FASB Proposes Improvements to the Accounting for Residential Mortgage Servicing Rights

The FASB issued a proposed Accounting Standards Update (ASU) on September 23, 2026, that would amend the guidance on the measurement of residential mortgage servicing rights (MSRs) related to “recapture.”

Key proposal

Under the proposal, an entity measuring a residential MSR at fair value under ASC 860-50 and ASC 820 would include the value of recapture in the rights and obligations associated with the servicing asset or liability, unless separate recognition is otherwise required under GAAP.

“Recapture” refers to the servicer’s ability to solicit an existing borrower to refinance while retaining the servicing rights on the new loan, and FASB noted that current GAAP does not explicitly address whether that value is included in residential MSR measurement.

 

Scope

 The proposal would apply to all entities that recognize residential MSRs under ASC 860-50. It would not apply to servicing rights for commercial loans, auto loans, credit cards, or student loans.

 

Expected effect

The proposed change could improve comparability among entities that measure residential MSRs differently today, because some entities already include refinancing opportunities in valuation while others do not. Entities that currently exclude recapture may need to update valuation methods and could report higher values for some residential MSRs.

 

Transition and effective date

FASB has not proposed an effective date and will determine it after considering stakeholder feedback.

The amendments would be applied using a modified prospective approach to residential MSRs outstanding as of the beginning of the adoption period, with a cumulative-effect adjustment to opening retained earnings.

Early adoption would be permitted in an interim or annual reporting period.

 

Comment deadline

Comments on the exposure draft are due November 9, 2026.