Case Studies & Testimonials
“Small Banker to Big Banker”
Our client located in San Diego, CA, was operating a small mortgage bank in 2007. They realized as they migrated from a broker to a banker they needed to have a CPA firm that understood their needs.
Our first engagement was to perform their annual audit for FHA and warehouse lines. After getting to know the client, it became clear their biggest challenge was they didn’t have an accounting department or consultants that could support their goals or understood mortgage banking accounting.
They entered into a mortgage banking consulting agreement with our firm.
Our goal was to create an accounting reporting structure and help shape the direction of the company, by providing decision support, and assist in scaling the company. Additionally, we would leverage our industry partners to help them grow.
- Broker to Banker
- Best Efforts to Mandatory
- Mortgage Banking Accounting, Hedge Accounting, Mark-to-Market reporting
- GSE approval and servicing
- Strategic Tax Planning
- 3864% (that’s not a typo) growth
“Accounting Department Evaluation”
This client was operating a mature mortgage bank based in Irvine, California. Management had a feeling that the financials were not making sense but the accounting department insisted that the results were correct. As a result, management lost confidence in the accounting department and had a difficult time making decisions based on the results.
We entered a consulting engagement to evaluate the accounting department team. This process includes interviewing all individuals in the accounting department to identify key employees as well as areas where there are deficiencies. We report our findings and make recommendations. If during this process we discover someone needs to be replaced, we would provide a systematic vetting process to fill their role.
After the evaluation, we determined there were numerous errors and practices that management was unaware of. We recommended replacing key members of the team and placing responsibilities on different members that were more suited for their skill set. We assisted in the interviewing process of a new Controller built on the approach of “TopGrading”. The Company implemented the recommendations.
We were able to recommend a new Controller through our process that was qualified to make meaningful improvements to the accounting department. As a result, financials closed by the 5th of the month and management reviews weekly Key Performance Indicators (KPIs) that provide management real time data to make decisions. The client is now an audit and consulting client.
“Audited Financials & Tax Prep”
An established mortgage banker was frustrated each year during the audit process. The CPA firm they engaged sent out staff that did not specialize in mortgage banking or were not really looking to give any added value to the client. The audit just felt like something “they had to do” to stratify regulators (FHA/HUD, Fannie Mae, Freddie Mac, DBO, etc.), investors and warehouse lines. Unfortunately, they were stuck answering the same questions every year and didn’t receive any industry expertise. In addition, they were recognizing income on their open but not closed pipeline for tax purposes. The CPA firm said that income was required to be reported for tax purposes.
All our audits are performed with the same simple and painless process with the added value of industry expertise. Since we understand mortgage banking, they did not need to teach us how they make money, underwrite, process, service or sell loans. We understand their business and that allows us to bring industry related improvement opportunities as they become clear. We also did a full evaluation of their tax returns.
Audit was completed early with no surprises. In addition, a key member of our team noticed an opportunity to increase margin with a different strategy. Client implemented and has realized much more in revenues as a result. Our tax department was able to save substantial amount of money in taxes related to the treatment of their mark-to-market assumptions on their open pipeline revenues.
Client operating in multiple states had a difficult time understanding mortgage banking accounting. Hedge entries did not make sense to them and they were questioning results. In addition, the accounting personnel did not have the sophistication to make recommendations to management related to the financial management of the company. Financial statements were being delivered to management 30-45 days after the close of the month. Management had consistently requested financials sooner but the accounting department said they were overwhelmed with work.
We entered into an outsourced CFO consulting agreement and immediately evaluated the accounting personnel to determine the best course of action. This included setting a clear set of goals, expectations, deadlines and most importantly providing support for the accounting department. This was used to create a foundation to provide CFO services. A CFO’s job is to spend 75% of their time forecasting and providing a path and plan to achieve goals.
By following our systematic plan, they now have a reporting rhythm to manage their company. This includes weekly cash requirements, projected revenues and Key Performance Indicators (KPIs) on our mortgage banking dashboard. Financials are closed and delivered by the 10th of the month. Net profits have increased by an average 35bps monthly since management can make better decisions. Management now enjoys the ability to forecast their future.