Have You Really Done All You Can to “Fixed” Costs?

April 18, 2023

With rising rates, lower volumes and lower margins converging on the mortgage industry over the past 18 months, the constant response has been a combination of consolidation/aggregation, reductions in force, or outright surrender.  To those of you reading this and still in the battle, have you taken a second (or even third) look at certain “fixed” costs?  Perhaps the answer is “no” because you assumed they can’t be lowered quickly enough to have an impact on current financial performance. Often, it takes two or three looks to uncover costs savings that might help your company navigate to the other side of the downturn – and potentially enhance economic performance in the long run. Here are four areas to consider when reviewing expenses in the current environment.

Employee Benefits

Employers can look at converting traditional vacation/PTO policies to non-vesting flexible time off (FTO) policies that allow employees to take whatever leave they need without accruing specific limited amounts as they work. These policies have to be monitored more closely for potential abuse, but may relieve employers, if structured properly, of the requirement to carry a liability for future time off under current generally accepted accounting principles. It also provides the advantage of not having to cash out unused accrued leave of employees upon voluntary or involuntary termination.


Many functions of the mortgage banking process can be performed on a contract basis by outside third parties. Whole departments previously viewed as “sunk costs” can be evaluated against the cost of a third party that provides a just-in-time version of the service. This is true for everything from client-facing loan-servicing functions to staff augmentation options in accounting and other support functions. Any evaluation of this type of outsourcing needs to consider not only the potential dollar savings, but also the potential loss of control and ready access to key functions in the business.

Healthcare Costs

Many smaller and medium-sized organizations have been exploring self-insuring its healthcare benefits using a group captive insurance plan that gives them the option to pool their insurance risks with similarly situated employers in order to share risk and increase collective purchasing power – both in stop-loss protection and potential enterprise-level solutions while, in turn, lowering costs. In addition to their cost effectiveness, these plans also offer greater flexibility to the employers that choose them. For example, some offer patient advocacy resources that can take a load off of an organization’s internal HR staff as well, as the insurer is usually well positioned to handle questions from employees about benefits that would otherwise be handled by internal human resources personnel.

Occupancy Costs

Mortgage lenders have been reviewing their space needs after being introduced to the virtual work environment during the pandemic. Much of the mortgage process has been automated to the point that lenders can significantly reduce their commercial real estate footprint. Some jobs, like call center support, may never need to come back to the office. Key considerations include:

  • With the implementation of ASC 842 for lease accounting, is the company abandoning any leases which could prompt asset impairment? Consider discussing with your auditors.
  • With the current conditions in the marketplace, does it make sense to buy commercial real estate where the business can consolidate those functions that require office space?
  • Understand that any lease can be broken or renegotiated, it’s just a matter of calculating the cost associated with that action to make sure that’s considered in the analysis of whether a different solution would be more cost-effective.
  • What functions are currently operating successfully from a remote location, and are there others that could be handled similarly?

In Summary

Executives should continue to challenge whether costs typically considered “fixed” can actually be variable, which will help to push through the slowdown and position companies to thrive when the market turns back around.

Kristin Golab

Senior Manager
About the Author

Kristin Golab started her career at Plante Moran in 2008, and she has focused 90% of her time within the financial services industry ever since. Kristin performs and supervises accounting, financial statement audit, and consulting engagements for financial institutions and mortgage companies. She is considered a technical expert in the firm’s Professional Standards Group as it pertains to the mortgage industry, including HUD, GNMA, Reg AB, and USAP compliance requirements. Kristin is a member of the AICPA, the Michigan Association of CPAs, the Mortgage Bankers Association (MBA), and the Michigan Mortgage Lenders Association. In recent years, Kristin has also been a speaker at several MBA conferences. She holds a B.A. and an M.S. in Accounting from Michigan State University. Go Green!

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