IRS Wants To Help Distressed Homeowners

[Dec 18, 2008.]

 

The Internal Revenue Service (IRS) recently announced a new process to assist homeowners having difficulty refinancing their mortgage or selling their home due to a federal tax lien.

In most cases, a consumer with a federal tax lien will be unable to refinance their mortgage. The new lender will not move forward with a transaction in which they are not the primary lien holder. If a borrower defaults on repaying the loan, the new lender wants first priority in recovering the money owed to them and certainly does not want to be competing with the U.S. Government for those funds.

Homeowners can either now request that the IRS subordinate their tax lien into a second lien position to facilitate a refinance or they can ask to have the lien discharged when selling a home for less than what is owed.

According to a Wall Street Journal article, the IRS issues more than 600,000 federal tax lien notices a year. Those numbers are expected to climb as taxpayers continue face difficult financial times.

"These are difficult times for the U.S. economy," said IRS Commissioner Doug Shulman. "Many homeowners are at risk of losing their homes. Many are hoping to refinance at lower rates, and in some cases, homeowners are forced to sell their homes and get the best deal they can in the current marketplace."

The agency also said that the program is designed for people who have a history of paying their taxes in full but who have fallen behind on taxes "because of these extraordinary times."

The requests typically take about 30 days to process, however, the IRS has announced plans to expedite requests to ensure homeowners receive quick relief.

 

About Author:

Chris Rocks is the Regional Director of the National Credit Federation (NCF), a consumer advocacy group that assists small business owners and consumers overcome debt and credit challenges.