MBA applauds SEC and FASB for FAS 157 clarification MortgagePress.comMBA, SEC, Securities and Exchange Commission, Financial Accounting Standards Board, FAS 157
The Mortgage Bankers Association has hailed the announcement by
the Securities and Exchange Commission (SEC) and the Financial
Accounting Standards Board (FASB) permitting the use of discounted
cash flow fair value measurements under FAS 157 when no active
market for a security exists.
"We want to thank the SEC and FASB for this clarification," said
John A. Courson, Chief Operating Officer of MBA. "FAS 157 was never
test driven in a market where the only transactions occurring are
distressed sales. In such an environment, FAS 157 was only
exacerbating the market illiquidity. This announcement should have
an immediate impact allowing companies to reflect the true value of
their mortgage assets and increasing capital and liquidity in
today's stalled credit markets."
According to MBA, many financial institutions have been marking
down their holdings of various credit instruments to values derived
from sales by distressed institutions who are selling to meet
collateral calls or risk-based capital requirements. In such a
market, intrinsic value and observable market prices have
diverged.
The clarification announced by the SEC and FASB will enable
financial institutions to value their assets based on a realistic
calculated present value of future cash flows. As a consequence,
the clarification should allow firms to write affected assets back
up to their intrinsic values."
The SEC's release can be found here.
For more information, visit www.mortgagebankers.org.
