Understanding the Real Cost of Mortgage Servicing—and What You Can Do About It

In previous articles, we’ve emphasized the importance of understanding, maintaining, and controlling your processes and associated risks. It may sound obvious—but in practice, it’s often overlooked. As a process improvement consultancy focused on data-driven gap analysis, we at BlackFin Group consistently encounter business leaders who take much of their operational efficiency—or inefficiency—for granted.

This topic is especially relevant today, as recent industry data highlights a continued rise in the cost of mortgage servicing. Expenses related to payment processing, compliance, customer service, and technology are climbing at a steady pace. Since 2019, the cost to service a loan has increased by over 9%, while productivity has declined—measured by a drop in average loans serviced per employee. A 2023 study by the Mortgage Bankers Association found that the cost to service performing loans rose to $176 per loan, up from $168 in 2022. More strikingly, the cost for non-performing loans surged by $49 in the same period, reaching a staggering $1,857 per loan.

This begs the question: how many servicers actually know their cost per loan—and more importantly, the detailed breakdown of those costs? That’s where gap analysis becomes essential. It identifies cost risks step-by-step, revealing inefficiencies that are often hidden in plain sight. When I see rising costs and declining productivity, my mind immediately goes to how technology systems are being used—or underutilized. But assumptions don’t drive value. Data does.

In a recent BlackFin newsletter, we encouraged leaders to take this moment—especially during uncertain market conditions—as an opportunity to reinvest in their organizations. That doesn’t just mean adopting new technologies; it also involves reviewing operational structure, internal communication, training programs, and compliance procedures. These factors all contribute to cost per loan and can be improved with intentional focus.

While it’s easy to point to increased regulatory demands, borrower outreach, and delinquent loan management as the main cost drivers—and they are significant—there are ways to combat the trend. At BlackFin Group, we recommend several strategies, including advanced automation, artificial intelligence integration, and cloud-based servicing platforms, which offer scalable and cost-efficient solutions.

Another smart move? Consolidating servicing operations and outsourcing select processes to reduce redundancy and improve oversight. Together, these solutions not only help control costs but also enhance compliance and borrower satisfaction.

Michael Harris is Managing Director and Partner of the Servicing Practice at BlackFin Group. Michael has over 20 years’ senior executive management experience in default servicing and mortgage servicing. He and his team are subject matter in all aspects of servicing strategy, investor relations, process, compliance requirements. Prior to BlackFin, Michael was the President & CEO of Jennick Asset Management and was responsible for developing the pilot outsourced management program for Fannie Mae, Freddie Mac, and HUD while working with the top 10 mortgage servicing and capital markets firms. For more information contact info@blackfin-group.com