RAP Accounting Making a Comeback?

Even though there are signs of life in the auction market for nonperforming residential loans, we continue to hear reports that several banks and investment bankers won't sell their dirty linen in the public market for fear of taking a big hit. There are exceptions, of course, and we're working on a story about that. But we're also told that one idea being presented in Washington has to do with 'RAP' or 'regulatory accounting principles,' which would allow firms stuck with NPLs to sell their bad assets and instead of taking the loss right away, they could take it over several years, thus softening the financial blow. Such a move, I'm told, could happen if regulators okayed RAP accounting for certain transactions. "It would give them an incentive to sell this stuff," said one NPL investor who's familiar with the idea. It also might help Fannie Mae and Freddie Mac enter the NPL market as sellers. As we reported earlier in the week, both GSEs are on the verge of large layoffs. We're told the two are being urged to reduce their G&A. As for who's doing the urging, we're not sure. Stefanie Johnson, a spokeswoman for the Federal Housing Finance Agency would not comment…