Before Financial Accounting Standard 122 was adopted, the principal reason given in its support was that it would make the accounting treatment for originated mortgage servicing the same as that for purchased servicing. The oft-heard refrain was, it will only change the accounting, not the economics.

Under this rule, we are required to capitalize servicing rights for originated loans and recognize changes in their value caused by fluctuating interest rates. The "relative fair value" of the servicing must flow through the income statement onto the balance sheet and be amortized over the "expected life of the asset." Neither relative fair value nor expected life of the asset are defined numerically, allowing substantial latitude for application.

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