Form 1098 Mort Int Stmt

[S T]

I have a client that refinanced (better rate) and now the 1098 Mort Stmts for 2012 are being corrected due to the PMI

the Original lender corrected their box # 4 to an outrageous amount of $2,958 - that account was paid off, the subsequent lender has $ 1,211 as PMI, then one more lender that has nothing in PMI

Can these numbers be accurate to place on the return first of all, and looks like PMI is gone now.

I am thinking somewhere the t/p received some refunds on the PMI on the refinance, but not seeing it

Wondering what to place as a deduction on the Sched A - when there is little to no information. Guessing if taxpayer does not want to participate in the "seek and find" Nothing?

Thoughts

Sandy

[Bonnie]

I had one this year too with a ridiculously high amount for PMI and the taxpayer said the mortgage company made them pay it all up front. Yes the entire premium got added into the principle instead of being paid so much each month. That's all I could figure. I've only seen one that way. Seems it was a refinance too.

[S T]

Thanks Bonnie for your insight and experience,
so how did you deduct?? take the amount and divide by the remaining term. original purchase in Oct 2011 - refinance in Feb 2012, and another refinance in Nov 2012.

I am thinking taking the amounts (which do seem extreme for 2012) adding those together and then dividing by approximately the 82 months remainder and deducting annually over the next 6-7 years.

I don't have a clue, and taxpayer can not or will not produce the paperwork, too much effort on their part I guess and I am suppose to have that "crystal ball" or see the notes magically appear on the ceiling

Sandy

[taxea]

Sandy I had a call into IRS Special Counsel on this. Got a call back this a.m. The safe harbor allows the TP/homeowner to take all principal and interest that was paid during the time they were in the govt program, plus both p/i paid to the loan servicer/s. So bx 3 of the 1098MA plus total payments made to mortgage company/s. Since ony the interest shows on the servicer's 1098 you need to ask the TP how much they paid in total for the year. In addition the prop tax and mort insurance.
This total payment, including taxes and insurance, must not exceed the amount that shows in Box 1 of the 1098MA issued by the govt agency.

Don't know why the IRS couldn't make it clearer.

[BP.]

Sandy, for the original loan, are you able to get the annual escrow statement to see if it shows the amount of the monthly payment that is attributable to the PMI?
And for the refi, maybe the HUD-1 (or other loan docs) show the period the PMI is allocable to?

Also, have a look at Pub 17, p. 158, very bottom left. Don't know if applicable to your case, but it says if any prepaid PMI hasn't been deducted already, there's no deduction for the balance if the loan is paid off early.

[Burke]

I don't have a clue, and taxpayer can not or will not produce the paperwork, too much effort on their part I guess and I am suppose to have that "crystal ball" or see the notes magically appear on the ceiling
Sandy

You know what? It's not your problem. If the TP is not willing to furnish you with the necessary documentation, well then...tell them "ce la vie" to the deduction.

[Burke]

I don't have a clue, and taxpayer can not or will not produce the paperwork, too much effort on their part I guess and I am suppose to have that "crystal ball" or see the notes magically appear on the ceiling
Sandy

You know what? It's not your problem. If the TP is not willing to furnish you with the necessary documentation, well then...tell them "ce la vie" to the deduction. It's amazing what they can do when they have to, or when money is involved. Wanna bet they will come up with it?

[taxea]

Sandy, for the original loan, are you able to get the annual escrow statement to see if it shows the amount of the monthly payment that is attributable to the PMI?
And for the refi, maybe the HUD-1 (or other loan docs) show the period the PMI is allocable to?

Also, have a look at Pub 17, p. 158, very bottom left. Don't know if applicable to your case, but it says if any prepaid PMI hasn't been deducted already, there's no deduction for the balance if the loan is paid off early.

There is if she paid it up front and it had to be amortized. If it is included in the loan when the loan is paid off does the servicer deduct the balance of the mortgage insurance first?

[taxea]

You know what? It's not your problem. If the TP is not willing to furnish you with the necessary documentation, well then...tell them "ce la vie" to the deduction. It's amazing what they can do when they have to, or when money is involved. Wanna bet they will come up with it?

On this one, I totally agree.

[BP.]

There is if she paid it up front and it had to be amortized.

Basis for this conclusion? "Special Rules for Prepaid Mortgage Insurance" in Pub 17 (and Pub 936 & Schedule A instructions) seem to contradict:

No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term.

[taxea]

Basis for this conclusion? "Special Rules for Prepaid Mortgage Insurance" in Pub 17 (and Pub 936 & Schedule A instructions) seem to contradict:

1. if it was paid upfront it was fully deductible in the year of payment
2. if it was put in the mortgage it should be amortized over 84 months, (my mistake) not the full length of the mortgage
3. if it was a va loan it is fully deductible

[joanmcq]

I believe FHA loans are requiring the first few years of mortgage insurance to be paid up front, but not the full amount. 5 year's worth maybe? My guess is that there is one 1098 for the loan that was paid off, one for the refi company, and then the loan was immediately turned around and sold to 1098 number three. So either the one from the refi reported the 5 year's worth and then the final servicer of the loan reports zilch, since it was all paid to number 2, or number 2 doesn't report it at all, and number 3 reports the 5 year's worth.

[S T]

Joan, I believe after chasing my "tail" and little assistance from the t/p you are exactly correct. you know these clients they throw all of this paperwork away as they do not have a clue.

Orig loan has 2500 for 2012, loan sold or refinance (I think sold) has a smaller amount of 1500, then an actual refinance (3rd loan) has -0-.

Would this mean then since it was all paid off through one lender to another, I deduct this $ 4,000 of fees for 2012?

Sandy

[joanmcq]

I think so.

Although around here, when you refi if not through a major bank, the loan is immediately turned around and sold. So you refinance your Citibank mortgage through El Cheapo Mortgage, and El Cheapo immediately turns around and sell it. Then all of a sudden, you're with Citi again. lol. Happened to me years back. I see the 1098s all the time with one month's interest on it, and then the rest of the year is with another major bank.