Mortgage Daily

Published On: February 28, 2003
Fed Cautions in Valuation of Servicing Assets

Government advisory letter issued

February 28, 2003

By MortgageDaily.com staff

Banks and thrifts involved in mortgage activities, especially those with exposure to mortgage-servicing assets (MSAs), should expect greater scrutiny of their activities during examinations, according to an advisory letter jointly issued by federal regulatory agencies this week.

The Federal Financial Institutions Examination Council, which includes agencies such as the Federal Reserve and the Office of Thrift Supervision (OTS), issued the letter to warn of mortgage banking risks, mostly in the valuation, accounting, and hedging of MSAs. It also suggests ways to deal with those risks.

“These aren’t new rules,” a Federal Reserve spokesman said. “We’re just re-emphasizing current rules and sound practices,” because refinancing has grown to such a level that some institutions have found themselves in an unexpected position.

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