221.04
| 221.04A | |
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The Internal Revenue Service requires certain mortgage holders, including Fannie Mae, to file information returns when $600 or more of a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. is cancelled. Except as provided in Part V, Chapter 2: Reporting and Remitting, Section 221.04D: Exceptions to IRS Form 1099-C Reporting, the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must file these returns on Fannie Mae's behalf, using IRS Form 1099-C, for all applicable Mortgage LoansMortgage LoansMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. (including Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. participations if Fannie Mae's percentage ownership of such Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. is 50% or greater). If, in the same calendar year, a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. is canceled in connection with a foreclosure or abandonment of secured property, it is not necessary to file both Form 1099-A and Form 1099-C for the same BorrowerBorrowerPerson who is the obligor per the Note. . Only Form 1099-C need be filed, and the Form 1099-A filing requirement for the BorrowerBorrowerPerson who is the obligor per the Note. will be met by completing boxes 4, 5, and 7 on Form 1099-C.
A debt is cancelled (in whole or part) when any of the following occur:
- discharge in bankruptcy under Title 11 of the U.S. Code;
- receivership, foreclosure, or similar federal or state court proceeding makes the debt unenforceable;
- the statute of limitations applicable to collecting the debt expires (if so determined by a court and any appeal period has expired), or expiration of the statutory period for filing a claim or beginning a deficiency judgment proceeding;
- foreclosure remedies by law end or bar Fannie Mae’s right to collect the debt (e.g., foreclosure by exercise of the “power of sale” in the Security InstrumentSecurity InstrumentInstrument creating a lien or encumbrance on 1 or more Properties and securing the Loan Document obligations. );
- probate or similar proceeding cancels or extinguishes the debt;
- Fannie Mae and the BorrowerBorrowerPerson who is the obligor per the Note. agree to cancel the debt at less than full consideration;
- a decision or defined policy of Fannie Mae causes collection activity to be discontinued and the debt to be cancelled; or
- expiration of a “non-payment testing period”.
The Internal Revenue Service presumes that a debt is cancelled during a calendar year if no payment has been received on the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. during a period (the “non-payment testing period”) of 36 months, plus the number of calendar months when collection activity was precluded by a stay in bankruptcy or similar bar under state or local law. The presumption may be rebutted, however, if there has been significant, bona fide collection activity at any time during the calendar year, or if facts and circumstances, existing as of January 31 of the calendar year following expiration of the 36-month period, indicate that the indebtedness has not been discharged.
| 221.04C | |
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The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. is responsible for completing the Cancellation of Debt (IRS Form 1099-C) accurately, and for filing it with the Internal Revenue Service and providing the information to the BorrowerBorrowerPerson who is the obligor per the Note. and to Fannie Mae by the required dates. The form must be filed on or before February 28 (or March 31 if filing electronically) of the year following the calendar year in which the discharge of indebtedness occurs.
If the Internal Revenue Service penalizes Fannie Mae because the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. failed to file a return or filed an incorrect or late return, Fannie Mae will require the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. to reimburse Fannie Mae for any penalty fees the Internal Revenue Service assesses (unless the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. can document that it met the filing requirements).
The ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. also must furnish the BorrowerBorrowerPerson who is the obligor per the Note. with an information statement before January 31 of that year. The requirement for notifying the BorrowerBorrowerPerson who is the obligor per the Note. can be satisfied by sending Copy B of a completed IRS Form 1099-C (or a substitute statement that complies with Internal Revenue Service requirements for substitute forms) to the Borrower'sBorrower'sPerson who is the obligor per the Note. last known address, and the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. must send Copy C to those states that require it. When the form is filed on Fannie Mae's behalf, it must show Fannie Mae's name as the “Creditor,” Fannie Mae's address and federal identification number (52-0883107), and include a legend identifying the statement as important tax information that is being furnished to the Internal Revenue Service.
Information that must be reported on IRS Form 1099-C includes:
- the Borrower'sBorrower'sPerson who is the obligor per the Note. name, address, and taxpayer identification number (the Social Security number if the borrower is a natural person);
- the date the debt was cancelled;
- the amount of the cancelled debt, which does not include interest or any amount received in satisfaction of the debt from a foreclosure sale or other means;
- a description of the debt, such as “mortgage loan,” and a description of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). if a combined IRS Form 1099-C and 1099-A is filed;
- whether the BorrowerBorrowerPerson who is the obligor per the Note. is personally liable for the debt;
- whether the debt was cancelled in bankruptcy; and
- the fair market value of the PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). if a combined IRS Form 1099-C and 1099-A is filed.
If the cancelled Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. had an original principal amount of $10,000 or more, was originated after 1994, and involves BorrowersBorrowersPerson who is the obligor per the Note. who are jointly and severally liable for the debt, a separate information return for each BorrowerBorrowerPerson who is the obligor per the Note. must be filed, and each return must report the entire amount of the cancelled debt. If the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. was originated prior to January 1, 1995, or if the original principal amount of the cancelled Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. was less than $10,000, and if there are multiple BorrowersBorrowersPerson who is the obligor per the Note. , reporting is required only with respect to the primary (or first-named) BorrowerBorrowerPerson who is the obligor per the Note. . In addition, only one information return is required, regardless of the origination date or the original principal amount, if the ServicerServicerPrimary Person servicing the Mortgage Loan, including the originator, seller, or a third party. knows, or has reason to know, that co-Borrowers were husband and wife living at the same address when the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. was originated, and does not know or have reason to know that such circumstances have changed when the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. is cancelled.
Interest. Interest need not be reported. If it is reported as part of the cancelled debt, the IRS Form 1099-C instructions require that it be shown in a separate box on the form.
Non-principal amounts. Cancellation of amounts other than stated principal, including penalties, fines, fees, and administrative costs charged to the BorrowerBorrowerPerson who is the obligor per the Note. , need not be reported.
Release of a co-Borrower. IRS Form 1099-C need not be filed when one BorrowerBorrowerPerson who is the obligor per the Note. is released from a Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. as long as the remaining BorrowersBorrowersPerson who is the obligor per the Note. are liable for the full UPBUPBUnpaid Principal Balance of the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. .
Guarantor or surety. A guarantor or surety (i.e., any GuarantorGuarantorKey Principal or other Person executing a Payment Guaranty, Non-Recourse Guaranty, or any other Mortgage Loan guaranty. or Key PrincipalKey PrincipalPerson who controls and/or manages the Borrower or the Property, is critical to the successful operation and management of the Borrower and the Property, and/or may be required to provide a Guaranty. executing a Non-Recourse GuarantyNon-Recourse GuarantyGuaranty executed by a Key Principal on Form 4501 series or Form 6015 series, or approved by Fannie Mae. or a Payment GuarantyPayment GuarantyGuaranty executed by a Key Principal on Form 4502 series or Form 6020 series, or approved by Fannie Mae. ) is not a BorrowerBorrowerPerson who is the obligor per the Note. for purposes of the debt cancellation reporting requirements, so IRS Form 1099-C is never required.
If, in the same calendar year, the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. is cancelled in connection with the acquisition or abandonment of the same PropertyPropertyMultifamily residential real estate securing the Mortgage Loan, including the fee simple or Leasehold interest, Improvements, and personal property (per the Uniform Commercial Code). securing the Mortgage LoanMortgage LoanMortgage debt obligation evidenced, or when made will be evidenced, by the Loan Documents, or a mortgage debt obligation with a Fannie Mae credit enhancement. , filing a timely and accurate IRS Form 1099-C will satisfy the requirement to file an IRS Form 1099-A.