In January, the Mortgage Bankers Association, supported by five of the nation's largest lending institutions, asked the Financial Accounting Standards Board to relax certain accounting rules concerning how restructured -- that is, failed -- loans are written down.
The purpose of the request, according to the MBA, was to relieve banks from the administrative burden of complying with the accounting rules, but the effect will be to materially limit the onerous loan losses that lenders will absorb as more residential loans default, and if home prices continue to decline.
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