FASB Delays Rule Affecting Trillions in MBS


The Financial Accounting Standards Board (FASB) on Wednesday delayed implementation of a rule FAS 140 that could force issuers of securitized assets including mortgages to post more capital on bonds guaranteed and held off the balance sheet.

FASB is now considering implementing the accounting change for any fiscal year that begins on or after Nov. 15, 2009 (as opposed to year-end 2008).

In a letter to FASB, Rep. Spencer Bachus, R-Ala., ranking minority member of the House Financial Services Committee, said changes to securitization accounting potentially affects $10.5 trillion in securitized assets, including $7.2 trillion in mortgage-related securities.

About a month ago concerns arose that Fannie Mae and Freddie Mac —  because of FAS 140 —  might have to raise additional capital to cover mortgage-backed securities guaranteed and issued by them but not held on their balance sheets. At the time, Office of Housing Enterprise Oversight Director James Lockhart argued that, even with the accounting change, the two companies would not face any extraordinary capital charge.