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December 4, 2017

New Amendment in GOP Tax Bill Spares Adverse Treatment for Mortgage Servicing Income

By Brandon Ivey

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The GOP tax reform bill approved by the Senate in the wee hours of Saturday included an amendment to exempt mortgage-servicing income from a change in the way the asset is taxed.

The Mortgage Bankers Association and other industry groups sought the amendment, claiming that if the measure passed as initially drafted, servicers would have faced significant financial difficulties from deferred taxation being eliminated.

In other words, without the amendment, mortgage servicers would be hit with the tax liability immediately, creating a possible liquidity crisis, especially for nonbanks.

“Had this language not been included, the change in tax accounting for mortgage servicing rights would have had a devastating impact on the flow of capital that supports a robust and competitive real estate finance market, both single- and commercial/multifamily,” said Dave Stevens, president and CEO of the MBA.

The amendment fixing the tax language was offered by Sen. Mike Rounds, R-SD, and included in a broader amendment to the tax reform bill in the Senate.