SECTION 4. APPLICATION

.01 Modifications. If a modification of a mortgage loan is described in section 3.01 of this revenue procedure—

(1) For purposes of ascertaining under § 1.856–5(c)(2) the “loan value of the real property” securing that loan, a REIT may treat the modification as not being a new commitment to make or purchase a loan; and

(2) The modification of the mortgage loan will not be treated as a prohibited transaction under section 857(b)(6).

.02 Asset test. The Service will not challenge a REIT’s treatment of a loan as being in part a “real estate asset” for purposes of section 856(c)(4) if the REIT treats the loan as being a real estate asset in an amount equal to the lesser of—

(1) The value of the loan as determined under § 1.856–3(a), or

(2) The loan value of the real property securing the loan as determined under § 1.856–5(c) and this revenue procedure.