The SEC and FASB are at it again with a plan requiring banks to forecast and book “current expected credit losses” over the life of loans without even a credit for expected interest income. Bank regulators are dutifully moving forward with plans to implement the new accounting standards.

The impact could be very negative for most banks, but particularly those that hold mortgages and other longer-term loans. A typical community bank might have as much as half of its balance sheet in residential mortgage loans. Forecasting and booking losses over the life of a 30-year mortgage is highly speculative at best — and requiring it to be done would probably sound the death knell for long-term mortgages.

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