Total direct operational costs in servicing, a subcomponent of total expenses, increased by a few dollars per loan compared to last year as mortgage companies contended with policy change.
Processing Content
Systems and customer service at $36 and $33 per loan, respectively, accounted for the two largest categories of direct expense, followed by executive management and specialized functions at $21.
Loss mitigation added $17 to costs. The following categories each added $11 to expenses: bankruptcy, real estate owned and other default costs, cashiering and investor accounting, collections and escrow or loss draft processing.
Claims and foreclosures, and costs involved in handling setups, transfers or payoffs each added $9 to direct operational expenses in servicing last year. Quality assurance and record-keeping each added another $6 to costs, while specialized loans added $3.
What drove costs higher
Respondents to the benchmarking study attributed the increase in total costs over 2024 to factors that include:
The majority or 75% of the costs came from expenses outside of functions connected with default, according to the MBA, which included customer service, executive management, escrow and loss draft processing, and set-ups payoffs and transfers in that category. Default related functions like collections, loss mit, bankruptcy and foreclosure accounted for the remaining costs.
Costs have played a role in recent servicing consolidation driven in part by the need for economies of scale to compete in the business. The MBA said the respondents to this report likely represent 60% of the total market.
In this episode of Conversations with Frank Fabozzi, CFA, Francesco Fabozzi explores how large language models are transforming investment workflows, from discretionary research and quantitative strategies to portfolio construction and governance. He discusses where AI creates value, the risks firms must manage, and why the future of investing will depend on combining domain expertise with AI-driven insights.
Key Discussion Points
AI beyond automation:Why discretionary investors may benefit more than large systematic firms
From sentiment to return prediction:How language models extract investment signals from unstructured data
AI in quantitative investing:Creating new predictive factors and enhancing research efficiency
Model risk and governance:Managing hallucinations, evaluation frameworks, and AI oversight
The next frontier—portfolio construction:Moving beyond stock selection toward AI-informed portfolio decisions
Building differentiated investment processes:Why domainexpertise, proprietary knowledge, and investment philosophy still matter in an AI-driven world
“Julie,” the CHRO of a mid-sized media organization, made a decision she called “practically unavoidable.” Facing board pressure to cut costs and show ROI on AI investments, she eliminated her firm’s 200-person analyst associate program—the entry-level cohort that had, for decades, been the company’s primary pipeline for mid-level talent. The savings were immediate. The consequences were not.
The banks are offering a free $10 ten times when checking out with Paze. Chase is also offering 10x Ultimate Rewards points bonus for Paze transactions.
One of the eligible merchants is Domino’s which is useful for getting nearly free pizza and the like.
It’s under the Extras menu, so you don’t need to add anything else to your cart. Just choose store pickup first (carry out), then update the quantity to 10 (it’s easier to update the quantity on the initial screen), then check out with Paze. It shows the $10 clearly on the Paze checkout screen.
This is useful for someone who wants to do some good in the world. It can also be a potential tax write off. You’ll have a receipt of the donation in your email.
As always please consult your own tax advisor for all tax matters.
Starting in 2026, even those who don’t itemize deductions can get a charity deduction of up to $1,000 for a single or $2,000 for a couple. See our post, IRS: Standard Deduction Filers Can Deduct $1,000-$2,000 In Charitable Donations (Begins 2026).
I’ll probably use the rest of the Paze credits for the St. Jude’s donation since aren’t really many options left that I’m interested in.
There’s a version of financial planning that physicians are pretty good at.
Retirement accounts, real estate, tax-advantaged savings. We research it, we optimize it, we talk about it at conferences.
Disability insurance is not that thing.
Not because physicians don’t understand the stakes. We do, better than most. We see what happens when someone can’t work. But this particular task has a quality that makes it easy to defer indefinitely: we know we have something, so we don’t feel the pressure to understand exactly what that something is.
That gap between “I have coverage” and “I know what my coverage actually does” is where real financial damage happens.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial, legal, or investment advice. Any investment involves risk, and you should consult your financial advisor, attorney, or CPA before making any investment decisions. Past performance is not indicative of future results. The author and associated entities disclaim any liability for loss incurred as a result of the use of this material or its content.
With so much noise out there, it’s hard to know who’s actually done what you’re trying to do.
That’s why PIMDCON brings together physicians building real freedom through real estate, entrepreneurship, and smart investing.
Real physician peers sharing proven strategies.
LEARN MORE ABOUT PIMDCON
The Story That Brought This Into Focus for Me
I know a physician, an interventional cardiologist, who developed a tremor in his early 50s. He could no longer safely perform procedures. By any clinical definition, his career as a proceduralist was over.
He had disability insurance. Had been paying premiums for years through his group. He assumed he was protected.
His policy was any-occupation, not own-occupation. Because he could theoretically still practice medicine in some capacity, the insurer’s position was that he wasn’t disabled. Not by the policy’s definition.
He had never looked at that detail. He’d always meant to. It just never happened.
This isn’t a rare situation. The details matter, and most physicians haven’t looked closely at them.
The Four Questions Every Physician Should Be Able to Answer
If you have disability coverage, through your employer or individually, these are the four things you need to know. Most physicians can’t answer all four without pulling out their documents.
1. Own-occupation or any-occupation?
This is the most consequential distinction in physician disability insurance. Own-occ policies pay benefits if you can no longer perform the specific duties of your specialty. Any-occ policies only pay if you can’t work in any occupation at all.
For proceduralists especially, this difference is significant. A surgeon who can no longer operate may still be able to teach, consult, or work in administration. Under an any-occ policy, that means no disability benefit. Under own-occ, they’re covered.
Many group policies offered through hospitals and large practices are any-occupation. Individual policies, particularly those marketed to physicians, are more likely to be own-occupation. Which one do you have?
2. What’s your elimination period?
The elimination period is the waiting period before your benefits begin. Most policies require 90 or 180 days. That means you’re responsible for your full living and practice expenses for three to six months before the insurance kicks in.
For physicians with high fixed costs, including mortgages, private school, practice overhead if you’re in a partnership, that’s not a trivial period. Knowing your elimination period helps you understand how much liquid reserve you actually need.
3. What income does your benefit actually replace?
Group policies typically cover 60 to 70 percent of your base salary, as defined in your employment contract. They don’t cover bonuses. They don’t cover income from a real estate portfolio or side business. They don’t know about your partnership distributions.
If your lifestyle or financial plan has grown to include income beyond your clinical salary, your group policy may not be covering as much of it as you think. Individual supplemental policies can fill this gap, but only if you’ve identified it first.
4. Is your coverage portable?
Group disability coverage is tied to your employer. When you leave, it typically stays behind. This matters most at transitions: changing practice settings, going part-time, taking a leave of absence, moving into entrepreneurship.
These are often the exact moments when income is in flux and protection matters most. Understanding your portability, and whether you need an individual policy to bridge it, is worth knowing before the transition happens.
The Life Stages That Change the Calculus
Disability insurance isn’t a set-it-and-forget-it decision. There are specific points in a physician’s career when the coverage conversation deserves a fresh look.
Changing employers. The most obvious trigger. Your prior policy doesn’t follow you. What does the new group offer, when does it start, and is there a gap in between?
Going part-time. As clinical hours reduce, income structure changes. Some group policies scale proportionally with salary. Others have definitions that interact with part-time arrangements in ways worth understanding before you make the transition.
Building income outside of medicine. As physicians develop passive income streams, consulting practices, or healthcare-adjacent businesses, more of their financial life exists outside the clinical salary the group policy protects. This is a common situation for physicians in entrepreneurship-focused communities. It’s also a situation many haven’t thought through from an insurance perspective.
The 45-to-55 window. This is when physician income typically peaks and when health issues that could limit practice start to become more likely. Not dramatically in most cases, but enough to matter. Insurability can change in this window. Getting coverage in place, or reviewing what you have, before health conditions complicate the underwriting process is worth doing while it’s still straightforward.
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What to Actually Do
The goal here isn’t to send you into an insurance review spiral. It’s one concrete step.
Pull your disability policy documents. Look for two things: the definition of disability and the benefit amount. Those two data points will tell you more than any summary or conversation could. If you can’t find the documents, your HR department has them.
If what you find raises questions, or if you can’t find clear answers to the four questions above, the right next step is a conversation with a fee-only financial advisor or an insurance professional who works specifically with physicians.
Not someone who earns a commission on what you buy. Someone who can tell you what you actually have, where the gaps are, and what addressing them would look like.
The Deferral Problem
The cardiologist from the beginning of this piece is doing fine. He’s built a consulting practice and by his own account has a better quality of life in some ways than he did during his procedural years.
But he left a meaningful financial cushion on the table. One he had paid toward for decades. Because of a single policy definition he had always meant to look at.
The hard part isn’t understanding disability insurance. This isn’t complicated material. The hard part is that “I’ll handle this soon” is an extremely comfortable place to stay.
Soon becomes a year. Then five. Then a diagnosis changes the conversation.
Disability insurance for physicians is one of those things that works best when you think about it before you need it. Which means the ideal time to look at your policy is probably right now, before anything prompts you to.
Thinking through the financial structure of your life beyond clinical income? PIMDCON, the Passive Income MD Conference, is coming up in September in Dallas. It’s one of the best rooms I know for this kind of conversation. Details at pimdcon.com
Were these helpful in any way? Make sure to sign up for the newsletter and join the Passive Income Docs Facebook Group for more physician-tailored content.
Peter Kim, MD is the founder of Passive Income MD, the creator of Passive Real Estate Academy, and offers weekly education through his Monday podcast, the Passive Income MD Podcast. Join our community at the Passive Income Doc Facebook Group.
Disclaimer: I am not a CPA, attorney, or financial advisor. The information in this post is for educational purposes only and should not be construed as tax, legal, or financial advice. Please consult a qualified professional about your specific situation before making any decisions.
When Brown University Professor Roberto Serrano changed the format of his midterm exam last spring, he was thinking about his students’ mental health, not academic fraud. Two of them had been shot, including Ella Cook, a young woman who had sat in his office just days before the December 13 massacre at Brown University and asked him to be her academic advisor.
“We had a very nice conversation,” Serrano recalled in an interview with Fortune. “She was a wonderful young woman, full of energy, full of ideas. Imagine my shock when a few days after that conversation took place, they released the names of the two mortal victims, and I saw that one of them was her.”
In that grief, Serrano made a decision he had never made in his 34-year career at Brown and gave his ECON 1170 class—an advanced undergraduate course in mathematical economics—a take-home, closed-book midterm. He wanted to remove the stress of sitting in a classroom on a campus where, he says, quite a few students were still too traumatized to set foot. Two of his students had been among the nine wounded in the attack; they fought for their lives for weeks, and both survived.
What Serrano got instead of gratitude was the largest known AI-assisted cheating scandal in the Ivy League, as previously reported by El Pais.
Cheating on a mass scale
Of the 86 students who took the March 5 exam, 40 scored a perfect 100. The class average was 96 whereas in previous years, the average had ranged between 65 and 80—and this exam, by design, was harder than usual. “The beauty of take-home exams used to be that we professors were able to challenge students a little more, just to push them to a higher level,” Serrano said. “The fact that this was a harder exam and this distribution made it absolutely clear that something very unusual had happened.”
Serrano got tipped off by something that was just too smart, he said. “Some answers contained unusual passages that coincided with results obtained after running the questions through ChatGPT,” Serrano said. His graders ran the exam questions through ChatGPT and made a telling discovery: the AI had generated a convoluted argument for a problem that has a much simpler, more elegant proof, and that same convoluted reasoning appeared across dozens of student exams. “This distribution made it clear that something seriously wrong had happened,” he said, calling it “absolutely ridiculous.”
But Seranno said he decided to give his students the benefit of the doubt: He wasn’t going to void the midterm, but told them the final exam would be in person. If the grade distribution didn’t roughly mirror the midterm’s, only the final would count.
When Serrano returned to class after grading, he told his students exactly what he’d found. “If you did this, if you just press a button to ask an AI agent to do this for you, you’re showing to be completely irrelevant. So my question to you is, why are you here? Why are you at a university if you refuse to learn, you refuse to work hard, if you refuse to put in the necessary effort to develop critical thinking?”
“If all you’re doing is just pressing a button to do to have this machine do the work for you, then you think you need a Brown degree for that?”
When asked about the initial reaction from his students, Serrano answered with just one word: “silence.” He suspected the cheaters weren’t even there: “I think most of the cheaters were not in class, frankly.” He closed class that day by reminding the students of the honor code. “You all signed this, right? Sadly, that’s the value of your signature.”
Following his speech, 27 students dropped the course; 22 of those had scored 100 on the take-home.
When the final came around, only 59 showed up for the in-person exam and 19 failed. The class average collapsed to 48 out of 100: by far the lowest final exam average in the course’s history. “The empirical evidence of fraud is overwhelming,” Serrano said. “When you put together all this information and the distributions of the two exams, it’s absolutely clear.”
After assembling his evidence, Serrano sent it to Brown’s dean of the college and provost. Neither responded initially. After he escalated the case to the university’s Academic Code Committee, he received a note calling the incident “a wake-up call.” The provost, he said, has maintained complete silence to this day.
The man who wrote the book on game theory explains game theory
Serrano holds a named chair, the Harrison S. Kravis University Professorship in Economics, among the most prestigious appointments a university bestows. He serves as an editor at Games and Economic Behavior, the leading journal in a field that covers the economics of risk, uncertainty and information, often known as “game theory,” exactly what’s at play when, say, cheating on an exam.
Serrano has over 6,100 citations on Google Scholar and is the author of two widely used textbooks, including the one Brown’s own economics department uses. He’s a fellow of prestigious academic societies and even got the King of Spain Prize for Economics in 2024.
The game theory expert looks at the current situation and despairs. “I’m very frustrated,” Serrano told Fortune. “I believe the arrival of AI has been like a tsunami for all of us. It’s caught everybody unprepared. But in my humble opinion, silence is the worst treatment for this problem.”
Serrano, who has been blind since age 17, earned his PhD at Harvard, and has spent more than three decades at Brown, acknowledged that AI has moved so quickly that institutions haven’t known how to respond. Brown has not yet responded to Fortune’s requests for comment.
But it’s not just Brown, Serrano said. He pointed to a recent New York Times essay that described a pervasive culture of AI cheating among Stanford peers: students who were at elite universities not to learn but to collect the credential. “What they miss in that very naive analysis,” Serrano said, “is that the Brown label is Brown for a while. But if Brown continues to produce mediocre students who refuse to learn, sooner or later the market is going to find out that the Brown label is not what it used to be.”
The broader trajectory, he warned, points somewhere darker. “If workers are just going to press a button to ask an AI agent to do the work for them, that’s inscribing a world in which humanity has chosen to become idiots,” he said. “We stop thinking.”
Brown is far from alone. Princeton’s faculty voted in May to end its 133-year-old honor code tradition of unsupervised exams, mandating proctors in every room starting July 1, the most significant change to the policy since students first petitioned for it in 1893. As Fortune reported in May, 57% of U.S. college students now report using AI tools in their coursework weekly. A separate Fortune analysis found that AI is causing measurable cognitive atrophy among students, with educators warning of a “great unwiring” of the ability to reason independently. And just last week, 47% of surveyed Harvard seniors admitted to cheating.
Serrano has already made changes for the coming academic year. Weekly homework assignments will carry zero weight toward final grades, since those can be completed with AI. Take-home exams are gone, permanently. “Unfortunately, the idea of a take-home exam is a thing of the past,” he said. “It’s too easy for students to succumb to temptation.”
“I’m sure there are appropriate uses of AI: it has the potential to be something very useful for students that will contribute to learning,” he said. “But we have to be absolutely clear about the risks it poses to academic integrity, which is a value we cannot drop.”
The final word, for Serrano, is not about exams or grade distributions. It’s about what kind of people universities are producing. “We need to establish the necessary guardrails — and if they fail, be prepared to implement consequences,” he said. “But this is bigger than academia.” “If we no longer defend truth and decency and honesty,” Serrano said, “then what kind of credibility are we going to have as academics?”
Cure volumes fell 6% month over month in May, with FHA cures continuing to lag broader market performance, a signal brokers can use to identify clients who may benefit from an early loss mitigation conversation.
Prepayment speeds cooled as rates rose. The single-month mortality rate fell 15% from April to 0.79%, a four-month low, though it remains 8 basis points above year-ago levels.
State-level stress remains concentrated in the South: Mississippi led with a non-current rate of 8.43%, followed by Louisiana at 8.33% and Alabama at 6.19%. Idaho (2.04%), Washington (2.17%) and Montana (2.21%) recorded the lowest shares.
“Overall mortgage performance remains healthy, yet the level of serious delinquencies and active foreclosures highlights the importance of reaching borrowers early,” said Bob Hart, president of mortgage technology at Intercontinental Exchange.
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