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HCL Acquires UFS’ Mortgage BPS Business to Build As-A-Service Consumer Loan Business in U.S.


As discussed in my blog of April 12, 2017, the mortgage processing industry in the U.S. is challenged to remain profitable because, from 2012 to 2016, loans outstanding grew 1.8% per year, while processing costs grew at 7.3% per year. This is leading to industry consolidation and operational restructuring. A recent example of a BPS vendor consolidating in order to drive greater efficiency into operational delivery is HCL Technologies with its acquisition of Urban Fulfillment Services Llc. (UFS).

Analyzing the transaction

HCL has agreed to acquire UFS for $30m, to be paid in tranches as certain goals are met. The transaction is expected to be completed by June 2017 subject to transfer of licenses (in 48 states) and regulatory approval. Founded in 2002, UFS has:

  • ~350 employees
  • 3 delivery centers:
    • Troy, MI
    • Denver, CO
    • West Lake, CA (Los Angeles)
  • 4 clients across 3 key demographics:
    • 1 tier one bank
    • 2 credit unions, of which one is the 3rd largest federal credit union
    • 1 non-bank lender
  • Services that are predominantly origination portfolio purchases, and fulfillment. HCL did not purchase the appraisals, evaluations, mailroom, or print services
  • Bank products supported for conforming mortgages, non-conforming mortgages, HELOCs, and refinances
  • ~200 mortgages processed per day on average.

UFS provides a client base that overlaps with HCL’s clients, but from the capital markets side. HCL has a capital markets client base that is increasingly looking to buy loan portfolios, allowing HCL to upsell UFS services to them. Indeed, the price paid is reasonable to gain access to a substantial U.S.-based M&L BPS business.

UFS brings onshore delivery capabilities, with capacity for internal growth. Its staff have on average 10 years of M&L BPS experience.

The acquisition allows HCL to grow strategic parts of its business:

  • SaaS cloud delivery: HCL will enable As-A-Service delivery of software and BPS. This will reduce cost of delivery for clients, which is important in the current cost pressure environment. HCL will use FinTech enablement to deliver much of the efficiency improvement in operations, and intends to build a loan origination solution delivered from the cloud as a new offering for clients
  • Retail banking (not just capital markets): HCL wants to pursue consumer loan BPS across all its processes.

HCL is also looking to make additional acquisitions over the next year to gain specialized loan expertise such as auto or student loans.


HCL is a vendor with strong technology services capabilities, which will be needed for adapting the strong loan BPS assets acquired in this transaction. HCL will be challenged to integrate UFS (which sells BPS services to consumer lenders) into its capital markets and ITS portfolio of offerings. Maintaining cultural independence and cross-cultural coordination within the resultant organization will require clear role-based definition and execution. HCL has been a successful serial acquirer of businesses, which indicates it should be able to successfully integrate these two firms.

Profitability will be dependent on increasing the level of automation. While UFS is currently profitable, the market is experiencing a large cost squeeze, driven in part by compliance costs, but also by stagnating volumes. When the origination market makes a cyclical downturn, volumes will fall aggressively. HCL will need to have implemented its FinTech enhancements to drive down break-even capacity utilization ratios, to be a winner in that environment. HCL is on the right path to succeed, but speed to digital enablement will determine if it can execute successfully.


NelsonHall will publish a major market analysis report and NEAT vendor evaluation for next generation mortgage and loan BPS services in late Q2 2017, addressing M&L BPS market issues in greater detail. 

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