Given the ugly employment picture in the U.S., now isn't exactly the best time for a company to be crowing about how cheap its labor costs are thanks to overseas outsourcing.

But don't tell that to Ocwen Financial, soon to become the nation's largest specialty servicer.

You might say the publicly traded Ocwen – which years ago threw its thrift charter overboard – has been on a (acquisition) roll lately. Over the past five months it has racked up almost $80 billion in MSR purchases: $39 billion from Litton Loan Servicing, $26 billion from Saxon Mortgage Services, and another $15 billion in the works from JPMorgan Chase.

Most of it, as you might guess, is tied to nonprime mortgages and was purchased on the cheap. It's a buyer's market for MSRs and Ocwen isn't bashful about its intentions. It's the industry's garbage man, and so be it. Nothing wrong with that – it goes where angels fear to tread.

Oh, and it case you missed its recent investor presentation before a Sterne Agee conference, the firm is currently investigating the purchase of an additional $300 billion of other MSRs.

In short, Bill Erby, Ocwen's CEO – and a former GE Capital executive – has been a busy man. And his hard work appears to be paying off. The company's share price is close to its 52-week high ($16), and the company is profitable.

Four years ago its future may not have looked so bright. Its share price was $4 and there were certain whispers about its future. But not anymore. There's nothing wrong with being a garbage man. Ocwen's goal is to clean up the mistakes of others by modifying loans and curing defaults.

To get where it is today it has relied on a veteran management team headed by Erby and his lieutenants – and a back office workforce that is mostly ensconced in Bangalore, India.

According to Sterne Agee numbers, Ocwen employs roughly 2,600 workers in India compared to 730 in the U.S. Sterne Agee analyst Henry Coffey describes the company's presence in India as “massive,” adding that its employment costs are significantly lower than its peers.

How much lower? According to Ocwen's own numbers, its employee cost in overseas locations is one-eighth that of a U.S. firm, a difference that Coffey calls “significant.”

Calculated in terms of basis points, Ocwen's labor cost is 26 basis points compared to 48 for Walter Investment Management, a competitor that owns Green Tree Servicing. PHH Mortgage has a seven basis point cost structure but it deals with mostly 'A' paper performing loans.
As any servicing executive knows, the processing of mortgages – troubled or otherwise – is a scale business where cheap labor quickly finds its way to the bottom line.

It might be argued that Ocwen's only problem – other than the occasional servicing related lawsuit – is its image: that of a fast growing mortgage company giving away American office jobs to foreigners and taking advantage of the Great Recession by purchasing receivables on the cheap.

Then again, this is business – not personal – and I doubt too many executives at Ocwen are losing sleep over its growing workforce in Bangalore. As analyst Coffey pointed out: “It's an effective and efficient strategy. The workforce in Bangalore is well educated and hard working. That's what you have to look at.”

Maybe so, but there are potential risks overseas as well. In late December Fitch Ratings downgraded Ocwen's servicer rating, questioning both its rapid expansion and its heavy reliance on a foreign workforce. India also is vulnerable to terrorist attacks with its business district being a potential target.

When Ocwen bought Litton in the fall rumors were rampant that it would close its Houston office and ship most of its jobs to India. So far, that hasn't happened. The firm has even pledged to keep the office open. At least for now.

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