A number of parties have brought to our attention that FAS 140...may not clearly state at what point a loan may be modified...This lack of clarity may be leading some institutions to withhold making loan modifications that may benefit borrowers -- and bondholders -- for fear of being found in violation of FAS 140.
House Financial Services Committee Seeks SEC Guidance on Loan Modifications
Citing rising mortgage foreclosure rates in the United States, the House Financial Services Committee said Friday it has sent a letter to Securities and Exchange Commission Chairman Christopher Cox regarding the FAS 140 accounting standard. Specifically, the members asked Chairman Cox to respond to the question: â€œDoes FAS 140 clearly address whether a loan held in a trust can be modified when default is reasonably foreseeable or only once a delinquency or default has already occurred? If not, can it be clarified in a way that will benefit both borrowers and investors?â€? To see the full letter, click here. In the letter, the Committee outlines its concerns: