Loan Modifications And Tax Liens Part I

31 Dec Loan Modifications And Tax Liens Part I

As a mortgage foreclosure defense attorney in Southwest Florida, I’ve witnessed mortgage modifications work in many instances; however, the overwhelming majority are going nowhere fast. You definitely need someone who knows what they are doing to help you. When you add a tax lien to the mortgage modification mix, you could all but guarantee the mortgage company representative will move your file to the bottom of the pile, until now.

The Internal Revenue Service (IRS) has recently announced an expedited process to ease the modification or re-financing process. Let me be the first to say that I feel much better knowing that yet another Governmental Entity is getting into the “we want to help the individual homeowner game”.A federal tax lien is usually filed by the IRS against the property of a delinquent taxpayer to secure payment of the taxes. Here we are speaking about the federal tax liens which are secured by the taxpayer’s interest in real property. The tax lien creates another obstacle in the mortgage modification process, and therefore, usually causes many homeowners to abandon their attempts to modify their mortgages. Likewise, the filing of a tax lien usually dooms any attempt to refinance a home.

The IRS has stepped up to the plate and is now willing to make it easier for financially distressed individuals to either refinance their homes, modify their mortgages or sell their homes. According to their website, the IRS may allow their federal tax liens to become secondary to a new financing agreement and/or their federal tax lien may be discharged if the home being sold for less than the first mortgage lien.

IRS Publication 784, titled: “How to prepare an Application for a Certificate of Subordination of a Federal Tax Lien”, sets forth the procedure which must be followed by a homeowner seeking subordination of the IRS Federal tax lien. Subordination is a process where a federal tax lien can become secondary to another lien, like a new mortgage.

So, if the distressed homeowner has a tax lien and wishes to modify their mortgage or refinance with a new mortgage, they could request subordination by sending a request to one of 40 Collection Advisory Groups. The Advisory Group information is contained in Publication 4235. Although I understand the logic behind subordination, I don’t believe it will be used very often in Southwest Florida or anywhere the current housing market is in disarray. At this point in time, very few people have equity in their homes.

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Carmen Dellutri is a proud member of the Florida Bar, and he is a Board Certified Consumer Bankruptcy Attorney, Certified by the American Board of Certification. He practices in the areas of Consumer Bankruptcy and Plaintiff's Personal Injury. He is the principal attorney at The Dellutri Law Group, P.A. The firm supports many charitable and civic causes by donating time and much needed capital to our community. Mr. Dellutri and the other attorneys in the firm routinely speak to students of all ages about various legal and societal issues.
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