| ID | Status | Date | Public/Private | Industry | AHACPA Contact |
|---|---|---|---|---|---|
| #10989 | Closed | public | _General | _General Support |
|
We proposed an entry to book the custodial funds along with an offsetting mortgage servicing obligation liability. This is the T&I and P&I funds held at an independent custodian under the sub-servicer’s name. The client states these are off-balance-sheet accounts. I don’t see guidance per GNMA guide custodial accounts chapter. Do you know of any guidance that we can reference? Thank you! |
|
|
Alexandra, the GAAP on this issue is not as straight forward as you might think. From a FASB perspective this cash usually ends up in restricted cash and that is where the dilemma exists. FASB has not taken a firm stand on this presentation. However, a couple of things to keep in mind make this easier.
First, if the assets include escrow cash, then they would also include an escrow liability. Therefore, these amounts should never be implied to affect net worth of the lender.
Second, since the lender does not service, but moves the accounts to the sub-servicers, we are another entity removed from including the assets/liabilities on the client’s books.
Third, for most lenders who service, it only makes sense to put another company between them and loan. This money belongs to the borrower to pay for their expenses, so as an owner I want nothing to do with those amounts on my books.
Fourth, the sub-servicer is actually the “owner” of the accounts. There are established in their name for escrow purposes. IF I actually serviced the MSRs I owned, then this would be a different conversation.
Each of those items forces me to look at this restricted cash and I can see no reason for the lender who owns the MSRs to include escrows of the serviced assets help by the sub-servicer. Now interim servicing, where the bank collects a payment or two in another issue. The lender “owns” those accounts and therefore, LEAP has a line for those items. I would not presume that that line should include monies help by a sub-servicer for a borrower.
Les Sparks AHACPA (801) 547-0809
From: AHACPA Support <support@ahacpa.org> |