02 May Accounting Differences in the Marketing/Branding Industry vs Mortgage Industry
I’m new to this blogging phenomenon and new to the marketing and branding agency world in general. What I do have, is many years of experience in accounting, including, most recently, in the mortgage accounting world.
Some of the differences I’ve experienced thus far between the agency and the mortgage worlds are described below.
In the agency industry, there are no government or regulatory entities overseeing how the marketing and branding business itself is conducted on a day-to-day basis. However, if the agency has clients that must adhere to regulations (e.g., healthcare), these regulations will have to be kept in mind during the creative process by the people of the agency. On the other hand, The Department of Financial Institutions, FHA, VA and USDA greatly impact how the mortgage companies conduct business. A rigid set of guidelines needs to be followed.
There are no compliance regulations directly affecting the agency world, so no personnel are required to oversee this aspect of the business. In the mortgage industry, a “compliance specialist” is on staff to oversee that the government regulations are being met as well as an outside auditing company is used on a monthly basis to verify that the regulations are being followed.
Mortgage loan processing is quite straightforward because of the required guidelines, with little variation permitted to accommodate the different needs of different borrowers. In a marketing/branding agency, there are options for how business can be conducted. For example, you can structure a contract on a fee basis or hourly basis that can include expense reimbursement with or without markup. This flexibility is not an option in the mortgage world.
In processing a loan, you will go through the same process for each loan, with subtle nuances taken into consideration for each loan. In marketing/branding, you can use a wide variety of resources (people/products, etc.) to pull together ideas, create strategies and implement ideas. The availability of these resources allows the creative process to unfold in many ways to affect the end product.
When a loan is funded, there is no ability for changes. If changes do occur, the cost is absorbed by the mortgage company. In the agency world, if changes occur, it is most likely at the client’s request—but certainly with their approval. Typically, the client pays for the changes.
Because of the government regulations, the fees a mortgage company charge are limited and stated upfront to the prospective borrowers prior to the loan closing. In marketing/branding, fees and/or hourly rates are stated in the agreement but can be changed with amendments or purchase orders during the course of the project(s).
In the mortgage business, every time a loan closes you are “creating an invoice”. The length of time to close a loan can take from ten days up to 30 days. Any longer than 30 days, and the loan is usually cancelled, or a new loan is started under a different loan program. The loan closing process is a standardized procedure with little variation allowed. In agencies, invoicing occurs on a monthly basis or upon request of the client. Projects can last from a few days to years depending on how the project is structured. Each clients’ requirements for invoice submittal are as unique as the business they are in.
The smaller mortgage companies usually sell the closed loans to a larger bank/investor for servicing. The investor agrees to purchase the loan prior to the loan closing, so the mortgage company is assured of being paid for the loan. In agencies, you are responsible for collecting monies due for services rendered.
At the end of the day, the debits and credits both must balance whether it is the mortgage industry or the marketing/branding industry. Getting to the final result in the mortgage business is more of a straight line and flexibility is the exception, not the rule. In agency world, meanwhile, the business itself is characterized by a start/stop, circular, zig zag, changing pattern and flexibility is the required norm
The differences I’ve noted above are in no way inclusive of all the differences, but are just a few I’ve observed.