Changes to Mark to Market are coming.

For Months we have been saying once the Financial Accounting Standards Board (FASB) changed their stance on mark-to-market accounting there would be a large improvement in the ability of financial institutions to be profitable. Today FASB voted to relax the accounting methods financial institutions can use to mark assets. The big change is to allow financial companies to use alternate models, like cash flow analysis, in marking assets. This enormous change will significantly reduce the writedowns banks have been taking on investments like mortgage-backed securities. These writedowns had forced companies to sell good assets and write down bad one while they were still performing but the value of the asset (such as a appraised value of a home loan) had gone down.


FASB finally understood that there was still value in assets such as home loans if the loans were still performing. Today the stock market is up due to this ruling and we expect to see the market to rally off of this.


For mortgage rates this will be positive since investors will be willing to now invest in MBS (Mortgage Backed Securities) again and not have to worry about the forced writedowns of the FASB 157 ruling. Currently the Fed were the major buyers in MBS The Feds involvement in buying MBS had pushed rates down and now if there is additional cash flowing into MBS we can expect to see continued low rates and maybe more expansion of some mortgage products for homeowners.