Accounting for Mortgage Bankers

Accounting procedures help mortgage bankers present accurate financial reports.

A bank providing mortgage loans must establish adequate and functional credit-risk management systems to prevent operating losses resulting from borrowers' defaults. Effective accounting procedures help mortgage bankers report accurate loan values at the end of each month or quarter.

Definition

A mortgage is a loan that a borrower uses to buy property, such as land, a house or an office building. A mortgage is a long-term loan because the borrower generally must repay funds after a year, and usually much longer.

Accounting

A mortgage accountant records property loans by debiting the mortgage receivables account and crediting the cash account. Crediting an asset account, such as cash, means reducing the account balance. This is different from the banking concept of credit. To record a mortgage default, the accountant debits the bad-debt expense account and credits the mortgage receivables account.

Financial Reporting

A mortgage accountant reports mortgage receivables as long-term assets in the balance sheet, otherwise known as a statement of financial condition. The accountant also reports bad-debt expense in the income statement, also referred to as a statement of profit and loss.

References

• The Office of the Comptroller of the Currency: Mortgage Banking