The Purpose of Mortgage Accountants

Uncategorized 09.03.2015 Comments Off

For many people in the United States, the single biggest loan they will ever attempt to get will be a mortgage loan, and it will be spent on housing, on building a future for themselves and their partners and families.  Likewise, one of the biggest loans made by most lending institutions will be mortgage loans, holding real property in collateral in order to help people finance their hopes and dreams (assuming they have decent credit and no criminal history to speak of).  Because there is so much money changing hands, doing so in accordance with so very many rules, regulations, laws, and provisions, and so many peoples futures at stake, it makes sense to have on hand a Certified Public Accountant to act as your mortgage accountant .

Some may wonder what a mortgage loan is, and others may be slightly misled on what it is, so to bring everyone up to speed, Ill offer a quick definition here of any terms that may come up.  A mortgage loan is an amount of money loaned to a person (borrower) by an individual or organization (lender) with money on hand, in exchange for the promise that the individual borrowing the money will pay back the total amount loaned (the principle) as well as the interest accrued at the rate (or adjustable rates, or various other ways of calculating and updating a loan rate) agreed on, in exchange for signing over a piece of real property of nearly equal value to the bank (or a share of some piece of property, some tangible asset) as collateral.  Once the mortgage loan has been made, the borrower will pay back the principle, plus the interest that the loan accrues, often on a scheduled payment plan that is designed to clear the debt in a certain predetermined length of time (usually between five and thirty years).  Once the payments are completed, and the initial loan plus interest have been covered, the bank releases any claim they have on the collateral, and that is considered the end of the matter.  Of course, sometimes the payment schedule isnt completed, and the individual borrower fails to live to the agreement they signed with the lender.  This happened quite regularly for the last few years, and the result was often the same.  The collateral put up to secure the loan was seized (entirely legally, of course) by the lender, and they then ended up with real property that they needed to sell in order to recover the money they had lost.  However, as the market was collapsing, no one was purchasing real property, and the whole thing became a vicious cycle.

A Certified Public Accountant, acting as a professional mortgage banking accountant. is well equipped to help protect the lender, as well as helping them to find the reasonable return on their investment, their loan.  A CPA working as a mortgage accountant will be able to offer insight and advice to the lender on topics like interest rate lock commitments, forward mortgage loan sales commitments, closed loans held for sale, and mortgage servicing rights.

All these things sound fairly complex, but really, they arent.  The most complicated part isnt understanding those ideas and those phrases, but being able to calculate, to prognosticate the fiscal future of these things.  For example, interest rate lock commitments refer to locking in the rate of the interest on a mortgage loan at a certain rate.  This rate will (hopefully) be high enough that the lender is making decent profit, but low enough that it is still enticing to the borrower. The CPAs job in this scenario is to help ascertain what the market will be doing for the next few years; for example, if loan rates are about to see a sharp dip, the lender will benefit from locking in at current rates, or slightly lower than current rates, allowing them to make a decent profit.

The reason that a CPA is needed should be very obvious at this point.  Theres a lot of money involved, a lot of very complicated accounting processes involved, a lot of people with a lot of time and hope invested, and a lot of rules and regulations that need to be considered.  A Certified Public Accountant will be well equipped to help the lender to navigate the waters and to ensure that everything is well run, and in accordance with the rules and regulations, both federal and local, that are applicable to the mortgage loans in question.  With the help of a good CPA, everyone can get what they need and want.