
Dr. Andy Schell, Ph.D. - The Profit DoctorTM

Mortgage
CFO

A significant risk point is measuring mortgage loan gain on sale using CORE GL for federal reporting.
Dr. Schell helps mortgage divisions achieve
optimized, compliant, and profitable results.
Here are a few facts and questions every CEO should know.
Results are NOT spread based
! A mortgage division is like a manufacturing company with direct and indirect costs. NIM is ignored. Gross margin is an important KPI.
​​​​
What is your mortgage division's gross margin percentage?
Interest Income Ignored (Mostly)
! Interest income is not a significant comparison metric. ​
​​
Did you know that when comparing your mortgage division to an IMB, net interest margin is usually excluded?
Philosophical Gap is HUGE
! IMBs are transaction-focused, while depositories are relationship-focused. Mortgage Loan Originators (MLOs) see themselves as independent contractors deserving of special consideration for the volume they generate.
​
Is your MLO compensation more or less than 1% of the loan amount?
What happens when your MLO gets a 7 figure W2?
Regulatory Risk
Did you know each ECOA error could be a $10,000 fine if customers are not called and documented each 30 days, even if the applicant has not locked?​
Gain on Sale is Largest Revenue
! Loan sale gain is the largest source of revenue for a mortgage division. ​​
​
Is your mortgage division's Gain on Sale KPI metric greater than 3%?
ROA & ROE
! We've seen the mortgage divisions increase a banks ROA by 1%
​
Are your Cost of Funds allocated to your mortgage division?
What is your division's forecasted ROA contribution from gain on sale activity?
Speak Mortgage to MLO
How does your head of mortgage attract a new MLO branch?​​
How is pricing exception authority delegated to the head of mortgage or the MLO?
FAS Capitalization distorts Gain
!Accounting for loans available for sale (AFS) is different from (AFI). AFS is MTM while AFI capitalizes cost. This difference can be very confusing.
Is AFS capitalization distorting your gain on sale calculation?
​
If we talk about it, we can fix it. Ask us how.
Dr. Schell, PhD, CPA, warns bank CEOs:
​
Unless your head of mortgage worked for a depository, they likely don't know what they don't know about FDIC/NCUA mortgage lending.
​
Most of the time, this leads to regulatory findings. We can help you avoid this risk.
​
Mortgage company origination executives are amazing salespeople who may know non-supervised lending well, but this differs significantly from the FDIC/NCUA requirements.
​
Dr. Schell started working in FDIC mortgage lending in the 1980s, then ran mortgage for Bank of America, and for the last 18 years, he's been helping bank CEO navigate the mortgage lending waters.
​
Mortgage is amazingly profitable, but comes with risks that must be quickly contained.
--War Stories over the past 18 years helping banks--​​​​
-
HMDA reporting & ECOA tracking are challenging. MBS recently helped a bank fix thousands of these errors just before the FDIC examination.
​
-
​Mortgage servicing transfers are highly complicated and create significant regulatory and reputation risks. MBS recently helped a Credit Union address this complexity.
​
-
Loan Origination System (LOS) conversions are difficult to implement. The MBS team has helped many FDIC and NCUA companies finish stalled conversions.
​
-
MBS is the Encompass Admin for many FDIC banks, where we've addressed the Encompass online conversion's challenges. ​
​​​​​Contact Dr. Schell & MBS to learn more.