T2 FHFA Medium Confidence Advisory

AB 2023 - 01: Valuation of Mortgage Servicing Rights for Managing Counterparty Credit Risk

Enhanced supervisory expectations for mortgage servicing rights valuation methodologies in counterparty credit risk management

MODERATE

Impact Level

Top: model risk (4)

Classification

Regulatory Program: FHFA supervision
Doc Type: Advisory
Effective Date: 2026-09-14 (est.)
Days to Action: 60
Comment Deadline: —
Published: —

Urgency Basis

Advisory bulletin guidance on MSR valuation practices for counterparty risk management requires attention within 30-90 days for implementation review

Operational Context

Flags

Model Validation Trigger Examination Focus Legal Review Required

Affected Functions

Risk Management Model Validation Treasury Credit Risk Compliance

Institution Applicability

Banks With Significant Msr Portfolios Mortgage Servicers Fhfa-Regulated Entities Institutions With Msr Counterparty Exposures

Impact by Category

Compliance

Operational

Data Governance

Model Risk

Reporting & Disclosure

Capital & Liquidity

Consumer Protection

Third-Party Risk

Key Requirements

- Implement robust MSR valuation methodologies for counterparty risk assessment - Establish appropriate governance over MSR valuation processes - Ensure model validation coverage of MSR valuation approaches - Maintain adequate documentation of MSR valuation assumptions and methodologies - Monitor counterparty credit exposures related to MSR positions

Scoring Rationale

Moderate impact advisory focusing on technical valuation practices with significant model risk implications. Score reflects need for policy updates and potential model validation work while recognizing limited operational disruption for most institutions.

Scored: 2026-06-02T19:03:37.920Z Model: claude-sonnet-4-20250514 Confidence: Medium Aggregate Score: 2.6

AI Analysis Disclosure — This record, including its scores, impact assessments, and Advisory Assessment (impact, risk, and recommended actions), was generated by an AI model and may contain errors or omissions. The Advisory Assessment is a starting point for analysis, not a substitute for professional judgment. Effective dates, applicability determinations, impact assessments, and any recommended actions should be independently verified against primary regulatory source documents and reviewed by qualified compliance or legal personnel before taking compliance action. This output does not constitute legal or compliance advice.