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FASB issues guidance on classification of government-guaranteed mortgage loans upon foreclosure

  • FASB (US Financial Accounting Standards Board) Image

Aug 11, 2014

The FASB has issued Accounting Standards Update (ASU) No. 2014-14, “Classification of Certain Government-Guaranteed Mortgage Loans Upon Foreclosure,” in response to the EITF’s consensus on Issue 13-F.

The ASU requires creditors to reclassify mortgage loans as an other receivable that is separate from loans and to measure the receivable at the fixed or determinable amount expected to be received under the government guarantee if upon foreclosure the mortgage loan meets the following conditions:

  • “The loan has a government guarantee that is not separable from the loan before foreclosure.”
  • The creditor has both the intent and ability to recover a fixed or determinable amount under the guarantee by conveying the property to the guarantor at the time of foreclosure.
  • The amount of the claim that is determined on the basis of the fair value of the real estate is fixed at the time of foreclosure.

The ASU will be effective for public business entities for reporting periods (including interim periods) beginning after December 15, 2014. For all other entities, the guidance will be effective for annual reporting periods ending after December 15, 2015, and interim and annual periods thereafter.

For more information, see the ASU on the FASB’s Web site.

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