FASB Changes Course on MBS

The mortgage industry dodged a bullet when the Financial Accounting Standards Board decided Nov. 12 to change course in finalizing its special-purpose entity rule and essentially excluded investors and guarantors of mortgage-backed securitizations from its test for consolidation.FASB decided that no party to a securitization that qualifies under FAS 140 as a qualified special-purpose entity has to consolidate if the transferor of the assets does not have to consolidate. "This a 180-degree reversal of FASB's decision at its Oct. 30 meeting which would have resulted in non-transferor B-piece investors holding first-loss positions in a qualifying SPE being required to consolidate the QSPE," according to the Commercial Mortgage Securities Association. One B-piece investor said the Oct. 30 decision would have increased his firm's reportable assets from $3 billion to $60 billion. "We helped clarify the issues, and FASB gave us helpful guidance," said Robyn Stern, who chairs the CMSA's regulatory committee. Ms. Stern is with Ernst & Young in New York.