Academic journal article Journal of Accountancy

Changes for FASB No. 65

Academic journal article Journal of Accountancy

Changes for FASB No. 65

Article excerpt

Although the FASB exposed its proposed mortgage amendment for only 45 days, it still received a number of helpful suggestions from the accounting community, some of which were incorporated in the recently released final document. FASB Statement no. 134, Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise, amends Statement no. 65, Accounting for Certain Mortgage Banking Activities, issued in 1982.

According to Kevin Stoklosa, an assistant project manager at the FASB, the board made three major changes to the ED. "The proposed statement broke out retained securities between those held for sale--which would be required to be put in trading--and those not held for sale--which would have the option of being classified as trading, available for sale or held to maturity in accordance with Statement no. 115, Accounting for Certain Investments in Debt and Equity Securities." The board believed any retained security that the company intended to sell should go into trading.

However, comment letters, including one from the Mortgage Bankers Association, criticized this division, pointing out it did not exist in other types of securitizations. The FASB dropped this provision after it was pointed out that Statement no. 115 can be interpreted to say an entity can't even classify something as available for sale if there is a specified period of time in which to sell it. But the main reason for the change, according to Stoklosa, was that the board agreed with respondents that the accounting for securities retained after the securitization of mortgage loans should be the same as the accounting for securities retained after the securitization of other types of assets. …

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