Were revolving warehouse agreements, master notes, and mortgage assignments used to fund Florida mortgage loans exempt from documentary stamp tax?

Plain-English summary

Florida concluded that four versions of a wholesale warehouse mortgage program qualified for the section 201.21 documentary stamp tax exemption.

The lender advanced money so a mortgage company could originate loans secured by Florida real estate. For each advance, the mortgage company assigned the underlying mortgage note and mortgage to the warehouse lender as collateral. The loans were later sold to the lender or another secondary-market investor, and the sale proceeds paid off the related advance.

The four structures varied in two ways:

• whether the revolving credit agreement itself contained the promise to pay or a separate master note did; and
• whether a purchaser had committed to buy the underlying mortgage before the warehouse advance.

Those differences did not change the result. The exemption applied as long as:

1. actual advances did not exceed the indebtedness represented by the pledged collateral obligations; and
2. the documentary stamp taxes on those collateral obligations had already been paid.

That meant a master note showing the full credit-line face amount could still fall within the exemption even though no money was advanced at closing, provided later actual advances stayed within the pledged collateral.

Assignment treatment depended on purpose and recording

The Department concluded that the mortgage assignments described in the four structures were exempt when tax had already been paid on the collateral notes secured by Florida mortgages.

The legal discussion also preserved an important distinction:

• an assignment to a purchaser that becomes the new holder of the note and mortgage is not subject to documentary stamp tax; but
• an assignment given as collateral security for a new loan is a taxable mortgage when recorded in Florida.

In the stated program, the warehouse lender generally held assignments unrecorded. If the lender bought the loan, it recorded the assignment as the new owner rather than as a collateral holder.

What this means for you

Warehouse lenders

Track each advance against the specific pledged mortgage collateral. Section 201.21 did not protect any portion of principal indebtedness exceeding the collateral obligations.

Mortgage originators

Confirm that documentary stamp tax was paid on every underlying mortgage obligation before relying on the warehouse exemption. The prior-tax condition was explicit.

Secondary-market and closing teams

Document whether an assignment transfers ownership to a purchaser or merely secures a new loan, and whether it will be recorded in Florida. Those facts can change the assignment's tax treatment.

Tax professionals

Do not treat the absence of an advance at execution as the only reason for exemption. The Department relied on the wholesale warehouse statute and its collateral and prior-tax requirements across all four structures.

Common questions

Q: Did the agreement itself have to contain the promise to pay?
A: No. Two structures used the agreement, while two used a separate master note, and all four qualified under the stated conditions.

Q: Was a master note for the full credit line taxable immediately?
A: The TAA found the described structures exempt, provided actual advances never exceeded pledged collateral and the collateral obligations had been taxed.

Q: Did a prior investor commitment change the answer?
A: No. The different collateral-disposition timing in Structures 3 and 4 did not change the exemption conclusion.

Q: Were the assignments exempt?
A: The Department said the described assignments were exempt when documentary stamp tax had already been paid on the collateral obligations.

Q: Can a recorded collateral assignment be taxable?
A: Yes. The TAA's legal discussion says an assignment used as collateral security for a new loan is taxable when recorded in Florida.

Q: What if advances exceed the pledged mortgage debt?
A: Section 201.21 does not exempt the excess amount.

Citations and references

• Fla. Stat. § 201.08 — tax on written obligations made, executed, or delivered in Florida and on mortgages or security instruments filed or recorded in Florida.
• Fla. Stat. § 201.21 — wholesale warehouse mortgage exemption, collateral definition, prior-tax condition, and excess-indebtedness limit.
• Fla. Admin. Code rr. 12B-4.053(28), 12B-4.054(6) — assignments to purchasers versus recorded collateral assignments.
• Fla. Admin. Code ch. 12-11 — TAA request procedure.
• Fla. Stat. § 213.22 — Technical Assistance Advisements.
• Fla. Stat. ch. 119 — public-record disclosure with identifying details deleted.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-013

Original ruling text

Nov 30, 1998

Re: Technical Assistance Advisement No. 98(B)4-013
Documentary Stamp Tax/Wholesale Mortgage Loans
Sections 201.08 and 201.21, F.S.
XXX (Bank Holding Company)
XXX (Taxpayer/Lender)

Dear :

This is in response to your letter dated September 29,
1998, requesting a Technical Assistance Advisement regarding the
taxability of the promissory notes accompanied by a wholesale
warehouse mortgage revolving line of credit agreement and the
assignment in connection with the same mortgage agreement. This
request is made pursuant to Chapter 12-11, F.A.C., and is issued
to you under the authority of s. 213.22, F.S.

Statement of Facts

The following is the description of the transactions
outlined in your letter:

Bank Holding Company owns one hundred percent (100%) of the
issued and outstanding stock of each of the other taxpayers.
The remaining taxpayers are national banking associations or
state banks which do business in the State of Florida.

Lender has developed a wholesale warehouse mortgage program
whereby Lender finances the operations of a mortgagee.
Mortgagee makes mortgage loans to mortgagors on property located
solely in the State of Florida. Each mortgage loan is evidenced
by a mortgage note given by a mortgagor in favor of mortgagee
secured by a mortgage on real property owned by the mortgagor
located in Florida.

Lender will finance mortgagee's operations by entering into
a wholesale warehouse mortgage revolving line of credit
agreement (the "Agreement"). Pursuant to the Agreement,

advances are made by the Lender for each mortgage loan made by
Mortgagee, and Lender takes an assignment of the applicable
mortgage note and mortgage. The mortgage loans are ultimately
sold to Lender, investors or otherwise, on the secondary market
and the proceeds of the sale are used to retire the advances
made by Lender under the Agreement. At no time will the amounts
advanced by Lender under the Agreement exceed the amount of the
mortgage notes and mortgages assigned to secure the advances.
Proper documentary stamp tax and nonrecurring intangible tax
have been paid on each of the mortgages.

Lender has proposed four alternative ways of structuring
the referenced transactions as follows:

Structure 1

Under Structure 1, the wholesale warehouse mortgage
revolving line of credit is evidenced solely by the Agreement
and miscellaneous collateral documents. The Agreement contains
a maximum line of credit amount and a promise of mortgagee to
repay any amounts advanced pursuant to the Agreement from time
to time. No amounts are advanced at the time of execution of the
Agreement. Each time an advance is made, mortgagee receives a
mortgage note from the mortgagor, assigns the mortgage note and
mortgage in blank, and delivers the mortgage note, certified
copy of the mortgage, and assignment to the Lender. The
mortgage note and assignment are held by Lender as security for
the advances under the Agreement. The assignment is not
recorded. Ultimately, mortgagee will sell its mortgage loan. In
some cases, mortgage loans are pooled and a number of mortgage
loans are sold simultaneously. In other cases, the mortgage
loans are sold individually. In some cases, the purchaser may
be the Lender and in other cases, the purchaser may be a third
party investor. Upon the sale, the sale proceeds are applied to
the advance which funded the particular mortgage loan. If a
third party purchases the loan, Lender releases to the purchaser
of the mortgage loan, the mortgage note, assignment and all of
the other documents it holds evidencing the loan. If Lender
purchases the loan, it records the assignment as the new owner
of the mortgage and retains the other documents.

Structure 2

This Structure is identical to Structure 1, except the
Agreement does not contain a promise to pay. Rather, the
Agreement is evidenced by a master note executed and delivered
by the mortgagee to Lender at the time of closing.

Structure 3

This Structure is the same as Structure 1, except that,
prior to the advance being made to mortgagee, Lender or a third
party investor has made a commitment to purchase the underlying
mortgage loan being funded by the advance. The mortgage note,
assignment and other documents are held by Lender only until the
paperwork is in order and the documents can be delivered to the
purchaser of the loan. When the purchase closes, Lender follows
the same procedure as in Structure 1.

Structure 4

This Structure is the same as Structure 3, except that, the
Agreement does not contain a promise to pay. Rather, the
Agreement is evidenced by a master note executed and delivered
by the mortgagee to Lender at the time of closing. The form of
Agreement used in this structure is identical to the Agreement
used in Structure 3 except that it contains promissory note
provisions similar to those contained in Structures 1 and 2.

Requested Ruling

A. Wholesale Warehouse Mortgage Revolving Line of Credit
Agreement. In each of the above scenarios, the Agreement
creates a wholesale warehouse mortgage revolving line of
credit. In each case, the document is executed and
delivered in Florida. In Structure 1 and 3, the Agreement
contains a specific promise to repay indebtedness advanced,
and in Structures 2 and 4, the promise is evidenced by a
Master Note. In each case, there are no amounts advanced
under the Agreement at the time of the execution of the
document. Please confirm that the form of Agreement under
each section is exempt from documentary stamp tax in each

of the four structures.

B. Master Note. In Structures 2 and 4, a master note is
executed along with the Agreement. In each case, the face
amount of the master note equals the full amount of the
revolving line of credit even though no amounts are
advanced at the time of closing. Please confirm whether
the master note set forth in Structures 2 and 4 is exempt
from documentary stamp tax.

C. Collateral Assignment Documents. In each Structure, an
assignment is executed. The Assignment is not recorded
while held by Lender unless there is a default under the
Agreement. Ultimately, the assignment may be recorded by
the purchaser of the underlying mortgage loan at which time
the Assignment would not evidence a collateral position but
would evidence direct ownership of the Mortgage. Please
confirm that under each of these structures, the Assignment
is exempt from documentary stamp tax.

D. Structuring Differences. Please confirm that the
conclusions set forth above with respect to the Agreement,
Master Note, and Assignment are not affected by the
differences with respect to disposition of the underlying
collateral contained in Structures 1 and 2 from those
contained in Structures 3 and 4.

Law and Discussion

Section 201.08, F.S., imposes documentary stamp tax on
promissory notes and other written obligations to pay money
which are made, executed or delivered in Florida, and upon
mortgages, trust deeds, security agreements and other evidences
of indebtedness which are filed or recorded in Florida.

Section 201.21, F.S., exempts from documentary stamp tax
principal obligations when the maker thereof pledges or deposits
with the payee or holder thereof, pursuant to any agreement
commonly known as a wholesale warehouse mortgage agreement, as
collateral security for payment thereof, any collateral
obligation or obligations, as hereinafter defined, provided all

excise taxes imposed by this chapter upon or in respect to such
collateral obligation or obligations shall have been paid. If
the indebtedness evidenced by any such principal obligation
shall be in excess of the indebtedness evidenced by such
collateral obligation or obligations, the exemption provided by
this section shall not apply to the amount of such excess
indebtentess of such principal obligation. The term "collateral
obligation" means any note, bond or other written obligation to
pay money secured by mortgage, deed or trust, or other lien upon
real or personal property. A collateral assignment of a
collateral obligation made pursuant to a wholesale warehouse
mortgage agreement does not invalidate the exemption from
documentary stamp taxation under this provision.

As stated in Rules 12B-4.054(6) and 12B-4.053(28), F.A.C.,
an assignment of a mortgage by a lender to a new lender who has
purchased the note and mortgage and becomes the holder of the
note and mortgage is not subject to documentary stamp tax.
However, where the assignment of a mortgage is given as
collateral security for a new loan, the assignment is a taxable
mortgage when recorded in Florida.

Conclusion

As long as the actual advances under the master note are
not in excess of the pledged collateral, all four of the
structures described in your letter meet the criteria for
exemption from documentary stamp tax under s. 201.21, F.S.

The assignments of mortgages would also be exempt from tax
under s. 201.08, F.S., provided the documentary stamp taxes
imposed by this chapter have already been paid on the collateral
obligations (promissory notes secured by Florida mortgages).

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the

statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance and Dispute Resolution

BES/mh