Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has issued guidance allowing certain asset securitization vehicles to avoid a challenge to their tax status in the event disqualifying modifications are made to subprime mortgage loans held by the vehicle. Real Estate Mortgage Investment Conduits (REMICs) are common securitization vehicles for mortgages. Aimed at aiding current attempts to curtail the economic fallout of the subprime mortgage crisis, the revenue procedure's emphasis is on residential subprime adjustable rate mortgage (ARM) loans. The guidance provided in Rev. Proc. 2008-47 relies on information contained in the recent publication by the American Securitization Forum entitled, "Statement of Principles, Recommendations and Guidelines for a Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans" (the July 2008 Framework).

  The July 2008 Framework is effective July 8, 2008, and applies to first-lien subprime residential ARMs that (1) originated between January 1, 2005, and July 31, 2007, (2) have an initial fixed rate period of 36 months or less, (3) are included in securitized pools, and (4) have an initial interest rate reset date between January 1, 2008, and July 31, 2010. This July 2008 Framework provides a fast track procedure for modifying loans in advance of a reset date and generally fixes the rate for a period of five years.

  The revenue procedure applies to a fast track modification to a loan following the July 2008 Framework, and to a second-lien holder's action of subordinating its lien to any new lien that may arise under a loan as the result of such a fast track modification. The transactions must occur on or before July 31, 2010. If either of these transactions occur, the IRS will not challenge a securitization vehicle's:

  (1) qualification as a REMIC on the grounds that the transactions are not among the exceptions listed in
Reg. § 1.860G-2(b)(3);

  (2) classification as a trust on the grounds that the transactions manifest a power to vary the investment of the certificate holders; and

  (3) qualification as a REMIC on the grounds that the transactions resulted in a deemed reissuance of the REMIC regular interests

Furthermore, the IRS will not contend that the transactions are prohibited transactions under Code Sec. 860F(a)(2) on the grounds that the transactions resulted in one or more dispositions of qualified mortgages and that the dispositions are not among the exceptions listed in Code Sec. 860F(a)(2)(A)(i) through (iv).

 
Rev. Proc. 2007-72 is amplified and, as amplified, is superseded by Rev. Proc. 2008-47.Rev. Proc. 2007-72 is amplified and, as amplified, is superseded by Rev. Proc. 2008-47.

Rev. Proc. 2008-47, 2008FED ¶46,514

Other References:

 
Code Sec. 860D

  CCH Reference - 2008FED ¶26,662.01

  CCH Reference - 2008FED ¶26,662.021

 
Code Sec. 7701

  CCH Reference - 2008FED ¶43,091.68

  Tax Research Consultant

  CCH Reference - TRC RIC: 9,300

  CCH Reference - TRC ESTTRST: 3,150