mortgage servicing rights

This subtopic governs how mortgage banking entities account for mortgage loans and mortgage-backed securities, including classification as held for sale versus held for long-term investment, related origination fees and costs, and transactions with affiliates. Loans held for sale are carried at the lower of amortized cost basis or fair value through a valuation allowance charged to income, while loans held for long-term investment are carried at amortized cost basis with credit losses measured under Subtopic 326-20. Transfers between classifications require reversal in earnings of any previously recorded allowance and re-measurement under the new classification.

ASC 948-10 is the Overall subtopic for mortgage banking, providing background on the two core mortgage banking activities—originating/purchasing loans for sale to permanent investors and subsequently servicing those loans—and defining the Topic's scope. Its only substantive requirements are disclosures about minimum net worth (capital) requirements imposed by secondary market investors and state regulators, including whether the entity complies and the effects of noncompliance. The Topic supplies only incremental industry guidance; entities must also apply all other applicable GAAP.