Skip Header

Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank



Home > News & Events > Financial Institution Letters




Financial Institution Letters

Accounting and Reporting for Commitments to Originate and Sell Mortgage Loans
Interagency Advisory
FIL-39-2005
May 3, 2005


Summary: The federal financial institution regulatory agencies are providing the attached guidance to institutions on the application of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, to mortgage loan commitments. The guidance also addresses related regulatory reporting requirements and valuation considerations.

Highlights:
  • The interagency advisory provides guidance to institutions on the appropriate accounting and reporting for commitments to:
    • Originate mortgage loans that will be held for resale and
    • 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 account for and report derivative loan commitments and forward loan sales commitments as derivatives in accordance with GAAP, which includes the use of valuation techniques that are reasonable and supportable in the determination of fair value.
  • Institutions are expected to apply the guidance contained in this advisory when preparing their regulatory reports.
  • An institution’s failure to account for and report derivative loan commitments and forward loan sales commitments in accordance with GAAP may be an unsafe and unsound practice.

Distribution:
FDIC Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Financial Officer

Related Topics:
SFAS 133, Accounting for Derivative Instruments and Hedging Activities
SFAS 149, Amendment of Statement 133 on Derivative Instruments and Hedging ActivitiesSecurities and Exchange Commission Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments

Attachment:
Interagency Advisory on Accounting and Reporting for Commitments to Originate and Sell Mortgage Loans

Interagency Advisory on Accounting and Reporting for Commitments to Originate and Sell Mortgage Loans - PDF 175k (PDF Help)

Contact:
FDIC Regional Accountant or Christine M. Bouvier a cbouvier@fdic.gov or 202-898-7289.

Printable Format:
FIL-39-2005 - PDF 40k (PDF Help)

Note:
FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2005/index.html.

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.

Paper copies of FDIC FILs may be obtained through the FDIC's Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (1-877-275-3342 or (703) 562-2200).



Last Updated 05/03/2005 communications@fdic.gov

Skip Footer back to content