TAX INFORMATION
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 citizen or resident of the United States.4
The Independent Foreclosure Review Payment Qualified Settlement Fund (QSF) is required
to comply with IRS information reporting requirements with respect to any payments
made. The information the Paying Agent 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
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 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 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 explain 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. For checks in an amount of $600 or greater,
the Paying Agent will report such payments as income to the IRS and appropriate
state agencies and to borrowers on a Form 1099 MISC. 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 not report a "Base payment"
of less than $600 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 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. If the interest
payment is in an amount of $600 or greater, the Paying Agent will report such payments
as interest income to the IRS and appropriate state agencies and to borrowers on
a Form 1099 INT. 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 not report an "Interest on other payment components" amount of
less than $600 to the IRS or to the borrower, but the amount is still subject to
taxation as income.
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-9 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 on a Form 1099 MISC and/or a Form 1099 INT. The Paying
Agent will deposit the amounts withheld on the borrower's behalf with the IRS or
the appropriate state agency. If required, tax documentation, such as a Form 1042-S
or Form 1098, will be sent according to the timeline mandated by the IRS.
If the Paying Agent is contacted by a Federal or State Agency with an Order to Withhold, then the Paying Agent is required by law to automatically withhold certain amounts. These amounts will be subtracted from the borrower's payment and itemized in the letter enclosed with the check. A separate letter including the agency's request will be mailed separately. The Paying Agent will remit these funds to the requesting agency and the borrower will retain the tax liability for these funds.
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.