Lenders have been having a long tug o' war with the Financial Accounting Standards Board and appear on the verge of total victory.
The industry had been trying for years to get the board to change its Rule 65, which deals with the valuation of mortgage servicing rights. Under that rule, servicing rights that were purchased are carried on the books as an asset, while the value of servicing rights on originated loans did not appear on the books.
As a result, companies that bought servicing and also originated loans had some on the books and some off, though the assets were otherwise identical.
The change seemed a shoo-in, but the board decided to consider some other servicing issues as well. It first proposed that declines in the value of a portfolio be measured separately by each category of loan. Declines would be deducted from earnings, but gains would not be added back.
Lenders argued that this was harsh and would exaggerate portfolio impairment.
At a Feb. 1 meeting, the board agreed to whole-portfolio valuation and sent the proposal back to its staff for redrafting.
"The staff is reexamining some of the valuation issue," said Alison Utermohlen, senior director, financial management, at the Mortgage Bankers Association of America.
"The issue is open to the extent the staff feels that perhaps some level of disaggregation is still appropriate," she said.
Separately, the board has decided to rescind a requirement that would have prevented lenders from recording sales of servicing rights on their books until all contingencies in the sales agreement had expired.
Because such sales contracts often protect the buyer against excessive defaults and other contingencies, the treatment would have been a major impediment to servicing sales - and at a time when many lenders are eager to sell their servicing portfolios.
The issue, though, isn't dead, only deferred, and will be back on the FASB agenda this year.