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REMIC Reform


Issue:  Commercial mortgage-backed securities (CMBS) are the second largest source of commercial and multifamily real estate financings and represents more than $850 billion outstanding.  The legal vehicle generally used to structure CMBS is a real estate mortgage investment conduit (REMIC).  Under current IRS rules, only certain loan modifications may be made without affecting a REMIC’s tax status.  If other modifications were made, it could cost a Real Estate Mortgage Investment Conduit (REMIC) its tax-exempt status. Recognizing that the tax rules were adopted in 1992 before the CMBS market took off, the IRS issued proposed regulations in November 2007 to accommodate commercial loans by expanding the list of permitted modifications that could be made to qualified mortgages held by a REMIC or grantor trust.

CRE Finance Council Position:  The REMIC structure is critical to the current and future capital and liquidity that fuels CMBS and the overall commercial real estate sector.  For the past several years, CRE Finance Council along with its industry coalition partners have been seeking modernization of the REMIC rules to keep pace with current transactional needs and reflect current market realities.   CRE Finance Council believes that revising the rules to address commercial loan modifications will help ease the legal burden on the industry in connection with securing tax opinions and will, in the long run, protect investor value.

Status:  The comment period for the proposed rule closed on February 7, 2008. CRE Finance Council , as a part of the REMIC industry coalition, submitted specific comments on the proposed rule. A hearing on this issue was held April 4, 2008 and a representative of the coalition provided a statement. Final rules are expected to be issued in the next few months.

Industry Resources:

June 25, 2010
Council Urges IRS Action on Technical Corrections to REMIC Regulations 

November 4, 2009
CMSA Urges IRS to Reconsider Application of Recently Issued REMIC Regulations to Collateral Releases  

October 30, 2009
Financial Regulators Adopt Guidance on Prudent CRE Loan Workouts 
Policy Statement on Prudent CRE Loan Workouts

October 22, 2009
CMSA-MBA Issue Paper to Address Questions Related to Changes in REMIC Rules 

September 30, 2009
ASF Submits Request to IRS on Recently Issued REMIC Regulations  

September 15, 2009
IRS Issues Final Regulations to Expand Permissible Modifications for Commercial Mortgage Loans held by REMICs 

IRS Issues Revenue Procedure to Describe Conditions for Modifying Commercial Loans with No Tax Consequences

IRS Issues Notice on Whether Guidance is Necessary for Modifications of Commercial Mortgage Loans held by Investment Trusts

CMSA Summary of IRS Guidance on Modifications to Commercial Mortgage Loans

July 8, 2009
CMSA's Response to Certain REMIC proposals to Authorize Loan Modifications and Restructure Contracts

December 29, 2008
American Special Servicers Association REMIC Proposal

March 11, 2008
REMIC Industry Coalition Submits Statement for April 4 Hearing on Proposed REMIC Rules

February 7, 2008
REMIC Industry Coalition Submits Comment Letter on Proposed REMIC Rules 



November 2007
REMIC Reform Position Paper 

November 12, 2007
Cadwalader Memo on Proposed REMIC Rules

November 8, 2007
IRS Proposes Rules on Modifications to REMICs 

April 30, 2007

REMIC Industry Coalition Submits Letter on IRS Notice 2007-17 "Modifications of Commercial Mortgage Loans Held by a REMIC"

February 28, 2007
IRS Issues Notice 2007-17, Modifications of Commercial Mortgage Loans Held by a REMIC

March 10, 2005
REMIC Industry letter to U.S. Senate

March 9, 2005
REMIC Senate Bill 580 Introduced

March 4, 2005
REMIC Industry Letter to U.S. House

March 1, 2005
H.R. 1010 - REMIC Modificiation Legislation Introduced in U.S. House 

January 27, 2005
REMIC Industry Coalition List of Permitted Modifications

October 1, 2004

REMIC Industry Coalition Letter to FSC/ETI Conferees 

H.R. 4113 - REMIC Modification Legislation

S. 2422 - REMIC Modification Legislation

May 19, 2004
REMIC Industry Letter on S. 2422

May 5, 2004
REMIC Industry Letter on HR 4113