TAX INFORMATION FOR NONRESIDENT ALIENS OF THE U.S.
On February 28, 2013, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board
released amendments to their enforcement actions against 13 mortgage servicers for deficient practices in
mortgage loan servicing and foreclosure processing.1 The amendments require the servicers to
provide cash payments to borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010
and whose mortgages were serviced by one of the 13 servicers or their affiliates.2 Regulators have
published the payment amounts on their websites.3 In addition, in July 2013, the Federal Reserve
Board also released an amendment to its enforcement action against GMAC Mortgage for deficient practices in
mortgage loan servicing and foreclosure processing.
All payments received in connection with the IFR Payment Agreement may be subject to taxation depending on
the borrower’s individual circumstances. This webpage provides general information regarding potential
U.S. federal income tax consequences of these payments if you are a nonresident alien of the United States.4
The Independent Foreclosure Review Payment Qualified Settlement Funds (QSFs) are required to comply with IRS
information reporting requirements with respect to any payments made. The information the Paying Agent
(Rust Consulting) must report to the IRS varies depending on such things as the nature of the payment, the
residence status of the recipient, and whether the Paying Agent is required by law to automatically withhold an
amount of the payment. As a result, borrowers may receive a letter from the Paying Agent requesting additional
tax-related information to process their payment. Borrowers who are nonresident aliens of the U.S. may also
receive one of the tax documents described below.
This webpage is intended solely for informational purposes. It does not suggest a particular tax treatment or
address possible state, local, or foreign tax or any other possible tax considerations based on a borrower’s
individual circumstances.
Please note that the Paying Agent cannot provide tax guidance to borrowers in connection with cash payments.
The information below is general in nature and should not be viewed by borrowers receiving a payment as tax
advice. For more information, consult a qualified professional tax advisor.
In most cases, borrowers who are nonresident aliens of the U.S. will receive a check that represents only a lump
sum “Base payment” that does not represent reimbursement of any particular amounts. For these borrowers, only
Section A of the discussion below applies.
A limited number of borrowers who are nonresident aliens of the U.S. will receive a check that includes the lump
sum “Base payment” and additional amounts. For these borrowers, the letter enclosed with the check will include
a section called “Breakdown of your payment” that corresponds to Sections A through E of the discussion below,
which explains what amounts this payment represents.
This is a lump sum payment that does not represent reimbursement of any particular amounts. The entire “Base
payment” may be subject to taxation as income depending on the borrower’s individual circumstances. The Paying
Agent will report all such payments as income to the IRS and appropriate state agencies and to borrowers who are
nonresident aliens of the U.S. on a Form 1042-S. The Paying Agent will mail this form to borrowers in the first
quarter of 2014, according to the deadlines for mailing required by the IRS. The Paying Agent will report the
“Base payment” portion of the payment amount to the IRS and to the borrower who is a nonresident alien of the U.S.
and this component will be subject to tax withholding at the rate of 30%.5
This payment represents a return of mortgage interest previously paid by the borrower. The tax treatment of this
amount may depend on the borrower’s individual circumstances. If the borrower previously deducted mortgage interest
on the loan that is the subject of the payment, then the payment may be taxable in the amount of the tax benefit the
borrower received from a mortgage interest deduction in a prior year. If the return of mortgage interest is in an
amount of $600 or greater, the Paying Agent will report such payments to the IRS and appropriate state agencies and
to borrowers on a Form 1098. The Paying Agent will mail this form to borrowers in the first quarter of 2014, according
to the deadlines for mailing required by the IRS. If the return of mortgage interest is in an amount less than $600,
the Paying Agent will not report the amount to the IRS or to the borrower, but the amount may still be subject to
taxation depending on the borrower’s individual circumstances.
This payment represents a return of the amount of the borrower’s lost equity in their home. The tax treatment of this
amount may depend on the borrower’s individual circumstances. The Paying Agent is not reporting this amount to the IRS
or state agencies, so the borrower will not receive a tax document related to this portion of the payment, but the amount
may still be subject to taxation depending on the borrower’s individual circumstances.
This payment represents a payment of interest due to the borrower on the amounts specified in Sections A, B, and C above
and/or Section E below. The tax treatment of this amount may depend on the borrower’s individual circumstances. The
Paying Agent will report all such payments as interest income to the IRS and appropriate state agencies and to borrowers
who are nonresident aliens of the U.S. on a Form 1042-S. The Paying Agent will mail this form to borrowers in the first
quarter of 2014, according to the deadlines for mailing required by the IRS. The Paying Agent will report the “Interest
on other payment components” portion of the payment amount to the IRS and to the borrower who is a nonresident alien of
the U.S. and this component may be subject to NRA withholding at the rate of 30% under certain circumstances.
This payment represents a reimbursement of fees paid by the borrower related to their loan. The tax treatment of this
amount may depend on the borrower’s individual circumstances and the types of fees the borrower paid. The Paying Agent is
not reporting this amount to the IRS or state agencies, so the borrower will not receive a tax document related to this
portion of the payment, but the amount may still be subject to taxation depending on the borrower’s individual circumstances.
If a borrower does not return tax information on the Form W-8 as requested by the Paying Agent, then the Paying Agent is
required by law to automatically withhold certain amounts. These amounts will be subtracted from the borrower’s payment
and noted in the letter enclosed with the check. The Paying Agent will report such amounts to the IRS and to borrowers
who are nonresident aliens of the U.S. on a Form 1042-S. The Paying Agent will deposit the amounts withheld on the
borrower’s behalf with the IRS or the appropriate state agency and mail the Form 1042-S to the borrower in the first quarter
of 2014.
This webpage is intended solely for informational purposes. It does not suggest a particular tax treatment or address possible
state, local, or foreign tax or any other possible tax considerations based on a borrower’s individual circumstances. For
additional information you can also go to www.irs.gov.
The information above is general in nature and should not be viewed by borrowers receiving payments as tax advice. For more
information, borrowers should consult a qualified professional tax advisor.