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C-4.2-01, Filing IRS Forms (06/09/2021)

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This topic provides information related to filing reports with the IRS. IRS Forms must be completed in accordance with the instructions of the IRS and the rules under the Internal Revenue Code.

If the IRS penalizes Fannie Mae because a servicer failed to file a required form - or filed an incorrect or late form - the servicer must reimburse Fannie Mae for any penalty fees the IRS assesses (unless it can document that it met the filing requirements).

The servicer must also follow all procedures in Reporting to the IRS in F-1-23, Reporting to Third PartiesF-1-23, Reporting to Third Parties for specific instructions pertaining to this topic.

IRS Forms 1099-A and 1099-C

The IRS requires that information returns be filed when Fannie Mae (or a third party) acquires an interest in a property in full or partial satisfaction of the secured debt, or when Fannie Mae has reason to know that a property has been abandoned or upon cancellation of the borrower's mortgage loan debt. The servicer must file IRS Forms 1099-A and 1099-C in accordance with IRS requirements on Fannie Mae’s behalf for

  • portfolio mortgage loans (including participation pool mortgage loans if Fannie Mae’s percentage ownership is 50% or greater) that Fannie Mae holds in its portfolio, and

  • MBS mortgage loans (including mortgage participations if the securitized portion of the whole mortgage loan is 50% or greater) that are not serviced under the regular servicing option.

The servicer must satisfy the reporting requirements for the “owner of record” (instead of on Fannie Mae’s behalf) for

  • participation pool mortgage loans held in Fannie Mae’s portfolio if Fannie Mae’s ownership interest is less than 50%,

  • mortgage participations in MBS pools if the securitized portion of the whole mortgage loan is less than 50%, and

  • most MBS mortgage loans serviced under the regular servicing option.

However, if the servicer did not perform its regular servicing obligation to purchase a delinquent MBS mortgage loan before the property was acquired, the servicer must file the information return on Fannie Mae’s behalf.

For purposes of filing these reports:

  • Fannie Mae (or the “owner of record”) acquires an interest in the property when any redemption period that follows a foreclosure sale ends without redemption rights being exercised (or when Fannie Mae accepts a Mortgage Release);

  • a third party — including the servicer of a first lien mortgage loan secured by a property that also has a subordinate lien, if the servicer bids an amount that is less than that required to satisfy both the first and second lien mortgage debts — acquires an interest in the property at the foreclosure sale; and

  • abandonment occurs when the servicer has “reason to know” from ”all facts and circumstances concerning the status of the property” that the borrower intended to discard or has permanently discarded the property from use.

The servicer will have an additional three months before its reporting obligation arises if it expects to begin foreclosure proceedings within the three months after it determines that abandonment has occurred.

When filing a form on Fannie Mae’s behalf, the servicer must include certain information on the form as set forth in  F-1-23, Reporting to Third PartiesF-1-23, Reporting to Third Parties.

Fannie Mae Exceptions to IRS Form 1099-C Reporting

The servicer must not file an IRS Form 1099-C for mortgage loans that Fannie Mae has assigned (or will assign) to vendors for collection. Fannie Mae will provide a list of accounts to servicers via email for which they must not send the IRS Form 1099-C. Notification will take place no later than January 5th of the year following the calendar year in which the foreclosure sale occurs.

IRS Forms 1099-MISC and 1098

The servicer must file IRS Form 1098, Mortgage Interest Statement, when applicable for each mortgage loan held in whole or in part by Fannie Mae using its own name and taxpayer identification number.

The servicer must not prepare or file IRS Form 1099-MISC, Miscellaneous Income, using Fannie Mae's name or taxpayer identification number. The servicer must consult with its tax advisor to review its reporting obligations with regard to the filing of IRS Form 1099-MISC.

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements Issue Date
Announcement SVC-2021-03 June 09, 2021