Washington (March 15, 2004) -- The Securities and Exchange Commission has issued a Staff Accounting Bulletin to provide guidance on banks' extending mortgage loans with an intention to sell the loan after it's funded.
SAB No. 105, "Loan Commitments Accounted for as Derivative Statements," poses a hypothetical situation in which a bank enters a loan commitment with a customer to extend a mortgage loan at a specified rate, intending to sell the mortgage after it's funded. According to the SEC, such a commitment should be accounted for as a derivative instrument, and measured at fair value.
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