In a move to simplify accounting for servicing assets and liabilities, the Financial Accounting Standards Board has issued a standard that makes it easier for mortgage bankers and other servicers of financial assets to report on the value of derivatives to offset risks associated with securitizations and other types of servicing.The new standard, SFAS 156, "Accounting for Servicing Financial Assets," amends SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" - itself a replacement of FASB Statement No. 125. It allows servicers to choose between fair value and amortization measurements to report the value of derivatives, as well as the assets or liabilities related to them.
The Mortgage Bankers Association is especially jubilant over the change, because its members requested two years ago that FASB consider an elective fair value measurement for these kinds of assets and liabilities. Alison Utermohlen, the association's senior director of government affairs, said that the country's large mortgage bankers were "clamoring" for the statement to be released.
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