The Internal Revenue Service's proposed changes to commercial real estate mortgage investment conduits will offer more flexibility for borrowers looking to modify their loans and bring the regulations up to date with today's market, according to proponents of the adjustments.

The current regulations addressing REMICs, adopted in 1992, allow for only limited modifications. The IRS and Department of Treasury have proposed exceptions that would allow for modifications that substitute, add or alter a substantial amount of the collateral for a guarantee or other credit enhancement on the loan. Those allowances would remain as long as the obligation continues to be principally secured by an interest in real property. It will also permit a change in the nature of the obligation from recourse to nonrecourse, if the obligation is still secured by an interest in real property.

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