By Alvin S. Brown
Tax attorney
Alvin Brown & Associates
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Know how IRS rules can work for and against your origination license
Since the passage of the Secure and Fair Enforcement for Mort- gage Licensing Act, mortgage
brokers and loan originators licensed
under the Nationwide Mortgage Licensing System have been subject to credit
checks aimed at evaluating their financial responsibility. Among other items,
these reports will reveal Internal Revenue Service (IRS) tax liens.
Any IRS tax lien likely will disqualify brokers and loan originators from
obtaining or renewing their license.
Brokers and loan originators hoping to
avoid such disastrous consequences
should keep current with their tax payments and IRS protocols for filing tax
liens. They also should know how to request tax-lien withdrawals.
A tax lien gives the IRS legal claim to
property as security or payment for tax
debt and can stay on a credit report for
as many as seven years after the debt
has been eliminated.
A Notice of Federal Tax Lien may be
filed only after:
• The IRS assesses a tax liability;
• The IRS sends you a Notice and
Demand for Payment (a bill that tells
you how much you owe in taxes); and
• You neglect or refuse to pay the debt
within 10 days after receipt of the
notice.
When the IRS files a tax lien against
a taxpayer, it obtains a lien against
all of that person’s property, property
rights and future acquired property.
The purpose of a Notice of Federal Tax
Lien, when filed in the public records,
is to protect the IRS’s interest in a taxpayer’s property against the claims of
other creditors.
A Notice of Federal Tax Lien validates
the government’s lien. After this notice
is filed, the IRS must provide the taxpayer written notice within five business days. The IRS also must advise
the taxpayer of the right to a hearing in
front of the IRS appeals office.
Under certain circumstances, the IRS
has the discretion to withdraw a Notice
of Federal Tax Lien. This can occur when:
• The filing was premature or otherwise not in accordance with administrative procedures;
• The taxpayer enters into an agree-
ment to satisfy the tax liability;
• The withdrawal of the notice will facilitate the collection of the tax liability; or
• The withdrawal of the notice would be
in the best interests of the taxpayer.
Although the IRS may withdraw a
Notice of Federal Tax Lien, it is not required to do so. The withdrawal of a
lien will, however, expunge it from
credit reports.
This past February, the IRS made
some important changes to its lien-filing practices. These changes are
spelled out in IRS document IR-2011-20
(
sctsm.in/IR-2011-20).
The changes include:
• Increasing the dollar threshold for
lien issuance, which will result in
fewer liens;
• Facilitating lien withdrawals after tax
bills are paid;
• Withdrawing most liens for taxpayers who enter into payment agreements; and
• Making payment agreements more
accessible for small businesses.
Mortgage originators with current
IRS tax liens may want to use this opportunity to request a withdrawal of
the lien. You can do this using IRS Form
12277, which can be found online at
sctsm.in/Form12277. •
Note: This article was written for educational
and informational purposes only and should
not be construed as tax or legal advice. For
information specific to your situation, please
consult a tax attorney or adviser.
Alvin S. Brown, tax attorney, operates Alvin
Brown & Associates, a tax-law firm specializing in IRS controversies and representing
clients in the U. S. and abroad. E-mail him at
ab@irstaxattorney.com or call (888) 712-7690.
Find him on Twitter: @ustaxattorney.
The letter makes it clear that HUD will
look for lenders to be more proactive
and to follow established guidelines for
lending and quality-control plans.
« QUALI T Y-CON TROL continued from page 32
“By eliminating brokers
without also reducing its
audit staff, HUD has more
time to check up on the
FHA-approved lenders
that remain. This will
directly affect loan
correspondents working
under these lenders,
The letter also includes specific guidance on early payment defaults, stating
that mortgagees must review such defaults within 45 days from the end of the
month in which the loan is reported as
60 days past due. (Note: Early payment
defaults are defined as loans that become 60 days past due within their first
six scheduled payments.) Again, mortgagees must maintain two years’ worth
of records.
The 45-day requirement proves HUD
will have the time and staff necessary
to pay close attention to early payment defaults.
In addition, Mortgagee Letter No.
2011-02 requires rejected mortgage
applications to be reviewed within
90 days from the end of the month
in which the decision to reject was
rendered. It’s likely that HUD will pay
more attention to fair-lending issues
moving forward.
HUD’s efforts to emphasize quality-control-plan requirements likely mean
brokers and lenders working with
FHA-insured loans can expect more
reviews and audits. If your company
lacks a quality-control plan that takes
Mortgagee Letter No. 2011-02 into account, make a point to update it as
soon as possible.
Also, make sure your plan is written
to your specific business model. If and
when HUD comes knocking, it will want
clear evidence that your plan reflects
the way your company originates, processes and under writes loans.
The better your plan is written and
follows your business model while also
adhering to FHA guidelines, the more
protected your company will be from
sanctions and the more likely you’ll
avoid repurchase requests. •
