| Title: | MBA Applauds SEC and FASB for FAS 157 Clarification |
| Source: | MBA |
| Date: | 10/1/2008 |
WASHINGTON, D.C. (October 1, 2008) – The Mortgage Bankers Association (MBA) hailed yesterday’s 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 at http://www.sec.gov/news/press/2008/2008-234.htm.
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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry
that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the
association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand
homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and
fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety
of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies,
mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending
field. For additional information, visit MBA's Web site: www.mortgagebankers.org.