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Mortgage with Federal Tax Lien

I've been working with the IRS on a FTL resolution - the IRS Advocate advised me to file for Lien Subordination making the IRS secondary to any other lien holder.  The FTL is on me, as I do not own any property, and swears there are lenders out there that will do this type of loan...Anyone have information on these types of loans?

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December 03 2009 - Savage-Guilford
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I recently closed a reverse mortgage in which the homeowner had a significant IRS lien. I worked my tail off to get IRS to subordinate the loan to no avail. Finally I recommend the homeowner contact an attorney. The IRS liens were over 10 yrs old and the attorney was able to get the liens release within a few days. We were able to close this loan quickly after.

My advise, HIRE AN ATTORNEY.

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December 04 2009
wrknprogrs

With all due respect, it's an underwriter call...........chances are with Any outstanding Lein with the IRS............you are SOL.

At a compliance meeeting this week, it was announced that HUD can now hold an underwriter civially liable for damages..........Unbelievable...for any issues relating to an approval deemed inapprpriate by HUD.

I don't think too many underwriters are going to want to waive the requirement that all liens be paid.

We are in a completely new environment in lending.

Best of Luck and Merry Christmas
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December 03 2009
I agree with you Hamp. .... The chances are slim to none.

If the IRS is aware of his/her financial sitution, there may be a big surprise the next time they check their bank account balance. ZAP, into IRS's account. All gone!
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December 03 2009
The IRS isn't going to let you cough up "their" money for the down payment. If you have cash to put down, I wouldn't even let the IRS be made aware of this. It may vanish from your account. Slippery slope you're standing on. Regardless of the subordination myth.

In fact, an IRS lien can't be subordinated. They may agree not to pursue it, but it is subordinate to nothing. It is ordinate ( if there is such a word), and enforceable in ways no other lienholder can muster. The FBI, garnishment, and prison time come to mind first. It has no lien position.

Those guidelines probably refer to people who already own property, not to those who are trying to use money they owe the IRS to acquire property.
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December 03 2009
Lien release with payment plan is going to be your best option to pursue.   I have never once seen a loan complete with an open IRS lien.  It is true guidelines will allow it, but lenders won't.

My best reasoning is no lender likes the idea of the possibility of battling IRS for money in a default situation.   Even a subordinated IRS lien could look to seize property in a default situation and put the lender at risk if property has depreciated since purchase.  

It simply isn't prudent to be lending when the IRS is involved.
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December 03 2009
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@Justin - you are correct!  Here's what one of my friends said to me in an email - she's been in the mortgage business for more than 25 years as an underwriter, and loan officer (BOA, NCMC, Accubanc) and currently doing foreclosure counseling for a local county government:

> Where are you getting this stuff? It is accurate. I can now recall approving a loan with these guidelines.
>Soooooo, can you tell me what to say to present this information to a lender citing the information in the FHA guidelines handbook? Or, is it totally at their discretion?
>It all depends on so many factors, but I know the underwriting guidelines. Most lenders now use automated underwriting, which tell them whether or not to approve the loan. Has your credit been reviewed by a lender recently? All lenders are required the follow the same FHA guidelines. They have more discretion when using conventional loan programs (i.e. Fannie Mae or Freddie Mac). I'll help however I can. But so far, you have been getting good information. The questions is, are lenders willing in this down economy to offer services previously offered. Keep the faith and keep pressing on. 

I talked with the IRS this afternoon - I've been working with a tax advocate for many weeks trying to get a resolution, it's just that I'm impatient now since I've actually found a house in an extremely sought after community and don't want to risk not getting it.  Since my lien qualifies under their current threshold for providing a lien release for individuals going into a payment plan, she's going to finish working through the errors and I'll enter in a payment agreement with the IRS for what, if any liability there is left and get a lien release.

Thanks so much for all of your contributions.  This process can be extremely stressful and draining, but it's good information quickly from so many knowledgeable people!

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December 03 2009

you will have to consult with a loan officer to go over the detials. FHA may have an option if you can subdinate to 2nd position and/or have payment plan in place. the loan officer will need to address if the lender has overlays more restrictive than FHA and the underwirter will allow.

here are two links you may use for your knowledge base link and link

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December 03 2009
Doug and Rudi know what they are talking about.  Just be careful who you listen to as things are so much different these days.

Good Luck.
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December 03 2009
That's like someone telling you you can buy porterhouse steaks for $1.00 a pound. All you have to do is find that butcher. .... Good luck!
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December 03 2009
The IRS may allow it but I don't know of any lenders that will want to close a purchase mortgage with the lien outstanding.
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December 03 2009
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@ Rudi:

Here is what the official IRS publication says about this information, however, the IRS Advocate states there are lenders out here that will do this, but can't provide me the name of one:

Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property.

In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution's, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt.  That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.

To apply for a certificate of lien subordination, people must follow directions in Publication 784, How to Prepare an Application for a Certificate of Subordination of a Federal Tax Lien. Again, there is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235, Collection Advisory Group Addresses, for address information.

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December 03 2009
To my knowledge all liens need to be satisfied before a lender would approve the loan.
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December 03 2009
 
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