The Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and National Credit Union Administration have issued the attached Interagency Advisory on Accounting and Reporting for Commitments to Originate and Sell Mortgage Loans. The advisory provides guidance on the appropriate accounting and reporting for both derivative loan commitments (that is, commitments to originate mortgage loans that will be held for resale) and forward loan sales commitments (that is, commitments to sell mortgage loans). Many institutions have experienced difficulty in reporting derivative loan commitments and forward loan sales commitments, and the Federal Reserve reminds institutions that they are expected to apply Generally Accepted Accounting Principles when accounting for these transactions.
As specified in Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, institutions must account for both derivative loan commitments and forward loan sales commitments as derivatives. In addition, the Federal Reserve expects all supervised institutions to follow the related guidance in the SEC Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments.
Reserve Banks are asked to distribute this SR letter
and the attached interagency advisory to state member
banks, bank holding companies, and foreign banking
organizations supervised by the Federal Reserve as
well as to supervisory and examination staff. Questions
pertaining to this letter should be directed to Arthur Lindo,
Manager Accounting Policy & Disclosure Section,
(202) 452-2695 or Greg Sierra, Financial
Analyst, (202) 872-4972.