Accounting experts from the major banking associations will gather on Nov. 2 in an attempt to reach common positions that they hope will help keep FASBs mortgage servicing project from getting mired in debate. Officials from the Mortgage Bankers Association and the Savings and Community Bankers of America are stressing the unity theme in part because of FASBs surprise that more than 100 individuals and groups have chosen to comment on what FASB regarded as a rather limited issue. And some commenters are suggesting the board go into areas, such as credit-card securitization, that bank groups would rather avoid. As a result, the boards original plan to issue a final statement next spring has been substantially elongated, said Alison Utermohlen of the MBA. I think well be lucky to see something out by the end of the first quarter of 1995 and maybe by the second quarter At issue is FASBs exposure draft, Accounting for Mortgage Servicing Rights and Excess Servicing Receivables and for Securitization of Mortgage Loans. This amendment to the boards Statement 65 is designed largely to enable bankers who originate their mortgages to capitalize their investments in servicing, just as institutions that purchase servicing rights now get to do. The MBA, SCBA, American Bankers Association and Independent Bankers Association of America generally support the change. They told FASB and banking regulators that during a meeting in Washington on Oct. 20. Their Nov. 2 gathering is designed to expand that unity into specific concerns particularly regarding securitization, impairment and implementation. The securitization question deals with a line in FASBs Exposure Draft declaring that any securitization of mortgage loans must be accounted for in two parts: as a sale of the mortgage loan and as an acquisition of a mortgage-backed security. This horrifies SCBA, which argues that securitization aren't sales. Marti Sworobuk, an accounting specialist with the association, contends that FASB has another project in the works that deals with securitization, and the sale question is best left to that project. SCBA and MBA also object to a part of the Exposure Draft requiring entities to measure impairments of their mortgage servicing portfolios on a stratum-by-stratum basis, with impairments being booked to valuation allowance amounts for each stratum. Were thinking about how to modify the FASB approach in a way to make it acceptable, Sworobuk said. It could be [through] developing a construct that involves a different orchestration or arrangement of strata. Sworobuk said the implementation question basically boils down to two approaches: a prospective one, in which only mortgages after a certain date are affected, or fresh start, in which everything changes at once. She said the prospective approach has the advantage that if you only apply it prospectively, you wont have a major adjustment to your financing statement. The fresh start approach has the effect of depressing return on equity, and there is a concern about its ability as an accounting measure to depress stock price.
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