A system and corresponding method are disclosed for blowing or spraying loose-fill insulation (e.g. fiberglass) into wall cavities and the like the system including a fiber recovery or recycling subsystem that vacuums up overspray or waste fibers and forwards them back toward the hopper. A fiber collector device having a fiber inlet and outlet is mounted above the hopper, and receives the recovered waste fibers and redistributes them back into the hopper so that they mix with virgin fibers therein. The mix of recovered and virgin fibers is then blown through the blow hose toward a wall cavity or the like to be insulated.