Proposal seeks to standardize MSR accounting for recapture values

A new proposal would require mortgage servicers to include recapture value when measuring residential mortgage servicing rights (MSRs), aiming to reduce diversity in practice. The Financial Accounting Standards Board (FASB) issued the proposal on Wednesday, which would amend General Accepted Accounting Principles (GAAP) to explicitly require entities to incorporate all rights and obligations associated with a residential mortgage servicing contract, including recapture, in the fair value of a residential MSR. Stakeholders have told FASB that current guidance does not clearly state whether the value attributable to recapture should be included in the MSR measurement, which has led to inconsistent practices and reduced comparability across servicers. BTIG analysts noted that accounting practice on recapture is currently split across its coverage universe. Lenders and servicers — including loanDepot, Rithm Capital and Rocket Companies — already include recapture in their MSR valuation models, according to the firm. Others, including Onity Mortgage, PennyMac Financial Services and UWM Holdings, do not. “We see this change aligning the accounting valuation of MSR more closely with marke...