Missed payments on mortgage

[taxxcpa]

Here is the situation: Someone misses payments on his mortgage for several months and the mortgage holder adds the principal and any escrow shortage back to the principal.

At year-end, would the uncollected interest be taxable to the mortgage holder or deductible by the payer.

Assuming both are on a cash basis, then I would assume that only the interest actually collected would be reported by either. Due to the increased principal, if, at a later date, payments are resumed, the new, increased interest would be reported on Schedules A & B.

Am I overlooking anything? Any suggestions on how many payments you would allow someone to miss before foreclosing.

[MLINDER42]

missed payments

I have had clients not pay for 12 months till they received a modification.The 1098 they received only included the interest that was actually paid.I have 3 clients now in the 5th month of no payments waiting for a modification.

[taxxcpa]

Late or non-payment

In this case the owner had moved out and rented the house. When the renters began paying late, the owner did not pay until rent was received. The July rent has not yet been paid and the owner is sending an eviction notice. The owner lost or quit his job and is looking for a new job. He has frequently changed jobs in the past and seems to be able to find new work fairly quickly. Hopefully he will soon do so and be able to resume payments.

The mortgage holder has agreed to hold off for three payments, but not indefinitely.