Florida mortgage rates have moved with a great deal of volatility this year – for a whole host of reasons. However, it’s rare that a an issue like Mark to Market Accounting comes into play as a determining factor in how home loan financing rates play out.
Well, that’s where we are at present.
Starting at 10:00 AM ET this morning, the House Committee on Financial Services initiated a meeting with key members of the Securities and Exchange Commission (SEC), the Financial Accounting and Standards Board (FASB), and the Geithner Gang (read – the US Treasury) to talk about mark-to-market accounting and whether it should be modified.
What is Mark to Market Accounting and Why Should We Care?
First – if you’ve never heard of mark-to-market accounting, you’re in good company. A lot of people haven’t.
Mark-to-market is a method of assigning value to an asset based on what it would be value at if sold today. This accounting method is officially known as FASB Statement 157.
Wondering why bank balance sheets look so terrible? Assign some of the blame to the mark-to-market method.
Banks are required to assign baseline values to the mortgage-backed securities they hold even if the mortgages themselves are doing well, and even if there are no plans at present to sell them. By following this mark-to-market approach then, banks are forced to seek TARP funds and take other measures to solidify their mandated capital requirements. Are your eyebrows raising yet? Wall Street and Washington’s are.
The Streeters and the good folks on Capital Hill are taking notice of mark-to-market’s impact on the economy vis-a -vis the banking industry. Even Fed Chairman “Uncle” Ben Bernanke wants to get in on the conversation.
The Kudlow Report Chimes In Here:
httpv://www.youtube.com/watch?v=wMFUY8DCn2Q
There will most likely not be any changes coming about immediately in terms of how banks are using the mark-to-market accounting method. However, if enough evidence shows that mark-to-market is causing undue damage to the economy, expect changes to the way we banks are valued to come about soon.
Those seeking a Florida mortgage or home refinance should stay on top of this issue. A reversal in mark-to-market rules would be a bad thing. In near immediate fashion, bank balance sheets would recapitalize and the economy would spring forward. This would reverse most of the pressures that have held mortgage rates low for so many months.
Though I’m all about seeing our economy get back on track, if mark-to-market accounting is reversed, we may see Florida mortgage rates rise.
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Kevin Sandridge
The Florida Mortgage Pro
Signature Home Funding
410 Laurel Cove Way
Winter Haven, FL 33884 |
Mobile: 863-604-3019
Fax: 888-496-0265
Email: kevin.s@sigfunding.com
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I hope you found this post useful! As always, if you or anyone you know is in need of a local Florida mortgage broker, I’m your guy. Call me at 863-604-3019 or apply online for your Florida mortgage. We’ll keep you posted and let you know when it’s time to pull the trigger!
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