Regulators OK Servicing Rule

Federal banking and thrift regulators have finalized a rule that raises the Tier I capital limit on mortgage servicing rights from 50% to 100%.The effective date of the final rule is Oct. 1. However, banks can elect to use the higher capital limit once the rule is published in the Federal Register. A few institutions have bumped up against the 50% capital limit, and an early effective date will provide relief from having to deduct mortgage service assets from Tier I capital. The final rule maintains the current practice of requiring institutions to take a 10% haircut when valuing mortgage servicing assets for capital purposes. However, regulatory relief bills moving through Congress would repeal the 10% haircut requirement that was first enacted in 1988 as part of the savings and loan bailout legislation.