FASB proposal would require recapture value in residential MSR fair-value measurements

Update that would explicitly require entities to include the effects of recapture when measuring residential mortgage servicing rights at fair value under Topic 820. The change is intended to eliminate diversity in practice where current guidance leaves it unclear whether recapture belongs in the MSR measurement.

What "recapture" means in this context

FASB did not provide a formal definition of recapture. The term refers to a servicer's ability to solicit a borrower to refinance and retain the servicing rights on the refinanced loan—cash flows and benefits tied to retaining a borrower rather than losing the servicing relationship. The board left the term undefined to preserve preparer judgment as servicing markets and cross-selling arrangements change.

Stakeholders reported inconsistent accounting across servicers because existing GAAP did not clearly state whether recapture should be included in an MSR's fair value. FASB's proposal aims to require entities to reflect all rights and obligations in a residential servicing contract when measuring MSRs, closing that ambiguity.

How the market and analysts view the likely effect

Disclosure practices vary. Few servicers break out a separate dollar amount for recapture within MSR disclosures. Some firms disclose recapture assumptions (Rithm), while others state recapture cash flows are embedded in their models but provide limited detail (Rocket).

Scope and questions for stakeholders

The proposal applies only to residential MSRs. FASB excluded commercial mortgage servicing and servicing for credit cards, auto loans and student loans because recapture is not a meaningful valuation factor in those markets today. The board is asking whether the scope should be broadened to cover all servicing assets.

Stakeholders have until Nov. 9, 2026, to submit feedback on the proposed ASU. FASB will review comments before deciding whether to finalize the guidance and whether to adjust scope, definitions, or disclosure requirements.

What practitioners should consider now

• Inventory current MSR valuation approaches and document whether and how recapture is included.
• Evaluate existing disclosures on MSR assumptions and consider whether additional transparency would be warranted if guidance is finalized.
• Track the comment letters and final ASU to see if FASB adds definition, disclosure requirements, or scope changes.