WASHINGTON - Democrats on the Senate Finance Committee have agreed to maintain the existing favorable tax treatment for purchased mortgage servicing rights but reduced the proposed deduction for acquired core deposits and other intangibles.

The agreement, which was expected to be ratified by the full committee on Thursday, is at odds with action taken by the House of Representatives.

The House had approved a 14-year amortization period for intangible assets, including core deposits and purchased mortgage servicing rights. At present, the servicing rights are amortized according to their real life cycles of seven to 10 years.

Industry Opposition

Thrifts and mortgage companies protested, arguing that the provision would reduce the value of servicing rights and create new costs for lenders that would be passed on to home purchasers.

The Senate Finance Committee agreed to "carve out," or exempt, servicing rights from the 14-year intangibles schedule. But to compensate for the lesser revenue, the panel limited the portion of an intangible asset that can be depreciated.

As a result, a bank or thrift would be permitted to deduct only 75% of the value of core deposits received in an acquisition.

Jim O'Connor, tax lawyer for the Savings and Community Bankers of America, hailed the decision on purchased mortgage servicing rights but said his organization would press for more favorable treatment of core deposits.

"It's a significant victory with respect to servicing," he said. "We hope we can return to the language of the House bill on the treatment of core deposits when the bill goes to conference."

Conference Negotiation Seen

The final bill will probably have to be hammered out in a conference committee by House and Senate negotiators.

Edward L. Yingling, executive director of government relations at the American Bankers Association, said he expects the industry will be able to maintain full deductibility for intangibles.

"It's one of those things that's ripe for a fix in conference," he said.

The SCBA argued that the House treatment of servicing rights amounted to a regressive tax on lower-income homebuyers.

Costs to Be Passed On

In a position paper. Mr. O'Connor said lower-income homebuyers often get loans guaranteed by the Federal Housing Administration or Veterans Administration.

Those loans include a service fee equal to 50 basis points - twice the service fee for a conventional loan.

"The spreads in residential mortgage lending are so constrained that any decrease created by the intangibles provisions will have to be passed on to the borrower." he added.

Drawing a comparison with benefits granted elsewhere in the bill, Dan Crane, a lobbyist working with SCBA, said, "Who should we provide favorable tax treatment for, the sports teams and movie studios or homebuyers?"

Although the House had hoped to generate $1.5 billion by extending the amortization period for servicing rights, the Mortgage Bankers Association of America argued that the savings would probably be less than $500 million.

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