerable interaction with commercial clients and homeowners behind on their mortgage payments.
Situs, the 15th-largest commercial servicer according to the Mortgage Bankers Association, is positioning itself with a staff that it says is better equipped to tend to customers and improve loan performance.
“We build up this institutional knowledge and that low turnover translates directly into high quality,” said Steven Bean, Situs senior managing director. Bean, who’s responsible for the company opening shop in his hometown of Robbins, says he wants to more than triple the company’s 80-person workforce as soon as possible.
Situs is making a small dent in job losses that have swept the industry as offshoring of mortgage servicing has become more common. Between 2009 and 2013, almost 2,800 workers who lost servicing jobs to foreign competitors were approved for taxpayer-funded retraining programs, according to the Labor Department.
“We don’t try to bash people who go offshore,” Bean said. “Our focus is we’re going to communicate better, have higher quality. We can get very cost-competitive but we’re probably not going to be able to match offshorers if price is all that matters.”
For some of the industry’s biggest players, including Atlanta-based residential servicer Ocwen Financial Corp., offshoring is viewed as essential. Chief Executive Officer Ronald Faris told investors in December that “my best guidance is it’s about $50,000 at least cheaper to do the work in India versus doing it here.”
Ocwen, which last year bought mortgage-servicing portfolios from JPMorgan Chase & Co. and Bank of America Corp., increased its workforce to 10,100 last year from 1,900 employees in 2009. Of those, 6,100 are outside the U.S. “Before we did these two acquisitions we were operating with about 85 percent of our staff offshore,” Faris said Dec. 4. “We’ve announced now some reductions here in the U.S. and we’ll start to see that mix move back closer to where we were historically.”
That week, the company said it would eliminate jobs in Texas, Iowa and Pennsylvania. Company spokesman Rick Gillespie declined to comment on the company’s offshore expansion.
The workforce of Nationstar Mortgage Holdings Inc., another residential servicer, grew to almost 7,000 in 2013 from about 4,600 in 2012. The company, based in Lewisville, Texas, added 2,000 “offshore resources” in India and the Philippines in 2013 “and may expand to other countries in the future,” according to its annual report.
The outsourcing is “consistent with what many other financial services companies our size and larger are doing” to control costs, Nationstar spokesman John Hoffmann said. “Our outsourcing partners are known, established companies.”
The offshoring in residential servicing worries consumer advocates, who draw a link to worse outcomes for borrowers who need help.
“We’ve seen, in many ways, an increase in the cost-cutting measures that servicers were implementing” before the financial collapse, said Diane Thompson, an attorney at the National Consumer Law Center. “It’s where the least investment has historically been, in staffing and infrastructure.”
On both the commercial and residential side, investors who own the mortgages also have an interest in making sure the loans are properly administered.
Thomas Crow, senior director at Fitch Ratings Ltd., has listened to calls between offshore servicing employees and borrowers. Servicers tend to use offshore labor for back-office work, rather than customer-facing responsibilities, he said.
Interactions involving customers are heavily scripted, he said. “If a question comes up that’s not covered by the scripting, it could be quite awkward,” Crow said. “The calls sound kind of mechanical. Does that have an impact on the ultimate resolution? It’s hard to say.”
Bean is no stranger to offshoring. He and a business partner, Jennifer Lang, were working at an India-based commercial real estate company, Global Realty Outsourcing, when it was sold in 2006. That April, Bean was visiting his parents in Robbins when his cousin called.
“She invited me to dinner and asked what I was going to do next,” Bean said. “She said, ‘Why don’t you do something here?’ The next thing I know I’m crunching numbers.”
He and Lang took their business plan to Situs, a one-time competitor, with the idea of building a middle-market servicer in his economically distressed hometown.
Situs, headquartered in Houston, Texas, and with offices in the U.S. and Europe, is a piece of Ranieri’s financial services portfolio. It opened in Robbins in January 2007.
The first help-wanted ad for the operation drew 150 applications, including people with finance degrees. Bean quickly hired 20 and put them in a six-week in-house training class. Starting salaries currently are $25,000 to $30,000.
“There’s not a lot of opportunity like what we’re bringing,” Bean said. “We don’t have a tremendous amount of competition” from other employers.
Last year, the company developed a 12-month training curriculum in partnership with Sandhills Community College in Pinehurst, North Carolina, to groom potential employees.
After losing her job at the sock factory, Hussey obtained an associate’s degree in business administration and was hired at Situs as a junior analyst in 2009. She’s since earned a bachelor’s degree and is pursuing a master’s in business administration.
It’s a far cry from when she spent her days putting socks into bags. She makes “more than enough to live on”, gets vacation days, a retirement plan and company-paid life insurance. An added bonus: Her new workplace has air conditioning.
As the company has grown, so have her responsibilities. She now oversees nine people.
“It’s a completely different atmosphere, a different profession,” she said. “From the time I worked in the hosiery mill to now, it’s unbelievable.”