Building a high performing accounting team in the mortgage industry can be challenging. The technical accounting is highly niche, and the work tends to be very operational and hands on. In my opinion, it's more akin to manufacturing than to traditional financial instruments. Even further, the mortgage industry is a bit like the Wizard of Oz; you think you may know how it works on the surface, but underneath is an enormous iceberg of capital markets and regulatory knowledge that is specific to this industry. All in all, this presents a challenge to build a team of highly competent accountants who can not just manage the work, but provide immense value to their company.
This challenge is what inspired me to create this series of blog posts. To show others my way of building and leading high performing mortgage accounting teams, in the hopes that it can be helpful to companies struggling to find their footing in this area, or for a younger me to have as a helpful resource. I want to be very clear that there is not just one way. This is what has worked for me after years of firsthand experience.
As I thought about what this series will cover, I wanted to run through every core function a mortgage accounting team would face:
- Fair value accounting
- Derivatives and hedging
- Mortgage servicing rights
- Warehouse lending and repurchase agreements
- Management reporting
- Regulatory requirements
In each of these the general outline will be to cover the topic from a real-world, boots on the ground perspective. In simple terms, what it is and why it matters.
Then, after a proper foundation is built, we'll talk about the "why" from a US GAAP perspective. What does guidance say about the transaction, encompassing the entire scope from initial recognition all the way through disclosure requirements. I'm not writing to impress you with my ability to cite the ASC— I'm writing this to do my best to simplify and ensure everyone can understand this industry.
And finally, we will get hands-on and discuss how a team would implement the actual recording of journal entries, performing the proper reconciliations, identifying what systems are used, what controls are relevant, etc.
TL;DR - what is the topic, why do we care, and how to implement.
Now, let's get into it and start with the most important concept a strong mortgage accounting team needs to have: Culture.
-Bennett