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princessicys1
3 Posts |
 Posted - 02/07/2010 : 08:43:42 AM
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| I have a client, who is going through a program and qualifies to purchase a home, but has a problem. The client has an IRS tax debt that will not be settles for ten years. The client is on a payment plan with the IRS, never let, has no other revolving debt and has fair credit. The program has already approved the client for the loan except they cannot get around the taxt debt. Is there a a way to obtain a mortgage loan when you have an IRS debt? If so, through who? |
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jstar
1343 Posts |
Posted - 02/07/2010 : 08:55:55 AM
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If the problem is due to high DTI because of the tax debt the only way to solve this would be to look for lower priced properties that fit his income.
Or is the lender saying they will not lend to some one with an IRS debt? |
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nowbroker
3004 Posts |
Posted - 02/07/2010 : 08:58:31 AM
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| IRS would have to subordinate the debt, otherwise a new mortgage lender would be in 2nd position. FHA will allow this, but check with IRS to see if they will subordinate. |
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steve_sushner
211 Posts |
Posted - 02/07/2010 : 5:30:34 PM
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The IRS does NOT have to subordinate to a purchase money mortgage. It is the only debt that take priority ahead of an existing IRS lien. The reasoning being that it is in the IRS' interest to encourage debtors to acquire potentially appreciable property.
If it were a refinance, the IRS would have to subordinate and to most people's surprise, regularly does so if the borrower's likelihood of payment is improved by the transaction. Do not expect cash out, obviously.
quote:
Originally posted by nowbroker
IRS would have to subordinate the debt, otherwise a new mortgage lender would be in 2nd position. FHA will allow this, but check with IRS to see if they will subordinate.
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nowbroker
3004 Posts |
Posted - 02/07/2010 : 5:48:09 PM
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| So if someone has an IRS judgment recorded in the past against them it will not attach to subsequent real property that they acquire? Never heard of that one. |
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steve_sushner
211 Posts |
Posted - 02/07/2010 : 5:51:20 PM
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It will attach, but automatically behind any purchase money mortgages (including purchase money seconds). I would venture that most people do not know that.
quote:
Originally posted by nowbroker
So if someone has an IRS judgment recorded in the past against them it will not attach to subsequent real property that they acquire? Never heard of that one.
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caniskovich
274 Posts |
Posted - 02/07/2010 : 7:55:39 PM
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| the IRS does not know someone is purchasing a home until the mortgage lien is already filed, if they choose to attach it would be in second position |
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steve_sushner
211 Posts |
Posted - 02/07/2010 : 8:00:57 PM
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Right result, but wrong rationale. The IRS does not file a lien on each property one at a time. They file a blanket lien that applies to all current and future acquired property. However, the lien is junior to any purchase money liens for the reasons I stated above.
quote:
Originally posted by caniskovich
the IRS does not know someone is purchasing a home until the mortgage lien is already filed, if they choose to attach it would be in second position
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princessicys1
3 Posts |
Posted - 02/08/2010 : 04:51:22 AM
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| I am hearing all of you, but I still have a question. The loan program my clien is going through is NACA. The mortgage broker advised HER that she cannot obtain their mortgage with an IRS lien, because when the mortgage payment is issued for the purchase of the home, the IRS will garnish their portion out of the funds, leaving a balance remaining owed on the purchase. Is this correct? |
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liverichly
6459 Posts |
Posted - 02/08/2010 : 08:43:46 AM
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Akilah Smith you are getting fed some BS there.
Contrary to most people's beliefs, when you owe money to the IRS it does not automatically become a tax lien or judgment. They give you a chance to make payments directly to the IRS without anything being done to one's credit. They don't look to garnish anything, repossess property, etc. until after you've defaulted on the payment agreement with the IRS (usually have to be delinquent for many months on the plan). If your client does not have a tax lien from the IRS, then the payments to the IRS will just be treated as any other debt that is owed and payments are being made on - added to the debt to income ratio but most underwriters/lenders should not have an issue with it being from the IRS. Problem is that your client is using a very unique program, NACA, and that program has it's own unique set of qualifications & guidelines one must meet. If your client is set on using NACA and only using NACA, and the loan officer that is telling them they will have an issue obtaining a NACA loan if they owe money to the IRS (tax lien or not) then it sounds like your client would need a new loan program. |
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steve_sushner
211 Posts |
Posted - 02/08/2010 : 08:50:00 AM
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| The IRS could garnish the funds she was planning on making her payment with. |
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princessicys1
3 Posts |
Posted - 02/08/2010 : 08:52:22 AM
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| Thank you all for the information. The tax lien has already been applied on my clients credit report. If she elects not to use NACA, is there an alternative? |
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liverichly
6459 Posts |
Posted - 02/08/2010 : 09:34:13 AM
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If a payment plan has been established, and the last 12 months have been on time... then FHA should be fine with the tax lien not being paid off, the payments to the IRS will still be counted in the debt to income ratio though. I believe VA & USDA would also be OK with it.
FHA specifically states:
Since the IRS routinely takes a second lien position without the necessity of independent documentation, eligibility for FHA mortgage insurance will not be jeopardized by outstanding IRS tax liens remaining on the property unless the lender has information that the IRS has demanded a first-lien position. |
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gcapozzoli
253 Posts |
Posted - 02/08/2010 : 09:41:05 AM
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| be sure to get a clear caivrs number if customer elects to go for the government loans. |
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liverichly
6459 Posts |
Posted - 02/08/2010 : 10:20:29 AM
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| Yeah, without a CAIVRS clearance government financing won't be available. |
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emoney
1006 Posts |
Posted - 02/08/2010 : 3:27:38 PM
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quote:
Originally posted by caniskovich
the IRS does not know someone is purchasing a home until the mortgage lien is already filed, if they choose to attach it would be in second position
Don't think so as IRS and/or any other Federal debt/lien takes priority over any other obligation and can not even be bankrupt. |
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steve_sushner
211 Posts |
Posted - 02/08/2010 : 7:58:01 PM
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Not over a purchase money mortgage- see above.
quote:
Originally posted by emoney
quote:
Originally posted by caniskovich
the IRS does not know someone is purchasing a home until the mortgage lien is already filed, if they choose to attach it would be in second position
Don't think so as IRS and/or any other Federal debt/lien takes priority over any other obligation and can not even be bankrupt.
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