PURPOSE.
To distribute an interagency advisory (the Advisory) which provides guidance on the appropriate accounting and reporting for commitments to: (1) originate mortgage loans that will be held for resale, and (2) sell mortgage loans under mandatory delivery and best efforts contracts. The Agencies believe the accounting guidance in this advisory is consistent with generally accepted accounting principles (GAAP). Institutions are expected to apply the guidance in this advisory when preparing their regulatory reports.
APPLICABILITY.
The attached guidance does not apply to the majority of credit unions that simply originate loans to members to hold in portfolio. The guidance will be of interest to your credit union if the credit union:
- Originates mortgage loans to members that it intends to resell; and
- Enters into commitments to sell the originated loans.
POLICY.
Enclosed Joint Interagency Policy Statement.
The document reminds credit unions of requirements under generally accepted accounting principles to report interest rate lock commitments with members on loans originated for sale as derivatives. Derivatives must be carried at fair value in the financial statements. Likewise certain forward sales commitments may also be derivatives requiring fair value measurement.
BACKGROUND.
The National Credit Union Administration is joining the other four federal financial institution regulatory agencies in issuing guidance on the appropriate accounting and reporting for commitments to originate mortgage loans that will be held for resale and commitments to sell mortgage loans. Based on the Agencies’ review of regulatory reports, some financial institutions may not be following the appropriate accounting and reporting for commitments to originate mortgage loans that will be held for resale and commitments to sell mortgage loans Accordingly, this Advisory provides additional guidance on the application of GAAP.
EFFECTIVE DATE.
This Bulletin distributes the Advisory and is effective upon issuance.
EXPIRATION DATE.
This Bulletin will expire when superseded or when the Advisory is incorporated in agency Manuals.
/s/
Director David M. Marquis
Office of Examination and Insurance
Enclosure
Distribution: C
All FCUs
All FISCUs
All State Supervisory Authorities (2)
Leagues and Trades (2)