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November 30, 2020

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Notice to Mortgage Lenders – Your Mortgage Interest Statements Must be Revised Starting in Tax Year 2016

An act passed by Congress last year makes changes to IRS Form 1098 (Mortgage Interest Statement) starting in tax year 2016 (reported commencing in calendar year 2017).  Internal Revenue Code Section 6050H(b)(2)(D) requires that a Form 1098 include “the amount of outstanding principal on the mortgage as of the beginning of the calendar year” as well as the date of origination of the mortgage loan.  Earlier this month, the IRS released a revised Form 1098 which repeats the language quoted in the previous sentence without further elaboration.  A question had been raised as to whether the amount of outstanding principal as of January 1 needed to be updated to reflect a monthly payment received after January 1 but which is credited as of January 1.  The Credit Union National Association is reporting that the IRS has clarified that any payments received after January 1 (such as during the grace period for receipt of monthly payments) are not to be reflected in the outstanding balance as of January 1, nor is a payment that is received prior to January 1 but rejected for insufficient funds after January 1 to be added back to the outstanding balance as of January 1.

Mortgage lenders must make sure that their systems are updated to provide the revised Form 1098 starting next year.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume VI, Number 167



About this Author

Sherwin Root Corporate Attorney Sheppard Mullin Los Angeles

Mr. Root is a senior attorney in the Corporate Practice Group in the firm's Los Angeles office.

Practice Areas

Mr. Root handles transactions and regulatory issues for clients in the financial services industry, including banks, thrifts, and mortgage banking companies, and general corporate matters.  He is a former Senior Counsel at Home Savings of America, FSB, where he was the primary attorney responsible for legal matters relating to residential lending.