As Florida real estate slowly pulls itself out of the foreclosure fraud files; there is finally a government agency standing up to the bully of banks!
Last week, Reuters News Service published an exclusive article exposing yet another way the banks have been defrauding taxpayers. This time it wasn’t directly through improper lending practices, robo-signing or bad assignments of mortgage.
Now, the IRS discovered that banks acting as servicers for “REMICs”, otherwise known as Real Estate Mortgage Investment Conduits, have been claiming tax-exempt status on the income they generate under favorable tax code provisions.
So what is a REMIC? A REMIC is a passive entity where mortgages are pooled and securitized into investments. Generally, the investors in REMICs are large funds, pension plans, and 401ks.
Not only did the banks failed to comply in any manner with the requirements of the Internal Revenue Code that allow this favorable tax treatment, they have apparently decided to ignore the IRC altogether.
So what does this mean for taxpayers?
It means that the banks have been systematically ignoring IRC provisions, thinking the IRS is too sheepish to enforce the law. These entities, as a result of the actions of the banks servicing the mortgages, have failed to pay billions of dollars in taxes, and robbed the government, and thus the American people, of that money.
The reason that REMICs were afforded this massive tax break is due to the fact that they are meant to be vehicles for passive investing, and as such they have rules for strict compliance that require that all mortgages passing into a REMIC must be transferred into a trust within 90 days of trust formation.