Subprime Loan Modifications and Tax Implications

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The federal government took a major step in implementing its program for alleviating the subprime mortgage crisis when the Internal Revenue Service, on December 26, 2007, issued Revenue Procedure 2007-72. In its pronouncement, the IRS has said that it will not seek to disqualify a REMIC (that is, a real estate mortgage investment conduit, under Internal Revenue Code Sec. 860A et. seq.) if a mortgage loan that is included in the REMIC is modified, under the conditions stated in this Revenue Procedure. Also, the IRS will not seek to categorize the loan modification as a ?prohibited transaction? under the REMIC rules.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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