In a letter to the Senate Finance Committee, several banking trade organizations wrote to lawmakers on Monday to express concern over new reporting rules requiring servicers to furnish additional information about mortgages on the IRS 1098 form.
“Servicers do typically collect the information proposed to be reported when they ‘board’ new loans onto their servicing systems…” the letter, which was signed by the American Bankers Association, Consumer Mortgage Coalition, Housing Policy Council of the Financial Services Roundtable and Mortgage Bankers Association, said. “However, only some of this information is currently relevant for tax reporting purposes, so many servicers do not store all the information in a manner that would permit their automated servicing technology systems to retrieve it, and use the information to populate the appropriate boxes in a Form 1098, in a timely manner.”
Servicers are currently required to report information about interest payments on consumer mortgage loans, along with information including the payer’s name and address and amount of interest and points received on the loan during the calendar year.
Under the new proposal, servicers would also be required to provide information on the unpaid principal balance, address of collateral, whether the loan was a refinance, real estate taxes paid from escrow and the date of the loan’s origination.
The trade groups said in the letter that servicers would be required to redesign their technology systems in order to comply with the new requirements—a process that could take months and is complicated by the fact that some servicers have multiple systems to reconfigure.
Additionally, the organizations said the IRS would need adequate time to redesign the Form 1098 and issue guidance clarifying parts of the proposal. The groups also said, depending on how the final rules and definitions are written, servicers may need to collect new information upon loan origination.
“For these reasons, we respectfully request that the amendments to the Form 1098… become effective for statements due after December 31, 2015, and that the IRS guidance be required to be final by April 1, 2015,” the letter said.