You know you're in the middle of an economic crisis when an accounting issue become Front Page News, and that's exactly where we're at today.
Mark-to-market accounting is having its day in the sun and people in need of mortgage sometime soon would do well to pay attention.
If you've never heard of mark-to-market accounting, don't worry. Not many people have. Mark-to-market is a method of valuing an asset based on its what-if-it-was-sold-today value. Mark-to-market is officially known as FASB Statement 157.
Mark-to-market is one reason why bank balance sheets look so awful right now. Banks have to assign firesale-like values to their mortgage-backed assets even if those loans are performing, and even if there's no plans to sell them. Assigning low values to assets, then, in turn, forces the banks to seek TARP funds and take other measures to solidify their mandated capital requirments. And contrary to news media there are some banks that are solid. Several were directed to take initial TARP money even though they weren't in danger. Now those same banks are returning TARP money and the stigma that follows.
Wall Street and Washington are taking notice of mark-to-market's impact on banking and, by extension, the economy. Even Fed Chairman Ben Bernanke has expressed an interest in opening a dialogue about the matter.
So, today, starting at 10:00 AM ET, the House Committee on Financial Services meets with key members of the Securities and Exchange Commission, the Treasury, and the Financial Accounting and Standards Board to talk about mark-to-market accounting and whether it should be modified.
It's unlikely that change will come immediately, but if enough evidence shows that mark-to-market is unduly damaging to the economy, expect changes to the way we value banks to happen soon.
For homeowners and home buyer, a reversal in mark-to-market rules would be a bad thing. Almost overnight, bank balance sheets would recapitalize and the economy would spring forward. This would reverse most of the pressures that have held mortgage rates low for so many months. My humble opinion is that it is going to take more than "juggling the books" on the banks to solve the huge economic issues in this country.
A healthy economy, in other words, may be bad for mortgage rates. Conversely a healthy economy is great for Renton and the Seattle area, because there will be stronger employment, healthier tax base for schools, hospitals, roads.
There are great values in Renton homes and townhomes. And at this point mortgage rates are as low as they have been in generations. Now is the time to invest in a home and your families future. Call the Gary McNinch Team Renton Wa Realtor. We appreciate the opportunity to help you decide if and when it is the right time for your next home purchase. We help Renton and Kent clients buy and sell homes and townhomes in Fairwood, Kent, Renton Highlands, Cascade, Talbot Hill, Newcastle, Kennydale, Skyway and Downtown Renton and we'll be glad to help you too.
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