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The so called “gross-up” provisions of mortgage loan agreements, which have not typically been the focus of significant borrower/lender negotiation, have been receiving increased attention lately. Gross up provisions usually provide that if there is a mandatory withholding or deduction, then the paying party shall pay, or “gross up,” the amount to be paid so that the payee receives the same net amount it would have absent such deduction or withholding. Such a provision typically requires that all payments must be paid in the full amount, free of any withholdings or deductions. The recent interest in such provisions is due to the newly enacted Foreign Account Tax Compliance Act1 (FATCA). Among other things,2 FATCA requires foreign financial institutions (FFIs), foreign trusts and foreign corporations to provide the I.R.S with certain information and annual reporting on account holders, to determine if they are American.

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