Summary of Statement No. 65

Accounting for Certain Mortgage Banking Activities (Issued 9/82)

Summary

This Statement extracts the specialized accounting and reporting principles and practices from AICPA Statements of Position 74-12, Accounting Practices in the Mortgage Banking Industry, and 76-2, Accounting for Origination Costs and Loan and Commitment Fees in the Mortgage Banking Industry, and establishes accounting and reporting standards for certain mortgage banking activities.

Mortgage loans and mortgage-backed securities held for sale are reported at the lower of cost or market value. Origination costs associated with loan applications received directly from borrowers are expensed as period costs. The premium paid for the right to service loans in a purchase of mortgage loans ordinarily is capitalized as the cost of acquiring that right.

This Statement also establishes accounting and reporting standards for several different types of loan and commitment fees. Loan origination fees, to the extent they represent reimbursement of loan origination costs, are recognized as revenue when the loan is made. Loan commitment fees ordinarily are recognized as revenue or expense when the loans are sold to permanent investors. Fees for services performed by third parties and loan placement fees are recognized as revenue when all significant services have been performed. Land acquisition, development, and construction loan fees and standby and gap commitment fees are recognized as revenue over the combined commitment and loan periods.