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Second Quarter a Tough One for Servicers.
The second quarter was a doozy for mortgage servicers. Just when you thought that the only mention of "impairment" in the future was going to be in the context of recaptured value, long-term interest rates took a dip, leaving lenders exposed to more downward pressure on the value of their mortgage servicing rights.
That's because 30-year mortgage rates ended the second quarter about 60 basis points below where they began the quarter. Ouch.
BB&T Corp., Winston-Salem, N.C., saw a decline in quarterly income for the second quarter, and a sharp drop in servicing values was part of the problem.
Revenue from mortgage banking operations totaled $12.4 million for the second quarter, down from $44.3 million in the second quarter of last year.
BB&T said the decline primarily reflected "fluctuations in the valuation allowance for mortgage servicing rights." In the second quarter of this year, BB&T's results include a net provision for MSR valuation, including hedging activities, of $9.1 million. In last year's second quarter, the bank recaptured $30.4 million of valuation.
But BB&T's results also highlighted a complication in the impairment picture that many lenders faced this time around. The "natural hedge" between loan production and loan servicing didn't hold up as strongly this year as it has in the past.
At BB&T, revenue from residential mortgage production activities declined $8.7 million compared to the same quarter last year because a larger percentage of loan originations were retained this year.
- Accounting for mortgage servicing rights.
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...s SFAS No. 122, Accounting for Mortgage Servicing Rights, amending SFAS No. 65...reconsider the accounting treatment of mortgage servicing rights. The MBAA wanted the FASB...the accounting distinction between mortgage servicing rights chat are acquired through...
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...approved a bill designed to improve mortgage servicing standards and enhance real estate...filed, the Escrow, Appraisal and Mortgage Servicing Improvements Act (H.R. 3837...borrower protections by improving mortgage servicing practices and requiring escrows for...
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...purposes, the bank records originated mortgage servicing rights in accordance with Statement...by amortization of the originated mortgage servicing asset that had been created when...which the amounts received under a mortgage-servicing contract should be reported for tax...
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Source: HighBeam Research, Second Quarter a Tough One for Servicers.