Banking Focus Newsletter
Chuhak & Tecson Banking Focus

Lenders’ issuance of Form 1099-C may not preclude future collection efforts

Federal tax regulations require lenders to provide borrowers with an IRS Form 1099-C, titled Cancellation of Debt, when any one of eight identifiable events occurs in relation to a borrowers’ debt. Borrowers who receive a Form 1099-C generally presume that they are free from any further collection efforts by lenders related to the identified debt. This is because the Form 1099-C generally requires the borrower to recognize discharge of indebtedness of income. While the occurrence of certain identifiable events may cause a debt to be discharged and accordingly bar further collection activities related thereto, courts are split as to whether lenders’ issuance of a Form 1099-C does in itself preclude the ability to continue collection efforts.

To read more about Form 1099-C, click here.

Don’t get served! CFPB issues revised mortgage servicing regulations

In early August of this year, the Consumer Financial Protection Bureau (CFPB) finalized a number of important changes to their regulations concerning mortgage service providers. It has become standard practice for many lenders and loan purchasers to utilize servicers to handle customer service, collections, loan modifications and foreclosures. Expanding on the mortgage servicing rules that initially went into effect in January 2014, the CFPB, after public comment, has enacted changes to the initial rules that include, among other changes, providing flexibility for servicers to comply with certain force-placed insurance and periodic statement disclosure requirements, clarifying requirements regarding early intervention, loss mitigation, information requests, and requiring services to provide periodic statements under certain circumstances when the servicer has charged off the mortgage. Most changes will become effective 12 months after publication of the revised rules in the Federal Register.

To read more about these changes, click here.
A bend in the road is not always the end of the road

The Illinois Property Tax Code (the Code) 35 ILCS 200/21-345 provides that “a right to redeem exists in any owner or person interested in a property, other than an undisclosed beneficiary of an Illinois land trust.” Therefore, if property taxes are sold in Illinois, it is not the end of the road for the wary lender. Lenders have the right to redeem. To do so, lenders should request an estimate of redemption from the County Clerk and pay the stated redemption amount. The county will then cancel the tax sale certificate and reimburse the tax buyer (the Buyer).  That is a best case scenario because the parties return to status quo and the lender maintains its lien on the property.   

However, what if the redemption expires before anyone redeems? Read more here.

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