A California broker crossing a §10232.4 trigger in the measurement year runs the threshold-broker classification and the first annual financial report with CPA engagement at the year-end filing deadline. The steps below walk the preparation from the trigger identification through the CPA engagement and the Department of Real Estate filing.

Step 1 — Confirm the threshold-broker trigger

The broker runs the §10232.4 trigger analysis against the broker’s arranged-loan portfolio and the broker’s servicing portfolio at the year-end measurement step. The analysis runs trigger one on the §10238 multi-lender loan count, trigger two on the aggregate principal across the arranged loans, and trigger three on the rolling three-month servicing aggregate. The broker confirms the classification on at least one trigger and runs the classification documentation against the broker’s system of record.

Step 2 — Engage a CPA with threshold-broker experience

The broker engages a CPA with experience on California §10232.4 threshold-broker filings. The engagement letter runs the scope on the broker’s portfolio — the §10238 multi-lender arrangement portfolio, the broker’s servicing portfolio, the broker’s trust-account framework, the broker’s §10232.5 lender disclosure framework, and the broker’s §10240 borrower disclosure framework. The engagement runs the CPA fee against the broker’s portfolio scale and runs the engagement timeline against the annual filing deadline.

Step 3 — Run the trust-account reconciliation across the year

The broker runs the trust-account reconciliation across the measurement year against the broker’s system of record on the borrower-level and lender-investor-level ledgers. The reconciliation runs each month’s financial-institution statement against the system of record on the same period. The broker corrects any unreconciled variances against the financial-institution statement before the CPA engagement runs the trust-account scope.

Step 4 — Inventory the arranged-loan portfolio

The broker inventories the arranged-loan portfolio across the measurement year — each loan with the borrower identification, the property identification, the loan principal, the loan term, the interest rate, the lender-investor pool (on a §10238 multi-lender loan), the §10232.5 lender disclosure file, the §10240 borrower disclosure file, and the broker compensation. The inventory runs the loan-level documentation against the CPA workflow and against the Department of Real Estate’s audit framework.

Step 5 — Inventory the servicing portfolio

The broker inventories the servicing portfolio across the measurement year — each note with the borrower identification, the property identification, the servicing principal balance, the lender-investor pool (on a fractional note), the year’s borrower payments, the year’s lender-investor distributions, the year’s impound disbursements (where applicable), and the broker’s servicing compensation. The inventory runs the note-level documentation against the CPA workflow and the trust-account reconciliation framework.

Step 6 — Document the broker’s internal controls

The broker documents the internal-control framework on the arrangement and servicing operations — the loan-arrangement workflow, the lender-investor disclosure workflow, the borrower disclosure workflow, the trust-account handling, the lender-investor distribution framework, the borrower-payment processing, the impound disbursement framework, the §6050H Form 1098 reporting workflow, and the §1024.35 error-resolution workflow. The documentation runs against the CPA’s internal-control scope on the annual financial report.

Step 7 — Run the CPA fieldwork against the documentation

The CPA runs the fieldwork against the broker’s documentation — the trust-account reconciliation across the year, the arranged-loan portfolio inventory, the servicing portfolio inventory, and the internal-control framework. The CPA runs sampling against the arranged-loan portfolio and the servicing portfolio against the CPA’s standard procedures on a §10232.4 engagement. The broker responds to the CPA’s open items against the documentation.

Step 8 — Compile or review the annual financial report

The CPA compiles, reviews, or audits the broker’s annual financial report against the engagement scope. The report runs the broker’s arranged-loan portfolio, the broker’s servicing portfolio, the broker’s trust-account framework, the broker’s compliance position on the §10232.5 and §10240 frameworks, and the broker’s internal-control framework. The CPA issues the engagement report against the broker’s annual financial report.

Step 9 — File the annual financial report with the Department of Real Estate

The broker files the annual financial report with the Department of Real Estate within the statutory annual filing window. The filing runs the broker’s annual financial report, the CPA’s engagement report, the broker’s portfolio documentation, and the broker’s compliance attestation. The filing runs against the Department’s electronic filing framework or paper-filing framework against the broker’s license designation.

Step 10 — Maintain QTAR cycle on the rolling quarterly framework

The broker maintains the Quarterly Trust Account Report cycle on each calendar quarter after the classification step. The QTAR runs within the statutory filing window after each quarter’s close. The broker runs the trust-account reconciliation against the system of record on each quarter and runs the QTAR filing on the quarterly cycle against the Department of Real Estate’s filing framework.

Related Topics

This article is educational and does not constitute legal advice. The §10232.4 threshold-broker framework runs against the California Department of Real Estate licensing and reporting framework, the §2846 California Code of Regulations Title 10 framework on Quarterly Trust Account Reports, the §10145 California Real Estate Law trust-fund framework, and federal servicing rules under Regulation X and Regulation Z on residential consumer-purpose loans. Consult qualified legal counsel and a qualified CPA on the specific filing and audit requirements that apply to any California broker portfolio.

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