6 trends mortgage servicers need to prepare for in 2025

Here’s how mortgage servicers can get ready for the complexities ahead.

2025 has kicked off with a degree of uncertainty for the mortgage servicing industry. Despite the US Federal Reserve’s interest rate cuts, mortgage rates are rising.  With little chance of returning to the low rates of 2020-2021, a refinancing boom is unlikely. Natural disasters continue to hit hard, with losses from the California wildfires estimated at $28 billion and climbing.

To adapt, the industry is shifting to a digital-first model that leans into data to better support borrowers. We’ve identified six trends that will impact mortgage servicing companies in 2025 and how they can navigate the challenges ahead.

1. Borrower-centric strategies will call for renewed attention to data.

To support borrowers feeling overwhelmed by high interest rates and recent natural disasters, servicers will need to move from transactional interactions to proactive partnerships. Data-driven decision-making will be an important step in operationalizing the partnership approach.

How mortgage servicers can adapt: By arming themselves with data and advanced analytics, servicers can anticipate borrower needs and intervene early. AI-driven systems can flag potential financial distress and initiate loan modifications or forbearance options that align with individual borrower circumstances.

Data will also enable mortgage servicing companies to get creative with customer retention. Because retention is far less costly than acquisition, doubling down on retention strategies is a worthwhile investment. For example, some servicers provide cashback incentives for borrowers who reach milestones such as 10 years of on-time payments. Others offer rewards for engaging with their digital platforms to set up autopay, for example, or for using the lender’s mobile app. Still others extend a small discount on interest rates to returning customers who refinance or take out a second mortgage.

2. MSR portfolios can provide flexibility in an uncertain market.

Rising interest rates have slowed down mortgage prepayments, which has elevated the value of mortgage servicing rights (MSRs), which are contractual agreements to sell a mortgage to another party. This has resulted in divergent portfolio strategies: Many independent mortgage banks opted to sell off significant portions of their MSRs—and large servicers acquired them. Acquirers enter 2025 with expanded portfolios that provide a ready customer base for cross-selling of products like home equity lines of credit (HELOCs).

How mortgage servicers can adapt: Expanded MSR portfolios allow for achieving scale and diversifying risk. For example, with advanced analytics, servicers can identify borrowers eligible for a HELOC and then promote tailored solutions with flexible terms that meet borrowers’ needs. This approach not only opens new revenue streams but also strengthens borrower relationships in a market where refinancing opportunities are on the decline. 

3. Delinquency management will take center stage.

Rising delinquencies present challenges, particularly within Federal Housing Administration (FHA) portfolios. For homeowners, the macroeconomic pressures of high inflation are made worse by soaring property insurance premiums and the impact of natural disasters. The pressures weigh heaviest on borrowers with lower credit scores and higher debt to income ratio.

How mortgage servicers can adapt: To be proactive about delinquency management, mortgage servicers will need to make changes on two fronts. One is to implement predictive tools that leverage the latest advances in AI and machine learning. Using predictive tools, servicers can more accurately identify at-risk borrowers and enable proactive, personalized loss mitigation strategies.

The second is portfolio resilience. Servicers will need to build scalable systems to handle increased operational and compliance complexity. Scalable systems can automate routine tasks, centralize data for real-time insights and natively integrate regulatory updates.

What’s more, by leveraging AI-driven automation and intelligent decision-making, as well as cloud platforms for scale, mortgage servicers can enhance process efficiency, reduce errors and ensure compliance with the changing regulatory landscape. 

4. Climate risk strategies have gotten real.

Recent climate events such as hurricanes in the southeast and wildfires in California have driven home the importance of climate risk strategies for mortgage servicers. Data plays a key role here, too. For example, by combining weather event tracking with portfolio data, servicers can proactively contact homeowners in affected areas about forbearance options or insurance claims assistance, rather than waiting for them to reach out while dealing with property damage.

How mortgage servicers can adapt: To assess their exposure to climate events, it’s critical for mortgage servicers to adopt a balanced approach. In the short-to-medium term, it will be essential to integrate risk data related to floods, hurricanes and wildfires into underwriting and servicing models. But leveraging advanced technologies for risk monitoring and automation is only part of the solution. Mortgage servicers will also need to actively participate in community rebuilding efforts to stabilize property values and support borrowers.

Long-term strategies require a different approach. Servicers should not only diversify loan portfolios to reduce reliance on high-risk areas but also advocate for stronger insurance frameworks and climate adaptation policies. By combining immediate relief measures with proactive planning, servicers can prepare for future climate challenges, safeguard their operations and support borrowers effectively.

5. Mortgage servicing will become fully digital.

An overwhelming number of consumers are now comfortable with online financial transactions, including securing mortgage and auto loans. The next move is up to mortgage servicers: They will need to implement the advanced digital solutions and automation that will add value for customers and streamline experiences.

How mortgage servicers can adapt: Smart mortgage servicers will use AI-driven predictive analytics to more accurately anticipate borrower needs. AI-driven insights will also provide servicers with the opportunity to cross-sell a wide range of products and solutions.

Self-service portals are another way to boost the customer experience. Agentic AI is paving the way for autonomous chatbots to not only offer 24/7 customer support but also handle complex tasks and problem-solving.

6. Operational efficiency will continue to be a high priority.

Boosting efficiency and reducing costs are perennial trend makers. In 2025’s uncertain economic environment, they will matter more than ever.

How mortgage servicers can adapt: When it comes to operations, 2025 is more about adopting than adapting. By automating routine tasks with generative AI—such as payment processing, customer query handling and document reviews—servicers can more easily optimize resources and focus on strategic initiatives.

We also expect servicers to continue adopting cloud technology to enhance operational efficiency. Leading the way will be cloud platforms that improve data accessibility and scalability, giving servicers the ability to pivot quickly to changing market conditions.

Next steps

The challenges mortgage servicers face also offer unparalleled opportunities for growth and innovation. By prioritizing borrower engagement, leveraging technological advancements and building resilience, servicers can turn obstacles into steppingstones.