The Internal Revenue Service's update on REMIC rules that will now allow for more commercial loan modifications is welcomed by the industry. However, the 80% property valuation test required at the time of the modification could bring punitive consequences.

The first ruling is the final implementation of Notice 2007-17, which allows additional types of modifications to occur in connection with commercial mortgage loans held by REMICs. The first notice discussing these changes was issued in March, with industry requests for amendments to the REMIC rules coming for years before that.

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