Share with your friends

Rev. Proc. 2020-26: Safe harbors, loan forbearance programs under CARES Act (COVID-19)

Safe harbors, loan forbearance programs under CARES Act

The IRS today released an advance version of Rev. Proc. 2020-26 that sets forth safe harbors under which modifications to certain mortgage loans in connection with a forbearance program related to the coronavirus (COVID-19) pandemic are not treated as replacing the unmodified obligation with a newly issued obligation, or as manifesting a power to vary for purposes of determining the federal income tax status of certain securitization vehicles—such as investment trusts and real estate mortgage investment conduits (REMICs)—that hold the loans.


Related content

Rev. Proc. 2020-26 also sets forth a safe harbor under which certain securitization vehicles are not treated as having improper knowledge of an anticipated default on the grounds that they acquired a mortgage loan with respect to which the borrower had participated in a forbearance program.

Read Rev. Proc. 2020-26 [PDF 137 KB] 


The “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) (Pub. L. No. 116-136) provides that during the covered period, borrowers with federally backed mortgage loans and multifamily borrowers with federally backed multifamily mortgage loans experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency may request and obtain forbearance on their loans.

Today’s revenue procedure reveals that the IRS and Treasury Department have received requests for guidance as to whether:

  • The forbearance of federally backed mortgage loans, federally backed multifamily mortgage loans, and non-federally backed mortgage loans held by investment trusts and REMICs will jeopardize the federal tax qualifications of the securitization vehicles; and
  • Federally backed mortgage loans, federally backed multifamily mortgage loans, and non-federally backed mortgage loans for which servicers have provided forbearances to borrowers that are experiencing financial hardship due to the COVID-19 emergency may be acquired by a REMIC without the acquiring REMIC being treated as having improper knowledge of an anticipated default for purposes of the rules governing REMIC foreclosure property.

Rev. Proc. 2020-26 provides that for mortgage loans held by REMICs, forbearances (and all related modifications) as described by today’s revenue procedure:

  • Are not treated as resulting in a newly issued mortgage loan for purposes of Reg. section 1.860G-2(b)(1)
  • Are not prohibited transactions under section 860F(a)(2), and
  • Do not result in a deemed reissuance of the REMIC regular interests

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal