Financial Reporting

FINANCIAL REPORTING

Sen. Charles Schumer, D-N.Y., called on the leaders of the Big Four to ensure that their clients are aware of SEC and FASB guidance on Statement no. 140 relating to modifications of subprime loans at risk of default.

In a letter to Barry Salzberg of Deloitte & Touche USA LLP, James Turley of Ernst & Young LLP, Timothy Flynn of KPMG LLP and Dennis Nally of PricewaterhouseCoopers LLP, Schumer wrote that one potential obstacle to refinancing or modifying at-risk subprime loans is a concern that such a move might require companies to stop using off-balance-sheet treatment for their securitized mortgage assets, putting them at risk of violating capital and other requirements. FASB and the SEC have concluded that off-balance-sheet treatment could continue in such cases.

Schumer, a member of the Senate banking and finance committees, called on the Big Four leaders to inform their clients of the guidance. “I am concerned that many of the investors holding securitized mortgage assets are continuing to cite FAS 140 as a reason to avoid loan modifications and refinancings,” he wrote.