Relief for Securitization Vehicles: Mortgage Modification under Foreclosure Prevention Programs
In a recently-issued Revenue Procedure (Rev. Proc. 2008-28), the IRS states that the modification of certain mortgage loans under foreclosure prevention programs involving, for example, interest rate reductions, principal forgiveness, extensions of maturity and alterations in the timing of changes in an interest rate generally will not cause the IRS either to challenge the tax status of certain securitization vehicles that hold the loans or to assert that those modifications create a liability for tax on a prohibited transaction. This relief is granted to real estate mortgage investment conduits (REMICs) and investment trusts where the mortgage loan meets all of the following conditions:
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