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Factors Influencing a Firm's Adoption of New Reporting Requirements: SFAS 122 and Mortgage Servicers

by James H. Gilkeson and Mitchell Stengel


This paper examines commercial banks' reporting of mortgage servicing assets (MSAs) during the period surrounding the issuance of SFAS 122, "Accounting for Mortgage Servicing Rights." Although the statement mandated reporting of originated mortgage servicing assets, which are created when mortgages are originated and later sold, we find that most affected bank servicers did not begin to do so. Banks may have avoided booking mortgage servicing assets because they are particularly volatile and are expensive to periodically value and test for impairment (another SFAS 122 requirement) Not reporting these assets is likely an acceptable practice on the grounds of their immateriality: they make up only a small part of most banks' asset base and earnings. Using call report data which identifies the size of the servicing portfolio whether mortgage servicing assets are booked or not, we analyze the factors that influenced bank servicers' decisions to begin reporting mortgage servicing assets on the balance sheet. We find that the size of the servicing portfolio and its growth rate were positively related to the reporting decision, while the size of the bank and its demonstrated ability to hold related securities (interest rate derivatives) were not. Results are mixed on the impact of the materiality (size) of the portfolio relative to total assets and earnings, as well as on a proxy for the banks' willingness to engage in other fee-based activities.


As with all OCC Working Papers, the opinions expressed in this paper are those of the author alone, and do not necessarily reflect the views of the Office of the Comptroller of the Currency or the Department of the Treasury.

Any whole or partial reproduction of material in this paper should include the following citation: Gilkeson & Stengel, "Factors Influencing a Firm's Adoption of New Reporting Requirements: SFAS 122 and Mortgage Servicers, " Office of the Comptroller of the Currency, E&PA Working Paper 99-2, December 1999


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