Offshoring Gets Easier, But with a Caveat.

Dallas -- It's easier than ever to outsource loan administration work to low-cost labor centers such as India, but lenders who have gone this route find that labor prices are rising in some key cities of India where many U.S. firms have set up shop.

As demand grows, lenders find that employee turnover is a big challenge in cities such as Mumbai and New Delhi. As a result, some are setting up shop in "second wave" locations where competition for qualified

employees is less intense.

David Zugheri, president and co-founder of First Houston Mortgage, said that the prevalence of low-margin, conforming loan products in today's market has put added cost pressure on lenders. And that is helping to fuel the need to rely on low-cost labor markets for back-office functions, Mr. Zugheri said during SourceMedia's Mortgage Servicing Conference here.

About the industry's subprime mortgage crisis, Mr. Zugheri said that the race to the bottom of underwriting standards was fueled by a race to the top of profit margins.

Now that those days are gone, "You cannot afford to be inefficient," he said.

"We cannot afford to be completely on-shore."