FASB proposes new accounting standards for mortgage servicing rights

The Financial Accounting Standards Board (FASB) has issued a proposal to standardize how residential mortgage servicing rights (MSRs) are valued. The proposed change would require companies to include the value of “recapture” in their fair-value measurements of MSRs.

Currently, accounting practices regarding recapture are inconsistent across the industry. Some major lenders and servicers, such as Rocket Companies and Rithm Capital, already include recapture in their valuation models, while others, including PennyMac Financial Services and UWM Holdings, do not. This lack of uniformity has made it difficult for investors to compare financial statements across different servicers.

Analysts from BTIG suggest the change would align accounting valuations more closely with market valuations. However, analysts from Keefe, Bruyette & Woods (KBW) noted that the proposal is primarily a transparency and consistency initiative, suggesting it may not significantly impact financial statements as the market often already incorporates recapture into MSR valuations.