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.