Recapture is an IRS tax penalty. This rule can come into play on state housing loans when a buyer sells a home. The rule was created to try to recapture tax funds that the government missed out because this loan was funded through the sale of tax-free bonds.
I know of very few people ever have to pay this penalty. Lenders however use this penalty as a scare tactic to talk buyers out of doing state housing loans.
Good point. Lenders do that because the profit margin for a state housing loan is much smaller or they may not be approved even in the place to do state housing loans.
What is Recapture
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