NPN's and IRS Liens

[Kimberly Jones]

Does anyone know whether IRS liens can be wiped when foreclosing on a Residential Note?

[Steve Babiak]

The IRS lien position determines whether it is senior or junior; most likely it will be junior (unless the mortgage is a refi, but lenders usually will require a title search and would have seen the IRS lien and not approved the refi without the IRS getting paid). So if junior, it can be extinguished in a foreclosure, but the IRS does have a 120 day right of redemption. A deed-in-lieu won't extinguish the IRS lien, it must go through foreclosure.

Whether it is senior or junior is normally determined by recording dates. If the mortgage is recorded first, then the IRS lien is recorded later - this is a case where the IRS lien will be junior. Surprisingly, the IRS has no other special rights to have lien priority. So allow me to disagree with both Jon Holdman and Bill Gulley on that. Now, the debt still belongs to the parties that owed the IRS, even after the foreclosure and the redemption period expires - but it stops being a lien at the end of the redemption period and then it is just a debt / judgment.