Wipro is to acquire mortgage due diligence and risk management services provider Opus Capital Markets Consultants LLC (Opus CMC) for $75m to enhance its mortgage BPO capabilities. (See tracker article #201521 for acquisition details).

Wipro's existing mortgage BPO capabilities include:

• 850 FTEs in origination and administration BPO
• BPO services in loan originations and administration
• Loan origination services platform (LOS), acquired with Gallagher
• Mortgage licenses in 47 states (3 states in process)
• Joint venture with large sub-servicer for loan servicing

Opus CMC's existing mortgage BPO capabilities include:

• 490 FTEs, of which 315 are loan underwriters (all U.S. based across 5 locations
• Consulting services for secondary loan portfolio marketing (loan underwriting, valuation services, etc.)
• Service coverage for residential and commercial mortgages
• Loan valuation and due diligence platform
• Approved third party due diligence provider by Moody’s, S&P, Fitch, and DBRS)

The overlap of the client base of each vendor is just 10%, making cross selling of complementary services to existing clients a low hanging fruit.

Wipro is looking to create a significant presence in loan BPO with a platform based offering. This allows it to cover all three principal legs of mortgage operations:

• Origination, using the Gallagher platform, Net Oxygen
• Administration, using BPO services supported by Wipro process management tools
• Secondary market due diligence and marketing, using the Opus CMC platform.

Wipro believes the secondary market will grow as a percent of overall mortgage market as government agencies reduce their commitment to the mortgage market; private lenders pursue non-conforming loans with new product offerings; and private equity and hedge fund investors ramp up investments in loan portfolios.

This a timely investment by Wipro. It has extensive IT services capabilities in the retail banking sector, but has not yet developed a BPO business in the sector that is commensurate with its overall size. Wipro’s strategy in mortgages will allow it to finally create a banking BPO service that aggressively leverages its technology capabilities. The secondary market is going to dominate decisions and financing in the mortgage market. It remains for Wipro to allow the Opus CMC business to focus on its client base and solution development. Wipro intends to maintain the two businesses as separate entities so as not to distract either from their primary business focus.

Over time Wipro intends to expand the Opus CMC capabilities into other loan types, starting with student loans and auto loans. That will require adapting to the peculiarities of those markets. They are likely to acquire additional, smaller consultancies, to enter those businesses for the executive domain knowledge.