...Short Summary Atlanta Home Loan April 2002 - Al formed Atlanta Home Loan (AHL), a mortgage lending and financing company, in Atlanta, Georgia - Initial investment of $40,000 - Operated the company from his home Summer 2002 - Company grew rapidly - 4 telemarketers and 8 loan officers who all worked from their homes - Established banking relationships which allowed clients to borrow at wholesale rates - Rates varied according to client FICO scores The Company - Leads were bought from list brokers - Telemarketers called people on the lead lists to assess their interest in refinancing - The lists were then passed on Al who distributed them to the loan officers - Loan officers helped with the applications and ordered an appraisal and credit report - Admitted for EMBA in California, Al had several options for AHL - As the company was appraised for $600,000 and was continuing to grow, he decided to find someone to operate the business in his absence Back to School - June 2002 A Partner- July 2002 - Impressed by Joe's sales ability and being people oriented, the two reached a verbal partnership agreement - Joe would invest $8,400 and be entitled to half of the profits - Al soon found out Joe was irresponsible and terminated the agreement while appointing a new manager that lasted 3 days prior to rehiring Joe A New Partner and licensing agreement - Sept 2002 - As Joe neglected his responsibilities once again, Wilbur, an acquaintance of Joe, was then hired and given the use...
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...tlanta Home Loan Case Introduction: Atlanta Home Loan was a mortgage lending and financing company based in Atlanta with initial investment of $40,000. It was founded by Albert Fiorini in April 2002 and was operated from his home. He decided to earn an MBA degree from California and left the controls of the company in the hands of his employees. The control systems he used, what went wrong in implementing them and what should Al do now is discussed hereafter. 1)Control systems: a)At the time Al Fiorini was running the company: The company showed rapid growth potential. He performed background checks of employees. Al monitored activities of loan officers by their tracking number. Great goodwill that the company got loans on wholesale rates. b)At the time Al left to earn his MBA: Al used several types of control systems while he was away in California. He used a combination of controls which consisted of action, result and performance controls. Examples of action controls are as follows: Authority to write checks was withheld by Al. Keeping a check on Joe’s attendance and terminating the agreement when he failed to show up. Spent four hours a day talking on the phone to his employees to observe their behavioral patterns. Centralized decision making (where Al was the central body). All business mails received at his California address. Supervised the loan applications electronically. Observed the progress of every...
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...MANC_C03.qxd 08/01/2007 10:42 AM Page 95 Atlanta Home Loan Case Study Atlanta Home Loan THE COMPANY Atlanta Home Loan (hereafter AHL) was a mortgage lending and financing company based in Atlanta, Georgia. Al Fiorini founded the company in April 2002 with an initial investment of about $40,000. He started operating the company from his home. Al had many years of experience in the mortgage lending industry. He had worked for several different companies and had also served a year as president of the Orange County Chapter of the California Association of Mortgage Brokers. Under his direction, AHL’s business grew rapidly in its first quarter of operation. By the summer of 2002, the company consisted of four telemarketers and eight loan officers, all of whom worked from their homes. “Telecommuting” was convenient for the employees because Atlanta was a large city with heavy traffic. Al established banking relationships that allowed AHL clients to borrow money at wholesale rates. The actual loan terms varied depending on the clients’ FICO scores.1 In summer 2003, banks might offer an AHL client with a very high FICO score (over 620) a rate of 6.25–6.75% on a fixed 30-year mortgage. This rate provided the bank with an operating margin of 1.5–2.0%. AHL earned a fee of 1.50% of the loan amount for every loan funded. This provided AHL with an average revenue per loan of $3,200. AHL bought leads from list brokers for $0.20 per name. These lists provided...
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...Case --- Atlanta Home Loan 1. Identify the controls that Al Fiorini implemented to manage his business (both before and after he went back to school). Classify each control as a results, action, or personnel/cultural type control. a. Before Al went back to school •Result Controls: ① Telemarketers were paid a combination of an hourly wage plus a performance bonus ($10.00) for each lead produced. ② AHL paid the loan officers 40% of total loan revenue on loans that AHL originated, and 60% on loans they originated. •Action Controls: ① Telemarketers called and gave the potential clients’ names to Al and Al distributed the names to AHL’s loan officers. ② Al monitored the activities of loan offers, track the number of credit inquiries each requested. ③ Al monitored the loan application per lead ratios and their trends. ④ Under Al’s direction, AHL’s business grew rapidly. Telemarketers, loan officers and loan processors all took their responsibility. •Personnel Controls: ① Select the employees who work as telemarketers, loan officers, loan processors… to see if they were satisfied with these position or not. b. After Al went back to school •Result Controls: ① Al monitored AHL operations from afar. ② Al tracked the employee head count, the number of leads produced, credit inquiries requested, loan applications funded, office expenses and bank activity. ③ Al had the authority to sign checks written against AHL’s main bank account. ④ Al had all of...
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...the controls that Al Fiorini used to control his business both before and after he went back to school. Classify each control as a results, control, or personnel/cultural type of control. Action control Before he went back to school i. Al monitored the activities of his loan officers by tracking the number of credit inquiries each requested. (Merchant, pg.23) ii. Al closely monitored the loan application/lead ratio depending on the skill of the loan officer. (Merchant, pg.23) iii. Al refused Wilbur’s request to have signing authority on company checks written against AHL’s main bank account. However, as a sign of good faith, he left 4 blank checks (only to be cashed with his permission) with Letitia, the office manager, whom Al trusted. (Merchant, pg. 24) After he went back to school i. Al was no longer managing the day to day operations of the company but continued to monitor AHL’s operations closely. Daily, or as soon as the information was available, Al tracked the employee head count, number of leads, credit inquiries, loan applications, funded expenses and bank activity. (Merchant, pg.25) ii. Al was also on the phone 3-4 hours per day talking with employees, and, particularly, loan officers. He thought that this would allow him to monitor the employees’ emotional states, one that Al thought would be an important leading indicator of forthcoming company performance. (Merchant, pg.25) iii. Al also had the company mail forwarded to his California address...
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...Group Case # 2 Student Name: Pardeep Kaur Student ID: 300586082 Student Name: Course: Advanced Auditing, ACCT 742 Bud's Big Blue Manufacturing Accounts Receivable Confirmations List the four factors auditors should consider when evaluating the results of confirmation procedures: External confirmations are direct written response from third parties, addressed directly to auditors. External confirmations are obtained to satisify the existenance, accuracy, allocation, and cutoff objectives. It is important that the auditor keeps control on the procedures to get unbiased results. Confirmations should be tailored designed to meet the specific objects of a particular audit engagement and auditor should consider all the factors which can affect the responses. Followings are the four factors auditor should keep in mind while evaluating the external confirmations to arrive at the conclusion that responses received provide sufficent appropriate audit evidence regarding the assertion being audited: The reliability of confirmations: The auditor has to understand the reliability of the responses because even though the responses are obtained from the external sources, circumstances may affect the reliability. Responses may carry some risks of interception, frauds, and modifications. Information obtained may be not from authentic sources. The nature of any exceptions, including any implications and if any restrictions are imposed by the client over or included...
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...Case Atlanta Home loan A. Control and Effects Controls implemented by AI before he went back to school Result controls: * Telemarketers – their salaries consist of hourly wage and performance bonus based on leads produced. The performance salary has a motivational effect on amount of leads. * Loan officer – Company paid the loan officers 40% of total loan revenue on they originated and 60% on loans Loan officer originated. The explicit allocation encourages loan officer to increase their revenue. * Processors – AI have not electronic links to monitor the process of applications, but only track the number of credit inquires. The control may be ineffective because the number of credit inquires is not a good indicator of processors’ work. Action controls: * AI granted Wilbur to manage company according to the licensing agreement and enabled Wilbur fail to sign check against company main bank account without permission of AI. The control is right, but fail to implement properly. Since AI left the blanket checks to an office manager and just required verbally the manager not to use checks without AI’s agreement, which fail to restrict the administrative authority of Wilbur. On the other hands, the restriction doesn’t give Wilbur enough autonomy as a partner to manage company. * Telemarketer developed leads and gave the list of leads’ name to AI, AI distribute to names to loan officers. People controls: AI selected Joe and Wilbur as new partner to operate...
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...Atlanta Home Loan Eind 2002 raakte Albert (Al) Fiorini steeds meer gefrustreerd en gedeprimeerd. In september 2002 had hij vrij genomen om weer naar school te gaan om zijn MBA te halen. Hij ging ervan uit dat het door hem opgerichte hypotheek verstrekking bedrijf door zijn medewerkers zou worden gerund. Het was nu duidelijk voor Al, dat de medewerkers zijn bedrijf probeerden af te schermen voor Al. En verbazingwekkend genoeg het was ze ook nog gelukt. Al betreurde het, ze hadden niet alleen zijn bezit afgepakt maar ze hebben mijn hele bedrijf gestolen. Terwijl ik 2500 kilometer weg was en bezig was met mijn studie voelde Al zich bijna machteloos om ze te stoppen. Hij heeft veel slapeloze nachten gehad terwijl hij zich af vroeg wat hij kon en moest doen om zijn bedrijf terug te krijgen. Hij vroeg zich ook af waar het mis was gegaan, wat hij gedaan moest hebben om dit te voorkomen. AHL is een hypotheekverstrekker en financieringsbedrijf gevestigd in Atlanta, Goergia. Al Fiorini had het bedrijf opgericht in april 2002, met een eerste investering van ongeveer 40K. Hij begon vanuit huis te werken. Al had vele jaren ervaring opgedaan in de hypotheek en banken industrie. Hij heeft bij verschillende bedrijven gewerkt en hij is een jaar de directeur van de Orange County Chapter of the California Association of Mortage Brokers geweest. Onder zijn leiding groeide AHL in het eerste kwartaal snel. In de zomer van 2002 had het bedrijf 4 telemarketeers en 8 lening specialisten. Alle werkten...
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...Case Study: Atlanta Home Loan Synopsis of the Situation: Atlanta Home Loan was a mortgage lending and financing company based in Atlanta, Georgia. The company’s founder, Al Fiorini, had many years experience in the mortgage market, and he oversaw eight loan officers and four telemarketers. It was a profitable business with growth potential, so Al decided to find someone to run the business while he went to school to earn his MBA. His first attempts at partnership were unsuccessful, but he eventually found his new partner Wilbur Washington, who had a successful background in the mortgage business. Al began monitoring the company remotely and everyday keeping in touch Wilbur and the other employees. Al and Wilbur first quarreled over the hiring of a new office processor before a much bigger problem came up. Wilbur wrote pre-signed company checks without Al’s permission and they bounced. Even though Al spoke with a bank to transfer funds into a payroll account, to which Wilbur didn’t have access, Wilbur still managed to transfer money back to a general account. Al was frustrated and attempted to limit Wilbur’s power, but he was still able to open an account at another bank. Al called bank to freeze the account but the bank refused. Wilbur gained a signing authority with this second account. Al contacted the police and FBI with little success. Finally, Al asked the Georgia Department of Banking and Finance to withdraw AHL’s mortgage financing license. In the end, Al lost his business...
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...Countrywide / Bank of America Countrywide used to be one of the major mortgage companies in the United States until the housing market started to fall. They had so much bad loans that executives were about to closed the doors, until Bank of America came to the rescues and purchase the company. This was the beginning of the nightmare that was soon to make the evening news. The American people were soon to find out about all the creative loans that were approved to unsuspecting customers who were soon to lose their homes. This was the beginning of the end for Countrywide and a turbulent time for Bank of America which is still going on today. Defining and Analyze To define all the issues that created the downfall of Countrywide, we first need to look at the history of the company. The company was created by Angelo R. Mozilo and David Loeb about forty years ago. The partners were able to grow the company into a $500 billion home loan company and assets of $200 billion (The New York Times 2011). To be one of the major mortgage companies, they took many risks to ensure that their customers could live the America dream of owning a house. There have been many issues that led to the downfall of Countrywide. Greed would have to be high on the list. They approved loans that many other companies would not. Part of the problem happened during the crazy housing bubble that enables almost anyone to be approved for a mortgage. Gone were the days of qualifying for a mortgage by providing...
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...confidence again in the business world. Confidence in the character of the business world will enhance predictability, reliability, dependability, integrity, and regularity. Trust will give the business world a form of freedom. It will allow the business world to explore new directions, possibilities, and alternatives. Although trust always has its limits and always involves risk, trust frees the business institution from the need to continuously recheck, rethink, and reanalyze every decision and action they make. But we still need to have “gatekeepers” to keep executives from committing fraud again. Savings & Loan Scandal There have been many disappointments in my lifetime and that’s just in the past 30 years where the government has had to step in and provided some assistance at the expense of the American people. We can go back to the early 80’s when all the Savings & Loans went belly up and the government had to interfere and bail out all of them. The government spent billions of dollars to clean this mess. It was called the worse disaster since the Great Depression. Congress passed the Financial Institutions Reform, Recovery and Enforcement Act of 1989 because of...
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...definition: Ms. Salinas Savings & Loan has bucked the trend of financial and liquidity problems that has plagued the industry since 1985. Ms. Salinas believes it is necessary to have a long range strategic plan for her firm including a 1 year forecast and preferably even a 5 year forecast of deposits. Objective:1.To determine what would be a successful forecasting tool for the strategic plan of Ms. Salinas.2. To compare different forecasting tool with its Pros and Cons. | II. Review of Background Information: | In this case study, we should also focus the discussion on the 1980s concurrent crisis in the savings and loan (S&L) industry even though it was stated that Salinas has bucked the trend of financial problems during this period. A review of the S&L debacle (as it is commonly known today) provides several important lessons for financial-institution regulators. Moreover, legislation enacted in response to the crisis substantially reformed both bank and thrift regulation and dramatically altered the FDIC’s operations. The causes of this debacle and the events surrounding its resolution have been documented and analysed in great detail by academics, governmental bodies, former bank and thrift regulators, and journalists. Although the FDIC had a role in monitoring events as they unfolded and, indeed, played an important part in the eventual cleanup, until 1989 S&Ls were regulated by the Federal Home Loan Bank Board (FHLBB, or Bank Board) and insured...
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...Dear hiring agent: I want to express my interest into the Market Development Manager Position. I have a background in successful sales and marketing programs. I am familiar with the retail industry where I was brought into leadership roles. I am seeking to align myself with a progressive company poised for strong growth and market expansion. With extensive experience working with talented sales teams, meeting aggressive revenue targets, and delivering first-class sales solutions, I am confident that I can help your company meet aggressive goals as well. Capitalizing on my success at Federal Home Loan Bank, I am seeking a professional opportunity to leverage my exceptional sales record and proven account management skills to benefit your company as well as your clients. With the practical experience and demonstrated success, I have the drive and talent to quickly become a top performer within your organization. With this goal in mind, I have attached a resume outlining my qualifications. Some of my key strengths and accomplishments include: • A proven performer with a track record of outperforming sales goals, delivering high levels of customer service, and achieving successful sales results. • Ability to quickly cultivate relationships with very difficult to access, influential decision makers. • Proactively approach account and business challenges applying problem-solving skills, persistence, teamwork and resourcefulness to achieve positive results. Given my sales...
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...Case Study: Lincoln Savings and Loan Association In 1978, Charles Keating, Jr. began focusing his time and energy on his business endeavours when he founded the real estate firm, American Continental Corporation (ACC). Six years later, ACC acquired Lincoln Savings and Loan Association, which was headquartered in Phoenix, although its principal operations were in California. In his application to purchase Lincoln, Keating pledged to regulatory authorities that he would retain the Lincoln management team, that he would not use brokered deposits to expand the size of the savings and loan, and that residential home loans would remain Lincoln's principal line of business. After gaining control of Lincoln, Keating replaced the management team; began accepting large deposits from money brokers, which allowed him to nearly triple the size of the savings and loan in two years; and shifted the focus of Lincoln's lending activity from residential mortgage loans to land development projects. On 14 April 1989, the Federal Home Loan Bank Board (FFILBB) seized control of Lincoln Savings and Loan, alleging that Lincoln was dissipating its assets by operating in an unsafe and unsound manner. On that date, Lincoln's balance sheet reported total assets of $5.3 billion, only 2.3 percent of which were investments in residential mortgage loans. Nearly two-thirds of Lincoln's asset portfolio was invested directly or indirectly in high-risk land ventures and other commercial development projects. At...
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...Term Paper on: The Federal Home Loan Bank System Abstract The Federal Home Loan Bank (FHLB) System is a large, complex, and understudied government-sponsored liquidity facility that currently has more than $1 trillion in secured loans outstanding, mostly to commercial banks and thrifts. In this paper, we document the significant role played by the FHLB System at the onset of the ongoing financial crises and then provide evidence on the uses of these funds by the System’s bank and thrift members. Next, we identify the trade-offs faced by member-borrowers when choosing between accessing the FHLB System or the Federal Reserve’s Discount Window during the crisis period. We conclude by describing the fragmented U.S. lender-of-last-resort framework and finding that additional clarity about the respective roles of the various liquidity facilities would be helpful. Key words: Federal Home Loan Bank, government-sponsored enterprise, lender of last resort, liquidity Table of Contents Introduction The Federal Home Loan Bank System The Role of FHLB Advances during the 2007 Liquidity Crisis Aggregate Balance Sheets Regression Analysis Crisis-Related Lending by the Federal Reserve and the FHLB System Conclusion References Introduction In July 2007, the credit rating agencies (Standard & Poors, Moody’s, and Fitch) responded to the rapid deterioration in the performance of recently originated subprime mortgages by taking a ...
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