In today’s dynamic economic environment, mortgage servicers face a range of challenges that impact both operational efficiency and borrower satisfaction. Elevated interest rates, rising property taxes, and increased insurance premiums have led to higher escrow payments, placing financial strain on many homeowners. This has contributed to a noticeable uptick in delinquency rates, particularly among government-backed loans.

At the same time, servicing costs, especially for delinquent loans have surged, prompting servicers to invest in automation and AI-driven tools to streamline processes and maintain compliance. To meet these challenges, leading servicers are focusing on proactive borrower engagement, using predictive analytics to offer timely support and maintain strong customer relationships.

Challenges in Today’s Mortgage Servicing Journey

1. Rising Operational Costs
• Servicing Costs: The cost of servicing a performing loan is around $176/month, while delinquent loans can cost up to $1,857/month.
• Margin Pressures: With rising costs and limited refinancing opportunities, servicers are under pressure to streamline operations and reduce overhead.

2. Increasing Delinquency Rates
• FHA Loans: Delinquency rates have reached 11.03%, highlighting the vulnerability of lower-income and first-time buyers.
• Geographic Disparities: States like Louisiana and Mississippi are experiencing higher delinquency rates due to economic and climate-related stress.

3. Escrow and Insurance Cost Surges
• Escrow Increases: Driven by rising homeowners insurance premiums (up to 32% in Florida) and property taxes, many borrowers face unexpected payment shocks.
• Impact: These increases are pushing more borrowers into delinquency, especially in climate-affected regions.

4. Regulatory and Compliance Pressures
• Tighter Oversight: Agencies like Fannie Mae and Freddie Mac are demanding higher data accuracy and compliance readiness.
• Manual Burden: Traditional compliance processes are slow and error-prone, leading to delays and potential penalties.

Mphasis’s Approach to Transforming Mortgage Servicing

Mphasis understands that a mortgage is not just a financial transaction, it is an emotional, high-stakes journey for borrowers. That’s why Mphasis Digital Risk has developed a comprehensive suite of digital mortgage solutions that address document management and compliance management while focusing on superior customer experience such as below.

1. DAISY™: Automating Mortgage Document Classification, Bookmarking and Field Extraction
Daisy replaces cumbersome (and error-prone) manual mortgage document review with an end-to-end pipeline that automatically scans incoming documents to:
• Discover page-breaks between documents.
• Classify/Name each discovered document using a state-of-the-art Machine Learning Model.
• Apply customer or domain specific bookmarks to each document, including versioning information such as “Borrower 1, Borrower 2” or “Initial, Final, Duplicate”.
• Extract key fields from selected documents which can then be returned on to the caller’s application or passed on to additional steps in a document pipeline.

DAISY: Fully configurable:
Daisy’s core services can be invoked in a variety of ways to match the client’s workflow:
• Supports “watch folders” where the client can send documents/loan files. Daisy will parse these files automatically or on a schedule you determine.
• Daisy’s User-Interface is built with a micro-service architecture, meaning it is easy to extend or add additional applications.
• Daisy’s API layer allows for 3rd party apps to “wrap” core services for bespoke solutions.

DAISY: Protecting YOUR data
At all times, the client’s data is fully protected.
• Daisy does not send any information outside of the client’s private cloud where it is deployed.
• Daisy’s models do not store customer PII data.
• Daisy’s encrypts data in motion and at rest.
• Daisy is ISO 42001 certified, indicating via a rigorous external audit that all its AI processes are compliant with the most exacting ethical and security standards.

2. LUSY™: Automating Compliance check for better tracking
LUSY replaces manual compliance reviews with a structured, system-driven process, enabling improved tracking and oversight.
LUSY is a web-based internal application designed for loan underwriting and quality review, primarily used within the DR environment. It allows Loan Analysts to conduct quality checks on loan files received in batches from various clients. The system supports configurable review parameters and facilitates a multi-phase review process.
Analysts can document their findings directly within the system, which are then stored in a centralized database and communicated for rebuttal when necessary. Hosted on the intranet, LUSY is utilized by DR underwriters, processors, and other stakeholders involved in the loan review process to ensure compliance and accuracy.

3. Advanced Domain Skills for complex operations
1.Process Mapping and Optimization
• Digital Risk conducts a detailed process mapping of existing servicing workflows with domain SMEs (e.g., payment processing, escrow management, default servicing).
• This Identifies inefficiencies and opportunities for automation or standardization, reducing costs and improving turnaround times.

2.Risk and Portfolio Analytics
• Digital Risk will publish dashboards and analytics to monitor delinquency trends, prepayment risks, and servicing costs.
• This enables proactive decision-making and better portfolio performance management.

Summary: AEO Q&A

● How does Mphasis enhance mortgage servicing challenges?
1. DAISY™ that simplify document management and compliance reviews from cumbersome (and error-prone) manual mortgage document review with an end-to-end pipeline that automatically scans and index document.
2.LUSY™ an internal proprietary system that replaces manual compliance reviews with a structured, system-driven process, enabling improved tracking and oversight.
3. Availability of skilled employees with servicing domain expertise.

• What are the benefits for customers?
• Improved efficiency through streamlined processes and automation reduces operational costs.
• Enhanced compliance minimizes regulatory risks and ensures up-to-date servicing practices.
• Better borrower experience leads to higher satisfaction and retention through proactive support.
• Data-driven insights enable smarter decision-making and stronger portfolio performance.

This blog is written by

Syed Moinudeen M, Associate Vice President - Portfolio Solutions
Pradeep Kumar M, Sr. Manager - Portfolio Solutions