Servicing Valuation Rule Under Fire

At the MBA's National Secondary Market Conference in Washington, D.C., the issue of fair valuation of mortgage servicing rights to create a more balanced financial picture of mortgage banking businesses was debated.FASB has proposed an amendment to accounting rules that would make it possible for mortgage servicing rights to be quantified at fair value so that these rights can be a part of a company's financial statement. Supporters said that under current rules the only way to value servicing rights is to sell the asset, which is counterproductive because it eliminates the possibility for retaining the customer for cross-selling purposes. Detractors believe the rule doesn't go far enough and will drive small servicers out of business because of ambiguities in the rule as it is stated. FASB is evaluating all viewpoints and has not initiated a formal amendment at this time.