First for both of the 1098s which report interest you are sharing, on the page titled, "Do any of these situations apply? be sure for each of your returns the correct option is selected. For example, if your name is first on the 1098 and the 1098 is for your social security number you would select "None of the above." On the next page when entering the form information you would only enter your share of box 1 and box 2, check the box between those boxes and enter "MFS split interest with spouse."
On your spouse's return select, "My name is not on the 1098 or not listed first...," enter only her share of boxes 1 and 2, check the box between them and enter the "MFS split interest with spouse" explanation.
Next, your answers to the follow on questions appear to be correct for the loan that was transferred/sold. For the oldest loan, "No, it is not the most recent" and for the current loan "Yes, this is the most current."
For the additional information page. The PNC loan balance (payoff) would be the end of year balance with no date entered. The Prosperity entries would be each person's share of the payoff amount (split box 2 of the Flagstar 1098) and the box 11 date. The Flagstar balance (payoff amount) would be each person's share of the end of year balance and no date.
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