Securing a 1098 form when your mortgage lender shuts down
Q: Taylor, Bean & Whitaker serviced my mortgage until it was shut down last year. Will I get the end-of-year 1098 tax form from it?
A: You should receive a Form 1098, on which you report the mortgage interest you paid, which may be tax-deductible. Taylor, Bean & Whitaker's Web site indicates that those forms should have been mailed out by the end of January. If you did not get one and you have an online account, see if you can log in and download the form.
Taylor, Bean & Whitaker ceased operating last summer, and many of its loans were transferred to other servicers. If your loan was transferred, you should have received a 1098 mortgage interest form from the new company for the portion of the year that it serviced your loan.
The form from the new servicer should include the interest you paid on your loan to it, and might also include the interest you paid to Taylor Bean & Whitaker.
If you received the statement from the new servicer, review it to see whether it includes all of your interest payments for last year. If all the interest payments are included, you're all set. If it includes only the payments you made to the new servicer, call the company to see whether it can tell you how much interest you paid while your loan was serviced by Taylor, Bean & Whitaker.
If you have no luck with your current servicer and you can't get that information from Taylor, Bean & Whitaker, you will need to compute the amount for purposes of your income taxes. You can do that by reviewing any loan statements you received from Taylor, Bean & Whitaker before the loan was transferred and extrapolate based on that information.
The IRS would prefer that you include a 1098 from Taylor, Bean & Whitaker with your tax return, but if it's impossible for you to obtain the form, do your best using your loan statements.
Q: I was approved for a loan modification through a national lender. The temporary modification cut my monthly mortgage payment almost in half, which provided much-needed financial relief for my family. I recently completed the three-month trial period and was told by my lender that the modification is good for only five years. What will happen after the five-year period is up?
A: Congratulations. It sounds as if you have received a permanent loan modification. Fewer than 10 percent of homeowners who have applied for a permanent loan modification have received one.
The process of obtaining a loan modification starts with the application and supporting documentation. The lender reviews the documents and decides whether to place you in a three-month trial loan modification. During that period, you make certain payments; if you qualify for a permanent modification, you are one of the few to graduate to that plan.
But a permanent loan modification does not mean that you get a fixed interest rate for the balance of your loan. Under the Obama administration's Making Home Affordable program, the lender has the ability to reduce the interest rate to 2 percent, depending on your income and other circumstances. However, at the end of the five-year fixed period, the interest rate will gradually increase to what the market rate would have been on your loan on the date your modification became permanent.
For example, if the modification lowered the rate on your 30-year loan to 2 percent, at the beginning of the sixth year, your interest rate would start increasing one or two percentage points until it hits 5 percent, or whatever the interest rate was when your documentation was finalized. It would remain at that rate going forward.