{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/860/50/#40-derecognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"860","topic_title":"Transfers and Servicing","subtopic":"860-50","subtopic_title":"Servicing Assets and Liabilities","section":{"number":"40","label":"40 Derecognition","anchor":"40-derecognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"860-50-40-1","para":"40-1","html":"
This Section is organized as follows:
  1. a
    Overall
  2. b
    Transfers with a subservicing contract
  3. c
    Transfers involving participation in an income stream.
","snippet":"This Section is organized as follows:\n(a) Overall\n(b) Transfers with a subservicing contract\n(c) Transfers involving participation in an income stream.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9d84e8f3350b0ddf04f88f4843096cd394b9c7164a79f3c543fa05c6fa097917","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:637d508177ab3c1551efdeebacbb6031736f178591516a2eb1c2a220a4c2bccc","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"block":null,"heading":"Overall","paragraphs":[{"citation":"860-50-40-2","para":"40-2","html":"
The following criteria shall be considered when evaluating whether a transfer of servicing rights qualifies as a sale:
  1. a
    Whether the transferor has received written approval from the investor if required.
  2. b
    Whether the transferee is a currently approved transferor-servicer and is not at risk of losing approved status.
  3. c
    If the transferor finances a portion of the sales price, whether an adequate nonrefundable down payment has been received (necessary to demonstrate the transferee's commitment to pay the remaining sales price) and whether the note receivable from the transferee provides full recourse to the transferee. Nonrecourse notes or notes with limited recourse (such as to the servicing) do not satisfy this criterion.
  4. d
    Temporary servicing performed by the transferor for a short period of time shall be compensated in accordance with a subservicing contract that provides adequate compensation.
","snippet":"The following criteria shall be considered when evaluating whether a transfer of servicing rights qualifies as a sale:\n(a) Whether the transferor has received written approval from the investor if required.\n(b) Whether t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c606d5c3b82815f41462b90d13f99c6bbfa310c3e2b5aa903f68c42e91ff2dad","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"citation":"860-50-40-3","para":"40-3","html":"
Also, the following additional criteria shall be considered when evaluating whether a transfer of servicing rights qualifies as a sale:
  1. a
    Title has passed.
  2. b
    Substantially all risks and rewards of ownership have irrevocably passed to the buyer.
  3. c
    Any protection provisions retained by the seller are minor and can be reasonably estimated.
","snippet":"Also, the following additional criteria shall be considered when evaluating whether a transfer of servicing rights qualifies as a sale:\n(a) Title has passed.\n(b) Substantially all risks and rewards of ownership have irre…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:097b8438009077c2b91df9bdc4997b81a7667daa84dd2e83bae20f8cb4887874","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"citation":"860-50-40-4","para":"40-4","html":"
If a sale is recognized and minor protection provisions exist, a liability shall be accrued for the estimated obligation associated with those provisions. The seller retains only minor protection provisions if both of the following conditions are met:
  1. a
    The obligation associated with those provisions is estimated to be no more than 10 percent of the sales price.
  2. b
    Risk of prepayment is retained for no longer than 120 days.
","snippet":"If a sale is recognized and minor protection provisions exist, a liability shall be accrued for the estimated obligation associated with those provisions. The seller retains only minor protection provisions if both of th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6dbb9eaa68fe8988ce92953bbfabd42492170b0bcd1f15a1f6dd7bb4ad67600","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"citation":"860-50-40-5","para":"40-5","html":"
A temporary subservicing contract in which the subservicing will be performed by the transferor for a short period of time would not necessarily preclude recognizing a sale at the closing date.
","snippet":"A temporary subservicing contract in which the subservicing will be performed by the transferor for a short period of time would not necessarily preclude recognizing a sale at the closing date.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:012883fd5e08da4a7c37ce9537226fe5f413de700fa6c34ec20d60b00c1693ab","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"citation":"860-50-40-6","para":"40-6","html":"
The criteria in paragraphs
860-50-40-2 through 40-4
apply to transfers of servicing rights relating to loans previously sold and to transfers of servicing rights relating to loans that are retained by the transferor. The carrying amount of servicing rights sold relating to loans that have been retained shall be allocated at the date of sale between the servicing rights and the loans retained using relative fair values.
","snippet":"The criteria in paragraphs 860-50-40-2 through 40-4 apply to transfers of servicing rights relating to loans previously sold and to transfers of servicing rights relating to loans that are retained by the transferor. The…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70f164e98f6fbafbea74ac95c293442cb98f6d2ac0f5da57a7ccd525ba18d016","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47ca8efb07a69b8d5becea419e66a3f87ed52c4aefdbcb821af3fdde720878e3","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"block":null,"heading":"Sales of Servicing Rights with a Subservicing Contract","paragraphs":[{"citation":"860-50-40-7","para":"40-7","html":"
A sale of mortgage servicing rights with a subservicing contract shall be treated as a sale with gain deferred if substantially all the risks and rewards inherent in owning the mortgage servicing rights have been effectively transferred to the transferee, as discussed in paragraph 860-50-40-3. Attributes of the transferee (for example, ability to perform servicing) would not be significant to the accounting for the transaction. The risks and rewards associated with a transferor performing purely administrative functions under a subservicing contract would not necessarily preclude sales treatment. A loss shall be recognized currently if the transferor determines that prepayments of the underlying mortgage loans may result in performing the future servicing at a loss.
","snippet":"A sale of mortgage servicing rights with a subservicing contract shall be treated as a sale with gain deferred if substantially all the risks and rewards inherent in owning the mortgage servicing rights have been effecti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6f1bcc83c6ae49510f04f9d4d7766cb7b719b9c357446b76f8e87646d371dbbd","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"citation":"860-50-40-8","para":"40-8","html":"
Substantially all the risks and rewards inherent in owning the mortgage servicing rights have not been transferred to the transferee and, therefore, the transaction shall be accounted for as a financing if any of the following factors are present:
  1. a
    The transferor-subservicer directly or indirectly guarantees a yield to the transferee. For example, the transferor-subservicer guarantees prepayment speeds or maximum loan default ratios to the buyer.
  2. b
    The transferor-subservicer is obligated to advance a portion or all of the servicing fees on a nonrecoverable basis to the transferee before receipt of the loan payment from the mortgagor.
  3. c
    The transferor-subservicer indemnifies the transferee for damages due to causes other than failure to perform its duties under the terms of the subservicing contract.
  4. d
    The transferor-subservicer absorbs losses on mortgage loan foreclosures not covered by the Federal Housing Administration, Department of Veterans Affairs, or other guarantors, if any, including absorption of foreclosure costs and costs of managing foreclosed property.
  5. e
    Title to the servicing rights is retained by the transferor-subservicer.
","snippet":"Substantially all the risks and rewards inherent in owning the mortgage servicing rights have not been transferred to the transferee and, therefore, the transaction shall be accounted for as a financing if any of the fol…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4fa2f20b5343c768845d8f2470f73db6632983d5984363165f02fbd9b81a3f99","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"citation":"860-50-40-9","para":"40-9","html":"
The presence of any of the following factors creates a rebuttable presumption that substantially all the risks and rewards inherent in owning the mortgage servicing rights have not been transferred to the transferee and that the transaction shall be accounted for as a financing:
  1. a
    The transferor-subservicer directly or indirectly provides financing or guarantees the transferee's financing. Nonrecourse financing, for example, would indicate that risks have not been transferred to the transferee. Topic 450 requires a guarantor to recognize, at inception of the guarantee, a liability for the obligation undertaken in issuing the guarantee.
  2. b
    The terms of the subservicing contract unduly limit the transferee's ability to exercise ownership control over the servicing rights or result in the seller's retaining some of the risks and rewards of ownership. For example, if the transferee cannot cancel or decline to renew the subservicing contract after a reasonable period of time, the transferee is precluded from exercising certain rights of ownership. Conversely, if the transferor cannot cancel the subservicing contract after a reasonable period of time, the transferor has not transferred substantially all of the risks of ownership.
  3. c
    The transferee is a special-purpose entity without substantive capital at risk.
","snippet":"The presence of any of the following factors creates a rebuttable presumption that substantially all the risks and rewards inherent in owning the mortgage servicing rights have not been transferred to the transferee and …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21f49e1090470d5a3a7a21c98e709519224c8fe17496fc7029b52eca636729bd","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9d66acd7a77adfa8ca6ebf4f02c54426131033ac0b0a75249f1eff800ee13ea","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"block":null,"heading":"Sales of Servicing Rights for Participation in an Income Stream","paragraphs":[{"citation":"860-50-40-10","para":"40-10","html":"
The following addresses a situation in which an entity sells the right to service mortgage loans that are owned by other parties. The related mortgage loans have been previously sold, with servicing retained, in a separate transaction. Because of the ability to invest the float that results from payments received from borrowers but not yet passed to the owners of the mortgages, the mortgage servicing rights can be sold for immediate cash or for a participation in the future interest stream of the loans.
","snippet":"The following addresses a situation in which an entity sells the right to service mortgage loans that are owned by other parties. The related mortgage loans have been previously sold, with servicing retained, in a separa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f191d9bf09eca3efb8798deefe4b0653629f7e272c6c1ceb95e3619e8b81db9a","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},{"citation":"860-50-40-11","para":"40-11","html":"
If a transfer of mortgage servicing rights qualifies as a sale under the criteria beginning in paragraph 860-50-40-2 and the sale is for a participation in the future interest income stream, gain recognition is appropriate at the sale date. There are difficulties in measuring the amount of the gain if the sales price is based on a participation in future payments and there is no specified upper limit on the computed sales price. The transferor of mortgage servicing rights shall consider all available information, including the amount of gain that would be recognized if the servicing rights were to be sold outright for a fixed cash price.
","snippet":"If a transfer of mortgage servicing rights qualifies as a sale under the criteria beginning in paragraph 860-50-40-2 and the sale is for a participation in the future interest income stream, gain recognition is appropria…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c33a69008a755e763020bb4a16eaa17c2e2904094e943d913da5d9b3b33954ed","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1461de8efab7fef0045fc9039e0f5ae1039cfaa5229f0cf39bc9914b6bd6e5cd","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b78db759fdca47379130aeeea899ee8fa82d00d945281cbd29cc15a582a17fb4","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b78db759fdca47379130aeeea899ee8fa82d00d945281cbd29cc15a582a17fb4","downloaded_from":"2026-09-10T02:08:20.155Z","last_downloaded_at":"2026-09-10T02:08:20.155Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481289","source_sha256":"42127d3f2caf8397074adec3a437226a2907f4e85e98e50ce7ad774bb3fcddc0"}}