TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/393532
Th e M Rep o RT | 15 COVER STORY the organization plans to issue a final standard sometime in 2015 and has performed extensive analysis after receiving feedback during an open comment period. In late 2012, FASB introduced the new CECL model for calculating credit losses. The model, Klimek explains, "uses a single expected credit loss measurement objective for the allowance for credit loss." FASB adds that, "Under this model, the allowance for expected credit losses would reflect management's current estimate of the contractual cash flows that the company does not expect to collect, based on its assessment of credit risk as of the reporting date." While other recommended mod- els were studied and considered, including one recommended by the International Accounting Standards Board (IASB), FASB leaned more heavily toward the CECL model. "Comments received on the FASB proposal show that both U.S. and global investors strongly prefer the FASB's lifetime losses approach," Klimek said. "Had we adopted the IASB approach, it likely would have resulted in de- creased loan loss reserves among U.S. financial institutions, which would have been counterintuitive to the lessons learned during the recent financial crisis." Whichever way FASB goes in 2015, credit unions and small banks agree on one thing: Regulators' reluctance to consider the needs of smaller players when designing new accounting rules for the financial system is creating a market that will potentially be dominated by the very same lenders that created the credit crisis in the first place. If that is the case, Washington D.C.'s overall intentions are either misaligned, uninformed, or de- layed when considering the needs of certain institutions, industry experts say. Even still, credit unions and small banks believe their voices are being heard and remain active advocates in D.C. "I don't think that there is a black helicopter coming over the horizon trying to get rid of us all," Scurlock said. "I am not there yet." But he and others worry about regulators' perceived delay in recognizing the disparate im- pact some of these changes and proposals are having on smaller financial institutions. Still, Suncoast Credit Union's Renderos is hopeful FASB is taking all of the input into account. "We believe the Financial Accounting Standards Board will consider adjustments to lessen the impact," she told the MReport. But if such adjustments are not made, Renderos is not sugarcoat- ing the potential outcome given the unique role Suncoast plays in the lending market. "Our highest priority is to serve our members, and this proposal has the potential to impact our members and the economy," she concluded. "The proposal could discourage credit availability since higher credit quality loans would require less reserves and therefore [have] the least impact on the income statement on day one of a loan." As a result, Renderos warned, "[C]redit-challenged consumers could find it more costly and dif- ficult to find credit options." Up to Speed with tRId BootH 243 compliance customization service e-sign