Amendment Tackles High-LTV Tax Disclosures

High-LTV lenders would be required to disclose that the interest on the loan is not necessarily tax deductible under an amendment by Sen. Jack Reed, D, R.I., that has been added to the consumer bankruptcy bill (S. 1301).The Reed amendment is designed to stop misleading advertising of the tax advantages of 125% loans and to stop the Internal Revenue Service from requiring lenders to flag high-LTV loans. "Objectively, the Reed amendment eliminates the need for any IRS action," said Jim O'Connor, tax counsel for America's Community Bankers. The IRS has been considering changes to the "Mortgage Interest Statement" information form (Form 1098) to alert IRS that a borrower has a high-LTV loan. The Senate was expected to pass S. 1301 Tuesday if an amendment by Sen. Edward Kennedy, D, Mass., to increase the minimum wage is defeated. The House has already passed a bankruptcy bill (H.R. 3150), and the chief sponsor, Rep. George Gekas, R, Pa., expressed confidence Tuesday morning that a consumer bankruptcy bill can be passed in the next few weeks before Congress adjourns. In addition, the Clinton administration says it can support the Senate version of the bankruptcy bill, which has a more flexible standard for determining which debtors can have access to Chapter 7 bankruptcy.