FASB Delays Implementation of Changes to FAS 140

MBA (7/31/2008 ) Sorohan, Mike
The Financial Accounting Standards Board announced that it would delay by one year implementation of proposal that would modify Financial Accounting Standards No. 140. The Mortgage Bankers Association issued a statement commending FASB on the delay but warned that the proposed changes would adversely affect the real estate finance market.
FASB’s proposed changes to FAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, would bring sweeping changes to securitization accounting. The amendments to FAS 140 call for banks and finance companies that currently do not consolidate the issuing entities used in securitizations, commonly referred to as qualified special purpose entities, or QSPEs, to consolidate some or all of those entities. The affected transactions may include mortgage, credit card, student and retail auto loans.

MBA Chairman Kieran Quinn, CMB, said while MBA continues to have “grave concerns” about the proposed changes to FAS 140, it appreciates the extended time from FASB to allow markets to adjust to and evaluate the implications of the proposed changes.

"Consolidation of securitization QSPE is likely to swell the balance sheets of the affected entities, adversely impact financial ratios, financial covenant performance and regulatory capital tests; and bring a new chill to credit markets at the exact time when all market participants are working to relieve the current credit crunch,” Quinn said. “We look forward to working with the FASB to implement the changes and make this transition as smooth as possible."