FASB Gives Servicers Accounting Option

The Financial Accounting Standards Board has formally opened the door for mortgage companies to adopt "fair-value" accounting for mortgage servicing rights.Under the new guidance, Statement of Financial Accounting Standards No. 156, lenders will be required to initially account for the servicing asset on a fair-value basis when practical. Thereafter, they can either use the old "amortization method" or the fair-value method. FASB said the rule simplifies the accounting for servicing rights and makes it easier for servicers to offset changes in the value of MSRs with changes in the fair market value of instruments used to hedge those assets. "The Board specifically designed the statement to simplify and encourage more consistent accounting in this area," said FASB member Edward Trott. He said SFAS 156 is the latest in a series of projects aimed at reducing the complexity of using financial instruments to hedge servicing assets. The organization can be found online at http://www.fasb.org.