As we do in our “Ask the Experts” 504 Webinars, sometimes an issue coming down the pike gives us a chance to share our response. Here’s one that traveled through the informational grapevine:  A CDC contacted us recently because a borrower told him that the IRS requires CDCs to mail “year-end statements” to every borrower. He asked if that were true.

In word: No. The borrower was referring to the “year-end statement” generated by the CSA. It’s not an IRS form so the agency doesn’t require it. CSA’s “year-end statement” is just an informational report, not a tax form. So, the CDC isn’t required to do anything.

The IRS Form 1098 is generated and mailed out by February 1st each year by the institution that collects/processes loan payments. Form 1098 is sent to individuals, not corporations or LLC’s (as defined by the IRS) and shows how much mortgage interest was paid.

Not required, but a good idea. Sending a copy of this statement can give your CDC an opportunity to tout your accomplishments during the previous year and to market various programs for the future.

Most CDCs take one of these actions:

  • Mail or email the CSA report only to borrowers who have complied with the annual servicing requirements, e.g., have submitted updated insurance documentation, financials and/or tax returns and proof of any applicable real estate payments.

Not sending the statement or a payment history to borrowers not in compliance will compel these borrowers to contact the CDC. Now, the CDC can remind them of the SBA requirements and advise them of missing documentation. It’s also an opportunity to let them know that the CDC will send the statement and/or payment history within three days of receiving documentation that will bring them into compliance.

  • Send the statement to all borrowers. NOT recommended.
  • Hold the statement until the borrower requests a copy. This can give your CDC and the borrower an opportunity to have a friendly conversation even if there isn’t a problem.

We appreciate your questions and welcome the opportunity to share our responses in JRB’s 504 Webinars and eBulletins. Keep them coming.

Sandy Mortan
Senior Associate, CDC/504 Programs