Ezel / Tax Rulings / VA
VA P.D. 11-160 Recordation Tax 2011-09-19

Did homeowners qualify for Virginia's same-lender refinance tax rule when the broker had sold the original mortgage to its parent bank?

Short answer: No. The reduced recordation-tax rule applied only when the refinancing lender was the lender then holding the existing deed-of-trust debt. Although both loans went through the same broker, the broker had sold its entire interest in the 2007 mortgage to its parent bank before the 2010 refinance. It therefore was not the same lender, and Virginia denied the state and local tax refund.

Apply this to your situation

This page answers the general question as of 2011. Ezel answers yours, under current Virginia tax law, with citations.

Currency note: this ruling is from 2011
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Virginia Tax Commissioner determination on one 2010 deed-of-trust refinance. The result depended on which entity held the original debt at refinancing, the broker-bank relationship, assignment documents, retained interest, prior tax paid, refinanced amount, and the law then in effect. Payments serviced by an affiliated bank or repeated use of the same broker do not alone establish the same lender. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

Virginia denied the recordation-tax refund because the broker making the 2010 refinance no longer held the original mortgage debt. The homeowners had used the same broker for both the 2007 and 2010 loans, and mortgage payments went to the broker's parent bank.

Virginia's same-lender rule taxed only the amount of a new deed of trust exceeding the original secured debt when the existing debt was refinanced with the lender currently holding it.

After the 2007 transaction, the broker sold its entire interest to the bank. By 2010, the broker retained no interest in the old mortgage and therefore was not the same lender for the statutory rule. Tax applied to the full refinanced amount, and the refund was denied.

What this means for you

  • Identify the current holder of the existing deed-of-trust debt before refinancing.
  • The same broker or corporate family is not necessarily the same lender.
  • Review loan-sale and assignment documents, not only payment instructions.
  • Confirm recordation-tax treatment before recording the new deed.

Common questions

Q: Did using the same broker qualify?
A: No.

Q: Why was the parent bank relevant?
A: The broker had sold the entire original mortgage interest to the bank.

Q: What was the refund outcome?
A: Denied.

Citations and references

  • Va. Code § 58.1-803(A) and (D).
  • Virginia Public Documents 96-384 (December 20, 1996) and 06-3 (January 6, 2006).

Subject

A taxpayer must refinance his debt with the mortgage lender that holds the deed of trust.

Source

Original ruling text

September 19, 2011

Re: § 58.1-1821 Application: Recordation Tax

Dear *:

This will reply to your letter in which you request a refund of state and local recordation taxes paid by * (the "Taxpayers") for recording a refinanced deed of trust. I apologize for the delay in the Department's response.

FACTS

The Taxpayers, a husband and wife, refinanced their home mortgage in November 2007 through a broker, * (the "Broker"), a subsidiary of (the "Bank"), in the ** (the "County") and paid the recordation tax. Mortgage payments under the agreement were made to the Bank's mortgage servicing center. In May 2010, the Taxpayers again refinanced their mortgage through the Broker.

When the deed was submitted for recording, the County concluded that the Taxpayers were not entitled to the recordation tax exemption for refinancing with the same lender because the mortgage payments were made to the Bank rather than the Broker. The Taxpayers paid the recordation tax based on the entire amount of the refinanced mortgage and filed an appeal, contending the refinanced loan was made through the same lender.

DETERMINATION

Virginia Code § 58.1-803 A imposes the recordation tax on deeds of trust, mortgages, arid supplemental indentures. Under Va. Code § 58.1-803 D, when a deed of trust is used in refinancing an existing debt with the same lender and the tax has been previously paid on the original deed of trust securing the debt, the recordation tax will only apply to the portion of the deed of trust that exceeds the amount originally secured by the original debt.

The Department has defined "existing debt with the same lender" to mean that the lender providing the refinancing must be the same as the lender now holding the existing debt being refinanced. See Public Document (P.D.) 96-384 (12/20/1996) and P.D. 06-3 (1/6/2006). In other words, in order to qualify for the exemption provided in Va. Code § 58.1-803 D, a taxpayer must refinance his debt with the mortgage lender that holds the deed of trust.

According to the evidence, the Taxpayers refinanced their mortgage with the Broker in November 2007. The documentation indicates that the Broker sold its entire interest in the mortgage to the Bank. Under these circumstances, the Department would not consider the Broker to be the same lender for the purposes of Va. Code § 58.1-803 D when the Taxpayers refinanced the mortgage in May 2010, because the Broker retained no interest in the original mortgage. Accordingly, the Taxpayers were not entitled to the exemption from recordation tax for refinancing a mortgage with the same lender.

Based on the foregoing, the Taxpayers' request for the refund of recordation tax paid on the refinanced deed of trust is denied.

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, please contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4481567449.B

Get today's answer for your situation

You just read a 2011 ruling on this question. Ezel checks current Virginia tax law and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.