IRS Checking High-LTV Loans

The Internal Revenue Service is considering a change to the Mortgage Interest Statement (1098 Form) that would require lenders to check a box "if this may be a high loan-to-value loan."MortgageWire has obtained a copy of the draft 1098 Form, which has not yet been issued for public comment. The IRS has issued warnings in the past that it is concerned lenders are leading borrowers to believe that all mortgage interest on 125% LTV loans is deductible. Now lenders have to be concerned that they could face penalties if they do not check the box -- even if they are not sure it is a high-LTV loan. And borrowers may get a shock when they receive the new 1098 Form. "Homeowners will intuitively and justifiably believe their probability of an IRS examination has just increased," a source said.