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:
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.