Since the points and loan origination fees
are excellent profits for financing companies, one should always negotiate the mortgage down to no points or loan origination fees
, if at all possible.
Taxpayers usually pay points--also referred to as loan origination fees
, loan processing fees, maximum loan charges or premium charges--when closing a mortgage to secure a lower interest rate over the life of the loan.
This section modifies Revenue Rulings 57-541 and 67-297 so that loan origination fees
on FHA and VA loans paid during taxable years beginning after December 31, 1990, are deductible in the year in which paid, in cases where the other requirements of Rev.
Loan origination fees
are to be deferred and recognized over the contractual lives of the related loans as a yield adjustment.
Realty America accused TCC of making false representations to provide funding in a "Ponzi scheme" to commit to loans in order to garner loan origination fees
without the ability to fund them.
In PNC, the Tax Court had also relied on INDOPCO to require loan origination fees
to be capitalized.
The points must be designated on the Uniform Settlement Statement as points (for example, as loan origination fees
(including amounts so designated on Veteran Affairs (VA) and Federal Housing Administration (FHA) loans), loan discounts or discount points), and shown as paid from either the borrower's or seller's funds at settlement.
57-541, 1957-2 CB 319, and 67-297, 1967-2 CB 87, dealing with the treatment of loan origination fees
on FHA and VA loans, do not apply to cash-basis home buyers who satisfy the requirements of Rev.