Unit Cost: Mortgage Loan Servicing

Unit Cost: Mortgage Loan Servicing

KPI Details

Unit Cost: Mortgage Loan Servicing measures the average operating cost incurred by the bank, or loan servicer, to service a single mortgage loan over a defined period of time (e.g., monthly, quarterly, etc.). While loans within a servicing portfolio generate revenue through interest payments, servicing fees and/or secondary marketing earnings, overhead costs related to ongoing customer service (i.e., loan servicing) should be minimized to improve the profitability of the institution's loan portfolio. There are several areas where efficiency can be improved to control costs, including call center operations, loan boarding, loan data quality control/maintenance, and payment processing. The customer service call center is typically an area rife with improvement opportunities - more robust self-service options, standard call routing procedures, improved call forecasting and staffing practices and accessible IVR/VRU menu options can help to improve capacity, service levels and efficiency within the loan servicing function.

KPI Definition

The total cost of mortgage loan servicing operations (including labor, technology, occupancy and other overhead costs) divided by the average number of mortgage loans in the bank's servicing portfolio over the same period of time.

KPI Best Practices

• Prioritize loans based on outstanding amount, likelihood of delinquency, days past due, etc.
• Map and allocate personnel costs to servicing activities to expose redundancies or duplicate work
• Set time limits for how long the servicing function should spend on foreclosure and loss mitigation cases

KPI Calculation Instructions Unit Cost: Mortgage Loan Servicing?

Two numbers are used to calculate this KPI: (1) total mortgage loan servicing expense incurred by the organization over a given time period, and (2) the average number of mortgage loans in the organization’s loan servicing portfolio over the same period of time. Total mortgage loan servicing expense should include labor (salaries/wages, commissions, bonuses and benefits), occupancy, technology and other overhead costs related to loan servicing. The loan servicing function is typically responsible for loan boarding, payment processing, customer service/call center operations, escrow account management, collateral management and investor relations. Do not include costs related to defaults (loss mitigation, property preservation, etc.) in this calculation. To calculate the average number of loans in the organization’s servicing portfolio over a given time period, add the number of loans at the beginning of the measurement period and the number of loans at the end of the measurement period, and divide that number by 2.

KPI Formula :

Total Mortgage Loan Servicing Expense / Total Number of Mortgage Loans in Servicing Portfolio