The Internal Revenue Service has released a revenue procedure dealing with the tax effects on securitized mortgages that have been modified to avoid foreclosures.
Many servicers of mortgage loans have developed foreclosure prevention programs, the IRS noted. They have been applying the programs both to loans that investors hold directly and to loans held through securitization vehicles such as investment trusts and real estate mortgage investment conduits. The revenue procedure goes on to describe features of both types of vehicles and gives specific examples of how the rules can be applied.
The revenue procedure governs determinations made by the IRS on or after May 16, 2008, with respect to loan modifications effected on or before Dec. 31, 2010. The IRS has invited public comment by July 15, including whether the revenue procedure should be extended to loan modifications effected after 2010.