FASB Proposal Could Change How US Mortgage Servicers Value Their Rights
United States | September 26, 2026: A proposed accounting change in the US mortgage industry could make mortgage servicing rights (MSRs) valuations more consistent across lenders and servicers. The Financial Accounting Standards Board (FASB) has proposed requiring companies to include the value of mortgage recapture opportunities when measuring residential MSRs at fair value.
The proposal aims to address differences in accounting practices across the industry. While analysts expect greater transparency, they do not anticipate a significant immediate impact on financial statements.
Why FASB Is Proposing Changes to MSR Accounting
Mortgage servicing rights represent the contractual rights and obligations associated with managing mortgage loans. These can include collecting payments, managing escrow accounts and handling other servicing activities.
Recapture refers to the opportunity for a mortgage servicer to retain a borrower who refinances or takes out another mortgage, potentially generating additional business.
Current accounting guidance does not clearly specify whether the value of these recapture opportunities should be included in MSR valuations. According to FASB, this has contributed to inconsistent practices and reduced comparability among mortgage servicers.
The proposed amendment would clarify that all rights and obligations associated with residential mortgage servicing contracts, including recapture, must be reflected in fair-value measurements.
Mortgage Servicers Currently Follow Different Practices
Accounting approaches to recapture vary across the US mortgage industry.
According to analysts at BTIG, companies such as loanDepot, Rithm Capital and Rocket Companies already include recapture in their MSR valuation models.
Other firms, including Onity Mortgage, PennyMac Financial Services and UWM Holdings, do not currently incorporate it in the same way.
This difference makes it harder for investors and analysts to compare the reported value of mortgage servicing portfolios across companies.
The proposed standard could help bring greater consistency to these valuations.
Why the Proposal Matters for Mortgage Servicers
Recapture can represent a significant source of potential value for mortgage servicing portfolios. When borrowers refinance or obtain additional mortgages, servicers may have opportunities to retain those customers and generate further business.
BTIG analysts said including recapture in MSR valuations would bring accounting measurements closer to market valuations.
However, analysts at Keefe, Bruyette & Woods (KBW) do not expect the proposal to materially affect financial statements, arguing that market participants already account for recapture when valuing MSRs.
The primary expected benefit is therefore improved transparency and comparability rather than an immediate change in reported financial performance.
Disclosure Practices May Also Become More Important
Mortgage servicers do not generally disclose the precise dollar value of recapture within their MSR portfolios.
Some companies, including Rithm Capital, disclose assumptions related to recapture. Rocket Companies has stated that recapture cash flows are embedded in its valuation models but provides limited additional detail.
FASB has chosen not to establish a strict definition of recapture in the proposal. According to KBW, this approach preserves flexibility as servicing markets evolve, particularly where customer relationships and cross-selling opportunities create additional value.
For investors, clearer accounting requirements could make it easier to understand how companies assess the value of their servicing portfolios.
Proposal Initially Covers Residential Mortgage Servicing Rights
The proposed accounting change currently applies only to residential MSRs.
Commercial mortgage servicing rights and servicing assets related to credit cards, auto loans and student loans are excluded because recapture is not considered a meaningful valuation factor in those markets at present.
However, FASB is seeking feedback on whether the proposed requirements should eventually apply to all servicing assets.
This broader question could influence the eventual scope of the accounting standard.
November 9 Deadline Gives Industry Time to Respond
FASB has invited stakeholders to provide feedback on the proposal by November 9, 2026.
The feedback period will allow mortgage servicers, lenders, investors and other industry participants to comment on the proposed accounting treatment and its potential implications.
The final requirements will depend on FASB's standard-setting process and consideration of stakeholder feedback.
For mortgage companies and investors, the key issue is whether the proposed rules will improve the consistency of reported MSR valuations without creating significant changes to existing financial reporting practices.