SEC 'Dear CFO' Letter on Mortgage, Foreclosure, Loss Accrual (Incl. Litigation Risk) Not Limited to Financial Institutions

The SEC's 'Dear CFO' letter sent to public companies in October, 2010, posted on the SEC's website October 29, addresses "Accounting and Disclosure Issues Related to Potential Risks and Costs Associated with Mortgage and Foreclosure-Related Activities or Exposures."

Letter Lists Specific Disclosures 'To Be Considered'
Issued by staff of the SEC's Division of Corporation Finance, the October 29 'Dear CFO letter' contains a lengthy list of specific disclosures that "should be considered" in connection with mortgage (and mortgage securitization and sale-related) and foreclosure related activities.

Reminder Of MD&A Requirements
The letter also includes a reminder of certain MD&A requirements, including "any known trends or any known demands, commitments, events or uncertainties that you reasonably expect to have a material favorable or unfavorable impact on your results of operations, liquidity, and capital resources" (Item 303 Reg. S-K), and "legal proceedings, including proceedings known to be contemplated by governmental authorities" (Item 103 Reg. S-K).

Loss Accruals, Including Litigation
The SEC's October 29 'Dear CFO' letter also includes a reminder of current requirements for loss accruals and disclosures of contingencies, including Litigation-related contingencies, as currently required under FAS 5 (ASC SubTopic 450-20), and Rule 10-01(a)(5) of Reg. S-X. [Separately, The FASB recently announced that any new disclosure requirements under its proposed amendment of FAS 5 would not take effect this year, see our earlier post.]

Not Limited To Financial Institutions; Consider 'Similar Issues'
Significantly, although the Dear CFO letter was issued by the SEC to "certain public companies as a reminder of their disclosure obligations to consider in their upcoming Form 10-Qs and subsequent filings, in light of continued concerns about potential risks and costs associated with mortgage and foreclosure-related activities or exposures," the staff of the SEC take pains to note in the letter that:

  • the list of disclosures to be considered is "not an exhaustive list" (see paragraph 2 of letter, and 3rd last paragraph of letter),
  • the list of items to be considered, are, 'without limitation' to those items (paragraph 2 of letter).

Perhaps most significantly [in my view, see disclaimer on right side of this blog], public companies besides financial institutions should take note of the closing paragraph in the SEC's Dear CFO letter, in determining if the disclosures set forth therein are applicable to them:

Some of these issues are not limited to financial institutions that sold or securitized mortgages or mortgage-backed securities. Issuers that engage in mortgage servicing, title insurance, mortgage insurance, and other activities relating to residential mortgages should also consider the impact of these and similar issues for their disclosures.

Attendees at FEI's 29th annual Current Financial Reporting Issues (CFRI) conference Nov. 15-16 in NYC will hear about this and other SEC, FASB and IASB developments. (In other news, see also this FEI Summary: SEC Publishes 1st Progress Report on IFRS Workplan; IASB's Tweedie Emphasizes Single Set of Standards.)

 

This blog

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

39205

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

70424

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

44013

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

81167
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
17783

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

51025

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

74967

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

22696

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

59068

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

31822
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
95505
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
22765

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

47714
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
24619
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
28622

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

91783

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

30036

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

102583

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

55163

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

36341
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
62278

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

87652

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

48744