IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell

The ""Internal Revenue Service"":http://www.irs.gov (IRS) yesterday announced an expedited process that will help prevent a federal tax lien block on the refinancing of mortgages or the sale of a home by financially distressed homeowners.
If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options, the IRS said in a press statement. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien subordinate to the claim by the lending institution that is refinancing or restructuring a loan. Or, under certain circumstances, taxpayers or their lender representatives can petition the IRS to fully dismiss its claim if the home is being sold for less than the amount of the mortgage lien, the IRS explained.
The process to request a subordination or dismissal of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS said it will work to speed those requests in the wake of the economic and housing downturn.
""We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,"" said Doug Shulman, IRS commissioner.
""We realize these are difficult times for many Americans,"" Shulman said. ""We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.""
Typically, a federal tax lien is an involuntary lien on real estate for nonpayment of income or property taxes, and takes priority over bank liens securing the same property, placing the lender at a less than advantageous position in attempting to collect a debt from a delinquent borrower who also owes taxes. 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 doing so will ultimately help with the collection of the tax debt - a process called subordination.
Taxpayers or their lender representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring the mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments, the IRS explained, since lending institutions generally want their lien to have priority on the home being used as collateral.
Taxpayers or their representatives can also apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien. The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in separate assets, can substitute other assets, or is able to pay the IRS its equity in the property. Without a tax lien discharge, the borrower may be unable to complete the homeownership change and the ownership title will remain clouded.
The IRS also urges people to contact the agency’s Collection Advisory Group early in the home sale or refinancing process so that it can begin work on their requests. People sometimes delay informing lenders of the tax liens, which only serves to delay the transaction, the IRS said.
Currently, there are more than 1 million federal tax liens outstanding tied to both real and personal property. The IRS issues more than 600,000 federal tax lien notices annually.
For additional information on the IRS' lien relief for homeowners and their lenders, ""click here"":http://www.irs.gov/newsroom/article/0,,id=201343,00.html.