WASHINGTON - Mortgage lenders have gotten what they wanted from the Financial Standards Accounting Board. Now they want to make sure banking regulators follow suit.
FASB changed its Rule 65 last Friday to allow lenders to count servicing rights on loans they originated as assets. Previously, only purchased servicing rights could be carried on the books - a practice lenders claimed understated their assets.
"We believe that these standards go a long way toward improving the measurability and understanding the marketability of servicing rights," said Marti Sworobuk, a lobbyist with America's Community Bankers, which along with the Mortgage Bankers Association of America, several money- center banks, and the Big Six accounting firms led the push for the accounting rule change.
But before banks and thrifts can reap the benefits of the accounting change, the federal agencies that regulate them must revamp the way they treat mortgage servicing rights.
"If regulators continue with their current treatment of servicing rights, it would be as if the standards hadn't changed," Ms. Sworobuk noted.
While banking regulations now treat originated mortgage servicing rights as nonentities, they classify purchased servicing rights as intangible assets and limit the amount that can be included in capital to 90% of fair market value. Only 50% of core capital can be composed of purchased mortgage servicing rights.
America's Community Bankers has sent letters to the agencies urging them to treat originated mortgage servicing rights as assets, but not to lump them with purchased rights as intangibles.
"The regulatory agencies should be careful not to similarly taint (originated servicing rights)," advises the letter signed by Randall H. McFarlane, the thrift group's director of governmental relations. "Clearly, mortgage servicing rights possess attributes of tangible assets; they are measurable and are actively traded in a secondary market."
The letter goes on to ask regulators to advise banks and thrifts to report both purchased and originated mortgage rights as tangible assets on the next quarterly call report or thrift financial report.
Said Ms. Sworobuk: "We hope the regulators don't put their heads in the sand."