NORWALK, Conn. — The Financial Accounting Standards Board is seeking public comment on a proposal that would require companies to account for the value of retaining servicing rights when a borrower refinances a mortgage.
A residential mortgage servicing right is the contractual right to service a home loan. The proposed Accounting Standards Update addresses “recapture,” which occurs when a servicer solicits an existing borrower to refinance and retains the servicing rights on the new loan. Under the proposal, companies measuring a residential mortgage servicing right would include the effects of recapture and value all rights and obligations under the servicing contract in accordance with the board’s fair value guidance, according to FASB.
FASB said stakeholders have questioned whether current guidance requires the value associated with recapture to be included. That uncertainty has led to differing accounting practices and made companies’ reported figures less comparable, according to FASB. The proposal follows a recommendation from its Emerging Issues Task Force. Comments are due Nov. 9.
Separate Proposal
The mortgage servicing proposal is separate from an accounting update FASB proposed in August concerning cash equivalents. That draft would clarify how the existing definition of cash equivalents applies to certain digital assets, including stablecoins, and require more detailed disclosures about the components of cash equivalents from reporting entities, whether or not they hold digital assets. Comments on that proposal are due Nov. 19.
