The proposed revision of FAS 65 is starting to resemble that storied elephant that is very much like a w.all, or a tree, or a rope, or a snake, depending on who is doing the talking.

For publicly held mortgage banking companies, the revision may be a welcome shot in the arm for earnings. For commercial banks that have recently acquired mortgage businesses or assets, it could help make their strategy look good. For brokers of servicing rights, it could mean a sharp drop in business. And for many smaller banks and thrifts, and some large ones as well, it could have an assortment of unhappy consequences along with some welcome ones.

In fact, the proposal has so many details stirring dissent that some in the industry feel that a protracted debate on side issues could seriously delay implementation of major issues on which there is consensus.

The rule, formally Financial Accounting Standard No. 65, deals with the value of mortgage servicing rights, The revision would end the distinction between fights that were acquired by purchase and those that were acquired by making the loans.

Presently, purchased rights are carried on the books as an asset, while originated rights do not appear on the books at all, an anomaly that lenders agree should be corrected by allowing originated servicing to be recognized as an asset.

This change would not affect servicing values of loans held for investment by the lender, which would remain off the books.

A year ago, publicly held mortgage-banking companies were enthusiastic about the change because it held out the promise of increasing their reported earnings. Some analysts. said this might result in higher stock valuation by Wall Street even though the change had only cosmetic rather than economic impact.

But now many of those companies have been swallowed up by commercial banks, and the prospect that a revised rule would put a head on earnings is receiving less attention.

There does, however, appear to be agreement on one point: sales of servicing rights should decline.

And at least one banker believes that will be a good thing. Carlos Mello, first vice president and controller of People's Bank, Bridgeport, Conn., says it should improve profits and reduce the price spreads on mortgages offered by some companies.

"It should make smaller institutions, or any institutions that have sold servicing only to put its value on the books, more competitive because they wouldn't have to do noneconomic swaps."

Marti Sworobuk, who heads technical services for the Savings and Community Bankers Association, Washington, agrees. "When institutions no longer need to sell servicing, they will have bigger opportunities to cross-sell other financial services to their mortgage customers," she said.

A shortcoming of the FASB proposal, she said, is that it does not address whether purchased servicing rights are tangible or intangible assets, and her trade group is urging FASB to classify PMSRs as tangible. "It would help us to persuade regulators that purchased servicing rights are tangible assets," she said.

Under the five-year-old thrift bailout law, purchased rights are arbitrarily classified as intangible assets and thus count less toward capital than tangible assets.

Another provision of the proposal has attracted mostly brickbats from the mortgage industry. Many portfolio lenders prefer to securitize their mortgages to reduce the risk profile.

"The change proposed by FASB would treat securitization as a transaction where no transaction exits," said Ms. Sworobuk. And this treatment would require recognition of gains and losses on the income statement. she explained.

Another aspect of the proposal that has generated some heat is a section on treatment of impairment of the value of servicing rights. The board proposed that lenders stratify their portfolios but factors such as note-rate and mortgage terms.

Many members of the Mortgage Bankers Association hit the ceiling over this provision. said Alison Utermohlen, senior director of accounting policy. In a comment letter to the standards board, the MBA said its members were "extremely concerned" over stratification.

The letter continued: "We believe the Board's approach is conceptually incorrect because it would result in published values that are unrepresentative of the value of portfolios."

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