The way you have explained it makes sense. Thanks. After reading Patrick Quinn's letter regarding the capital rule, I examined Fannie and Freddie balance sheets over the years. In 2008 and 2009 both had unamortized fees as assets on the balance sheet. This stopped effective 2010.
When I was still a part of the workforce, I was familiar with maintenance and service contracts. Often the money was received for the length of the contract but only the period in the fiscal period would be posted to revenue and the balance would be a liability (money already received) and listed as Unearned Income. In case of Fannie and Freddie, the G-fees are earned when they purchase the mortgage. If the G-fee is $500 on a $100,000 mortgage the journal entry would be:
So looks like currently, when they bundle and sell the mortgages as MBS, $100,500 less amortized portion of G-fees is being recorded as a liability. I wish they'd go back to pre 2010 or exclude the unamortized G-fees from the liabilities.
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