SECTION 4. COVID-19

EMERGENCY AND REVENUE PROCEDURE 2020-26

.01 On March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (Emergency Declaration). The Emergency Declaration instructed the Secretary of the Treasury “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a).” ¹

.02 To provide additional relief, on March 27, 2020, Congress and the President enacted the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, 134 Stat. 281 (CARES Act). .03 On April 13, 2020, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) issued safe harbors in Rev. Proc. 2020-26, 2020-18 I.R.B. 753. These safe harbors apply for determining the Federal income tax status of certain securitization vehicles that hold mortgage loans. Under the safe harbors, certain modifications of mortgage loans in connection with forbearance programs described in that guidance are not treated as replacing the unmodified obligation with a newly issued obligation, as giving rise to prohibited transactions, or as manifesting a power to vary.

.04 In the case of mortgage loans held by real estate mortgage investment conduits (REMICs) and investment trusts, Rev. Proc. 2020-26 applies to—

(1) Forbearance (and all related modifications) of a Federally backed mortgage loan or a Federally backed multifamily mortgage loan, if the forbearance is provided under section 4022 or 4023, respectively, of the CARES Act (CARES Act Forbearances); and

(2) Forbearances (and all related modifications) that are not CARES Act Forbearances, that are agreed to by the borrower of any Federally backed or non-Federally backed mortgage loan, and that are provided by a holder or servicer of the loan under a forbearance program for borrowers experiencing a financial hardship due, directly or indirectly, to the COVID-19 emergency. The forbearance programs covered are those—

(a) Which are identical or similar to those described in section 2.07 of Rev. Proc. 2020-26; and

(b) Pursuant to which, between March 27, 2020, and December 31, 2020, inclusive, the borrower requests or agrees to the forbearance (and all related modifications).

.05 Section 6.01 of Rev. Proc. 202026 provides that for mortgage loans held by REMICs, forbearances (and all related modifications) described in section 5.01 of Rev. Proc. 2020-26 are not treated as resulting in a newly issued mortgage loan for purposes of § 1.860G-2(b)(1), are not prohibited transactions under § 860F(a) (2) of the Code, and do not result in a deemed reissuance of the REMIC regular interests.

.06 Under section 6.02 of Rev. Proc. 2020-26, in the case of mortgage loans held by investment trusts, certain transactions do not manifest a power to vary the investment of the certificate holders. These transactions are—

(1) CARES Act forbearances (and all related modifications); and

(2) Forbearances (and all related modifications) that are described in section 2.07 of Rev. Proc. 2020-26, that are requested, or agreed to, between March 27, 2020, and December 31, 2020, and that are granted as a result of a borrower experiencing a

1 https://www.whitehouse.gov/wp-content/uploads/2020/03/LetterFromThePresident.pdf

Bulletin No. 2020–26 991 June 22, 2020

financial hardship due to the COVID-19 emergency.