CC Resolution 2018-018 RIVCO Mortgate Certificate ProgramRESOLUTION NO. 2018 - 018
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LA
QUINTA, CALIFORNIA APPROVING THE CITY'S
PARTICIPATION IN THE COUNTY OF RIVERSIDE
MORTGAGE CREDIT CERTIFICATE PROGRAM
WHEREAS, the Tax Reform Act of 1986 established the Mortgage Credit
Certificate Program ("MCC Program") as a means of assisting qualified individuals with
the acquisition of new and existing single-family housing; and
WHEREAS, pursuant to Division 3, Part 1, Chapter 3.5, Article 3.4 of California
Health and Safety Code Sections 50197 et seq., local issuers are authorized to issue
Mortgage Credit Certificates ("Certificates") and administer MCC program; and
WHEREAS, the Board of Supervisors of the County of Riverside adopted
Resolution No. 87-564 on December 22, 1987 establishing a Mortgage Credit
Certificate Program; and
WHEREAS, the Board of Supervisors of the County of Riverside has authorized
the Riverside County Economic Development Agency ("EDA") to administer the MCC
Program pursuant to the applicable federal, state and local policies and procedures,
and to enter into those agreements necessary for efficient administration of the MCC
Program; and
WHEREAS, the County of Riverside ("County") will be applying to the California
Debt Limit Allocation Committee ("CDLAC") for a mortgage credit certificate allocation
in July 2018 or thereabouts; and
WHEREAS, the City of La Quinta wishes to participate in the MCC Program
administered by the EDA in connection with mortgage loans it will make available for
the acquisition of new and existing single-family housing in Riverside County; and
WHEREAS, the adoption of this resolution is necessary to include the City of La
Quinta as a participating unit of general government under County's MCC Program;
and
WHEREAS, the City agrees to cooperate with the County of Riverside to
undertake the MCC Program within City jurisdiction to assist persons or households of
limited income to purchase new and existing single family residences located in the
city; and
WHEREAS, the City by adopting this Resolution, hereby gives notice of its
election to participate in the Riverside County MCC Program.
Resolution No. 2018-018
Mortgage Credit Certificate Program
Adopted: May 1, 2018
Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of La Quinta,
California, as follows:
SECTION 1. The City of La Quinta agrees to participate in the MCC Program
administered by the EDA in connection with mortgage loans it will make available for
the acquisition of new and existing single-family housing in Riverside County;
SECTION 2. The City of La Quinta agrees to assist the County of Riverside to market
the MCC Program within the City's jurisdictional boundary by publishing a general
public notice in the local newspaper at least twice a year.
PASSED, APPROVED, and ADOPTED at a regular meeting of the La Quints City
Council held on this 1St day of May, 2018, by the following vote:
AYES: Council Members Fitzpatrick, Pena, Radi, Sanchez, Mayor Evans
NOES: None
ABSENT: None
ABSTAIN: None
d
LINDA EVANS, oyor
City of La Quinta, California
ATTEST:
PAM NIETO, Deputy City Clerk
City of La Quinta, California
(CITY SEAL)
APPROVED AS TO FORM:
WILLIAM H. IHRKE, City Attorney
City of La Quinta, California
Revised 12/21/2017
RIVERSIDE COUNTY
MORTGAGE CREDIT CERTIFICATE PROGRAM
HANDBOOK
This Handbook provides policies and procedures for the implementation of Riverside
County's Mortgage Credit Certificate Program, as established by Riverside County
Board of Supervisors' Resolution Number 87-564 dated December 22, 1987 pursuant to
California Health and Safety Code Section 50197.1, et.seq. and Internal Revenue Code
Section 25 (e)(5). The policies and procedures included in this Handbook are intended
to implement the Rules and Regulations adopted under Resolution 87-564.
July 2017
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(i)
RIVERSIDE COUNTY
MORTGAGE CREDIT CERTIFICATE PROGRAM
HANDBOOK
Prepared by:
Riverside County Economic Development Agency (EDA)
(951) 343-5469
FAX: (951) 352-4852
Mailing Address:
5555 Arlington Avenue
Riverside, CA 92504
www.rchomelink.com
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(ii)
Riverside County
Mortgage Credit Certificate Program
Handbook
Table of Contents
Section I. Program Overview………………...………………………………...…….1
Section II. MCC Program Definitions…………………………………………………2
Section III. Lender Participation……………….……………………………………….5
Section IV. Program Administration….…………...…………………………………. ..6
Section V. MCC Eligibility Guidelines …………...…................................…………9
Section VI. MCC Processing…………………………………………………………..12
Appendices
A. Income and Purchase Price Limits…………………………………………. 16
B. Participating Jurisdictions………………………………………………….… 17
C. Target Areas………………………………………………………………….. 18
D. How to Calculate MCC Credit and Adjust W4 Form……………….……. 19
E. IRS Forms…………………………………………………………………….. 21
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SECTION I. PROGRAM OVERVIEW
What is a Mortgage Credit Certificate? A Mortgage Credit Certificate (MCC) entitles
qualified homebuyers to reduce the amount of their federal income tax liability by an
amount equal to 20% of the interest paid during the year on a home mortgage. This tax
credit allows the buyer to qualify more easily for a loan by increasing the effective
income of the buyer. The buyer takes the remaining 80% of the mortgage interest as a
deduction. When underwriting the loan, a lender considers this and the borrower is able
to qualify for a larger loan than would otherwise be possible.
What is the difference between a “tax credit” and a “tax deduction”? A “tax credit”
entitles a taxpayer to subtract the amount of credit from their total federal tax bill
whereas a “tax deduction” is subtracted from adjusted gross income before federal
income taxes are computed.
How long does the MCC last? The MCC is in effect for the life of the loan as long as
the home remains the borrower’s principal residence. The MCC is not transferable to a
new loan when refinancing, nor can it be assigned or transferred to a new buyer or
another home. In addition, the MCC Program includes a nine year recapture provision
which provides for payment of a recapture tax to the IRS if the property ceases to be the
borrower’s primary residence within nine years from the close of escrow. The amount
of tax recapture is determined by formula, and provided to the borrower at the time the
application. After expiration of the nine year period, the borrower may dispense of the
property without incurring penalty, but would lose the future benefits of the MCC.
Who qualifies for an MCC? The three basic qualifications are: (1) the Borrower must
be a First Time Home Buyer; (2) the Borrower’s annual income must fall within the
program income limits; and (3) the home being purchased must be within the Program
purchase price limits and in an eligible location. If the home is located in a Target Area
Census Tract, then the first-time buyer limitation does not apply and the income and
purchase price limits are higher. The MCC Program has designated target areas where
the first time buyer requirement is waived and higher income and cost limits apply.
Information on the Riverside County target areas is provided in Appendix C. The current
income and purchase price limits are shown in Appendix A attached hereto and
incorporated herein by this attached hereto an incorporated herein by this reference.
How does the County obtain a MCC Allocation? In order to issue MCC's the County
must apply to the California Debt Limit Allocation Committee (CDLAC) for an MCC
allocation. The amount that the County receives is based on a combination of factors
including demonstrated need, past performance and available MCC authority.
How are MCC's distributed? Borrowers must apply for an MCC through a
Participating Lender. The Participating Lender will perform an initial qualification and
assist the Borrower in completing the MCC submission forms. The Lender then submits
the MCC application to the County. The County reviews the Borrower’s qualifications
and, if they meet the program guidelines, issues a letter of commitment to the Lender.
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The loan must close within 60 days of the commitment. Upon loan closing, the Lender
submits the MCC closing package to the County and the County issues the MCC, with
the Lender and borrower each receiving a copy. The Borrower can then adjust their
federal tax withholding (W-4 form) and claim the MCC tax credit on their income tax
returns.
How does a Lender become approved for the MCC Program? In order to participate
in the County's MCC Program, each Lender must enter into a Lender Participation
Agreement with the County. The Lender Participation Agreement details the Lender’s
responsibilities for assisting Borrowers in obtaining a MCC. Once the lender agrees to
participate in the MCC Program and signs the Lender Participation Agreement, the
Lender loan officers must attend an annual MCC training, provided by EDA. Upon
completion of this process, the loan officers may submit MCC applications through the
County’s Program for the current County Fiscal year.
SECTION II. MCC Program Definitions
The Mortgage Credit Certificate Program, authorized by Congress in the Tax Reform
Act of 1984, is an alternative to mortgage revenue bond-backed financing and is a
means of providing financial assistance to qualified borrowers for the purchase of new
or existing single family housing.
The MCC Program and its requirements are subject to the Internal Revenue Code
(“Code”) of 1986 Title 26 and all its amendments, all Treasury Regulations associated
with the Code and qualified mortgage revenue bond regulations.
As used in this MCC handbook and all MCC Program documents, the following words
and terms are defined. In the event of any discrepancy, any predefined words and terms
in the Code supersedes and governs this section.
Acquisition Cost: The cost of acquiring the residence as a completed residential unit. It
does not include – (i) usual and reasonable settlement or financing costs, (ii) the value
of services performed by the mortgagor or members of his family in completing the
residence, and (iii) the cost of land (other than land described in subsection (i)(1)(C)(i))
which has been owned by the mortgagor for at least 2 years before the date on which
construction of the residence begins.
Acquisition Cost Limits: The maximum acquisition cost for a New or Existing Home
which is eligible under the MCC program are identified in Appendix A to this Handbook.
Please note: If the “financed cost” of the residence exceeds the purchase
price/acquisition cost limit established for target or non-target areas, the following will be
required. (a) A written explanation of what is being financed, and (b) a written statement
that the listed costs are normal and customary.
Borrower: Any person or persons who is “married” a legal and has liability for a
mortgage for which an MCC has been applied for or received.
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Census Tract: (CTs) are small, relatively stable geographic areas that usually have a
population between 2,500 and 8,000 persons. They are located in census metropolitan
areas and in census agglomerations that had a core population of 50,000 or more in
the previous census.
Close of Escrow: the date the loan is recorded at the Riverside County’s recorder’s
office.
Certified Indebtedness Amount: The amount of indebtedness which: a) the Borrower
incurs to purchase the residence, and b) is specified in the Mortgage Credit Certificate.
Existing Home: Any residence that has previously been occupied for residential
purposes.
First-time Home Buyer: A person and their spouse who have not had an ownership
interest in improved-upon residential real property nor claimed any mortgage or real
estate related tax deductions for the last three (3) years, counting backward from the
date the mortgage being applied for is executed. Divorce does not nullify the non-
ownership interest requirement of the MCC Program.
Gross Annual Household Income: Income of the mortgagor (or mortgagors) and any
other person who is expected to both live in the residence being financed and to be
secondarily liable on the mortgage. All income derived from any source including
income from wages (gross pay, overtime, pension, veterans compensation, bonuses,
public assistance, alimony, net rental income, dividends and interests, assets, etc.) of all
the members of the household (other than minors) who contribute to the expenses of
the household and will occupy the dwelling should be included. Gross Annual
Household Income is to be calculated using the Income Computation Worksheet.
Income: Means the same as Gross Annual Household Income.
Income Tax Returns: A Borrower's Federal Tax Returns for the three years preceding
the Borrower's application; provided, however, that for mortgages executed from
January 1 to February 14, an affidavit in the form permitted by the Regulations may be
obtained.
Lender (Participating Lender): A financial institution which is licensed to do business in
the State of California, has met all of the requirements established by the Program
Administrator to participate as a Lender in the MCC Program, has reviewed the
Program Handbook and agreed to be bound by its terms, and has signed a participation
agreement with the Riverside County EDA. A participating lender must be a funding
lender. Only a funding lender can submit the closing MCC documents.
MCC: A Mortgage Credit Certificate issued under the Program.
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MCC Commitment: A written certificate signed by the Program Administrator which
commits the County to issue a MCC to a Borrower.
New Home: A residence that has never previously been occupied for residential
purposes by any person.
New Mortgage: A mortgage which is not issued in connection with the acquisition or
replacement of an existing mortgage.
Principal Residence: Means (1) a single family house, (2) condominium unit, (3) stock
held by a tenant-stockholder in a cooperative housing corporation, (4) occupancy of a
unit in a multi-family building owned by the applicant, and (5) any manufactured home
(including a mobile home) as defined under federal law which has a minimum of 400
square feet of living space and a minimum width in excess of 102 inches, which is of a
type customarily used at a fixed location with a permanent foundation, and which can be
expected to become the Principal Residence of the Borrower within a reasonable period
of time after the Mortgage is executed. Principal residence does not include
recreational vehicles, campers and other similar vehicles. It does not include property
such as an appliance, furniture, or other personal property, which, under applicable
local law, is not a fixture.
Program: The County of Riverside Mortgage Credit Certificate Program as established
by Resolution No. 87-564.
Program Administrator: That public or private entity designated by the Riverside County
Board of Supervisors to administer the Riverside County Mortgage Credit Certificate
Program.
Qualified Mortgage Bond: A bond issued by a public agency under Section 103A of the
Internal Revenue Code of 1954 or Section 143(a) of the Code.
Qualified Veterans Mortgage Bond: A bond issued by a public agency under Section
103A of the Internal Revenue Code of 1954 or Section 143(a) of the Code. The Cal Vet
Program is such a qualified bond.
Refinance: New mortgage or rollover of existing mortgage to lower interest rate.
Related Person: Has the meaning given that term under Section 144(a)(g) of the Code.
Resale Home: A home that is presently or has previously been occupied for residential
purposes.
Rollover: Interest rate reduction. Refinance not to exceed the outstanding balance of
current, existing mortgage.
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Targeted Areas: Those areas established by the Federal Government, using 2000
Census Tract information, as Targeted Areas under the Riverside County Mortgage
Credit Certificate Program. In these areas, household income limits and purchase price
limits are different from those in other areas, and persons other than first-time home
buyers are eligible for MCC's.
SECTION III. LENDER PARTICIPATION
Mortgage Credit Certificates can only be issued to Borrowers through Participating
Lenders. It is the responsibility of the Participating Lender to follow the guidelines in this
handbook, qualify the Borrower for the Program, assist the Borrower in completing all
MCC forms, and submit the MCC application and closing materials to the County. In
addition, the Lender must maintain MCC records and file an annual MCC report to the
Internal Revenue Service. These are responsibilities that should not be taken lightly, as
the Borrower is dependent upon the Lender's good faith efforts to explain and qualify
them for the program and to process their MCC application.
In order to participate in the County's MCC Program, each Lender must enter into a
Lender Participation Agreement with the County. The following procedures explain the
process for a Lender to become approved for participation in the County's MCC
Program:
1. Interested Lenders should contact the Riverside County Economic
Development Agency and speak with the County's MCC Program
Administrator. The Program Administrator will provide a copy of the
Lender Participation Agreement and Lender Participation Handbook.
2. The Lender executes the Lender Participation Agreement and provides
supporting documentation that the person signing the agreement is
authorized to bind the firm to the terms of the agreement. In addition, the
Lender designates contact people in the Lender's corporate office and all
branches serving Riverside County. As part of this process, the Lender
should distribute copies of the Lender Participation Handbook to all
persons who will be involved in the MCC Program.
3. Upon receipt of the executed Lender Participation Agreement, the Lender
Participation Agreement is signed by the County's designated person.
Upon execution of the agreement by the County, the Lender is approved
to participate in the MCC Program. The MCC Program Administrator
sends a copy of the agreement to the Lender and notifies the Lender that
they are approved for the County's Program and may submit MCC
applications, upon completing MCC training provided by EDA. Each
authorized agent from the lender submitting a MCC application must
attend training annually. All lender’s affidavit in the MCC program must be
signed by authorized agent of the lender.
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4. It is the Lender’s responsibility to provide W4 Forms to the Borrower as
well as assist in completing the W4 Form when the borrower loan closed.
This requirement is mandatory for participation in the MCC Program and
there will be no exceptions.
All approved Lenders shall be required to participate in the American
Chamber of Commerce Researchers Association (ACCRA) Cost of Living
Index Survey Conducted quarterly by EDA. Upon request, Lenders shall
furnish mortgage interest rates and purchase prices for home purchases
as requested by County of Riverside. This requirement is mandatory for
participation in the in the MCC Program and there will be no exceptions.
5. The Program Administrator will maintain the County's List of Participating
Lenders, distributing this list to interested borrowers and sending program
updates and related materials to the Lender.
SECTION IV. PROGRAM ADMINISTRATION
Borrowers may apply for an ("MCC") at the same time that they apply for a mortgage
loan from a Lender participating in the MCC Program. The Lender assists the Borrower
in completing the application; it is then reviewed and processed alongside of normal
loan processing and underwriting procedures. Within the overall guidelines provided in
this Handbook, there may be individual variations in the sequence of processing steps.
Please note: Incomplete applications will no longer be accepted and will be returned to
the Lender.
A. Application Process
1. Borrower applies for a mortgage from a Participating Lender, learns about
the MCC program from the Lender and remits an MCC application fee of
$400. Of the $400 fee, $300 is payable to the County and $100 maximum
is payable to the Lender (the Lender may waive part or all of the portion of
the $100 fee, however the County fee of $300 always applies). The MCC
fee may be paid by any person. The Riverside County application fee is
NONREFUNDABLE regardless of whether the applicant is ultimately
determined to be eligible. If credit is no longer available then the
application package and file will be returned to the lende r.
2. Lender and Borrower complete a preliminary eligibility review using the
Application Affidavit, and Income Computation Worksheet covering (a)
Borrower income; (b) Borrower prior homeownership status; (c) tax
liability; and (d) price of home.
3. Lender requests Borrower to sign the application affidavit, which serves to
certify the following facts:
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a. the residence will be used as a Principal Residence and that the
Borrower must notify the County when the residence ceases to be
the Principal Residence of the Borrower.
b. that except for a residence located in a Targeted Area, the
Borrower has not had an ownership interest in improved-upon
residential real property in the last three years.
c. that the purchase price does not exceed purchase price limits.
d. that this is a New Mortgage, as defined in the Internal Revenue
Code.
e. that no portion of the funds for the Borrower's mortgage is derived
from a Qualified Mortgage Bond or Qualified Veteran's Mortgage
Bond. Examples of a Qualified Mortgage Bond are a California
Housing Finance Agency (CalHFA) first mortgage loan, Riverside
County Single Family Mortgage, and a Cal Vet loan.
f. that the Borrower was not forced to apply through a particular
Lender.
g. that Borrower's Gross Annual Household Income does not exceed
the limitation under the MCC program. Gross Annual Household
Income is calculated with the Income Computation Worksheet
(MCC-2). In determining Gross Income, the combined income of all
members of the household 18 and older who will be living in the
dwelling unit must be computed.
h. that no interest is being paid to a Related Person within the
meaning of the Internal Revenue Code.
i. that the Borrower understands that the MCC cannot be transferred.
j. that the Borrower understands that any misstatement or fraud is
under penalty of perjury.
4. Lender transmits Submission Package to the MCC Program Administrator.
5. Program Administrator reviews Submission Package within ten County
working days of submission for completeness, Borrower's certification,
Lender's certification, conformity with MCC program guidelines.
6. Program Administrator issues an MCC Commitment to the Lender stating
that the application is approved and that an MCC will be issued. The
Commitment is valid for 60 days. The MCC will be issued to the Borrower
so long as there are no changes prior to closing which affect eligibility. An
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MCC code number is assigned at commitment, please utilize this number
in all correspondence/communication with the County regarding this
borrower.
7. Lender requests Borrower to supply Federal Income Tax Returns for the
last three years.
8. Lender processes mortgage loan application in the usual manner.
B. Verification Process
1. Underwriter performs normal mortgage loan underwriting process.
2. Lender takes into consideration the effect of the MCC on household
income available for house payment in qualifying the Borrower. The MCC
credit rate is 20%. Consult the underwriting guidelines for the type of loan
(FNMA, FHLMC, FHA 203 (b), VA, etc.) being used to determine how the
MCC Credit is to be calculated in qualifying for the mortgage.
3. Lender performs standard verification for loan underwriting. At the same
time, Lender must take reasonable steps to verify that MCC program
requirements have been satisfied. This may be done in any reasonable,
efficient manner. The items that must be verified are: income, purchase
price, first time homebuyer status and mortgage type. Lender must have
Income Tax Returns by this time.
C. Loan Closing
1. Lender approves the loan to the Borrower in accordance with standard
Lender policies. Lender provides W-4 Income Tax Withholding form to
borrower (See Appendix E).
2. Borrower uses W-4 to adjust tax withholding by an amount equal to the
MCC certificate value (See Appendix D).
3. Lender notifies Program Administrator of loan approval and submits
Closing Package Closing package should be signed and dated by all
parties at or as close to close of escrow as possible and submitted to EDA
within 5 business days of closing.
4. Program Administrator adds the amount of the MCC to the cumulative
total of all MCC's issued to date.
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D. Follow-up, Record Keeping, and Reporting
1. Lender files annual report, using IRS form 8329 by Jan. 31.
2. For six years, the Lender must retain:
a. Name, mailing address, and TIN (social security number or tax
identification number) of the MCC holder.
b. Name, mailing address and TIN of the MCC issuer.
c. Date of loan, certified indebtedness amount and MCC tax credit rate.
3. Program Administrator prepares reports on IRS form 8330, once each
quarter. This report includes the amount of MCC's issued, as well as other
information including name, address and social security number of any
Borrower whose MCC was revoked.
4. Program Administrator or its designee performs annual random audits of
participating Lender records to assure conformity with MCC program
guidelines.
E. Revocations
1. The MCC is automatically revoked if the residence for which it was issued
ceases to be the MCC holder's principal residence or if the mortgage
obtained in connection with the MCC is paid off (including refinances).
2. Revocation will also occur upon discovery by either Program Administrator
or lender of any misstatement of fact, whether by error or fraud, which
would render the Borrower or residence ineligible.
F. Non-Transferability
Mortgage Credit Certificates are never transferable under any circumstances.
SECTION IV. MCC ELIGIBILITY GUIDELINES
There are three types of eligibility guidelines under the MCC Program; 1) Borrower
Eligibility Guidelines; 2) Maximum Purchase Price Guidelines; and 3) Mortgage
Guidelines. Lenders must certify to the best of their knowledge that all information
provided by the Lender, the Borrower and the Seller is true. If the Lender becomes
aware that any provided information is not true, the Lender must notify the Program
Administrator immediately.
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A. Borrower Eligibility Guidelines
1. The Borrower must meet credit and underwriting requirements established by
the participating Lender, as would any other borrower. The effect of the MCC
on income is to be considered in relation to the underwriting requirements.
2. The Borrower and their spouse may not have held an ownership interest in
improved-upon residential real property nor claimed any real estate or
mortgage related tax deductions in the last three (3) years. The three years is
calculated by counting backwards from the date the mortgage applied for is
executed. This is the definition of "first time home buyer" under Federal
Internal Revenue Code regulations. The borrower’s (and borrower’s
spouse’s) last three years tax returns will be reviewed for any mortgage or
real estate related deductions. If a borrower’s tax returns show evidence of
mortgage or real estate related deductions, the borrower must provide
acceptable documentation that the deductions are not related to improved-
upon residential real property and must also provide acceptable
documentation evidencing the value of the property. Asset “income” from the
property must be imputed using the HUD passbook rate and added into
borrower’s total qualifying income. Also, the borrower’s total assets (including
property) must be equal to or less than MCC annual income limit amount
based on household size for the current fiscal year. If the borrower’s total
assets exceed the program’s annual income limit for their household size, the
assets must be spent down accordingly. Assets (including property) disposed
of for less than fair market value during the most recent 2 year period are
counted as if the household still owned the asset.
To demonstrate compliance with this requirement, Borrowers must complete
and sign the Application Affidavit, Closing Affidavit, and provide copies of their
last three (3) years signed federal tax returns (or acceptable Income Tax
Affidavit).
EXCEPTION: TARGETED AREAS
In target areas, as identified in Appendix C, the "first time home buyer"
requirement does not apply. No affidavit for the first time home buyer status
is required for homes in the target area; however, these MCC's must be
clearly identified as such.
3. Three years of Federal Income Tax returns are required. The three year
period begins from the date of application to participate in the Program. Tax
returns are required for each person whose name will be on the MCC and
their spouse. If a person has taken deductions, a copy of the Schedule A is to
be included.
a. If the Borrower can produce the signed 1040A, 1040EZ, or 1040
returns for the three preceding years with all schedules which show no
deductions for mortgage interest or real estate taxes, these forms shall
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be submitted with the MCC application. Certified tax returns can be
requested from the IRS by using form 4506-T.
b. If the Borrower is unable to produce income tax returns with the MCC
application, the Borrower must submit transcripts from the IRS
verifying the filing status of the Borrower for the tax years in question.
Transcripts can be requested from the IRS by filing Form 4506 T.
c. In the event the Borrower was not obligated to file federal income tax
returns for any of the preceding three (3) years, it will be necessary for
the Lender to obtain from the Borrower a completed and signed
Income Tax Affidavit, which is required in place of (a) or (b) above,
along with the other MCC program affidavits.
d. When the loan is closed during the period between January 1 and
February 14 and the Borrower has not yet filed his Federal Income
Tax Return for the preceding year with the IRS, the Lender may, with
respect to such year, rely on an affidavit of the Borrower that the
Borrower is not entitled to claim deductions for taxes or interest on
indebtedness with respect to property constituting his principal
residence for the preceding calendar year.
4. The residence being purchased with the MCC-assisted mortgage must be the
Borrower's Principal Residence. The Borrower must begin to use the MCC-
assisted residence as his or her Principal Residence within sixty (60) days of
the date the MCC is issued. The Borrower must certify his intention to do so
by signing the Application Affidavit, and also must promise to notify Lender if
the residence ceases to be his or her Principal Residence.
5. The Borrower's current Gross Annual Household Income must not exceed the
Income limits specified in the Program. Gross Annual Household Income is
calculated with the Income Computation Worksheet.
6. A co-mortgagor or co-owner is any person who is liable for a mortgage and
holds an ownership interest in the home. A co-signer is usually defined as any
person who is secondarily liable for a mortgage but does not have an
ownership interest in the home. A co-signer is not allowed under the MCC
Program.
7. Any misrepresentation, misstatement or fraud, or any failure to comply with
Program requirements by Borrower will result in revocation of the MCC and/or
severe penalties under Federal law.
B. Home Purchase Price Guidelines
The residence to be purchased by means of an MCC-assisted mortgage must fall
below the purchase price limits to qualify.
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C. Mortgage Guidelines
1. No refinancing or rollovers of existing mortgages (or land purchase
contracts) can be assisted with an MCC. The Borrower certifies that the
MCC-assisted mortgage is not being used to refinance or retire an existing
mortgage or land contract by signing the Application Affidavit. Also, MCC
cannot be used to purchase an existing mortgage.
2. The Homeowner will lose the benefits of the MCC Program upon
refinancing of the original first mortgage assisted with the MCC Program.
3. An MCC cannot be used in connection with a mortgage financed through
a Qualified Mortgage Bond or Qualified Veteran's Mortgage Bond.
4. No interest on an MCC-assisted mortgage (or certified indebtedness) may
be paid to any Related Person as defined in Section 144(a) of the Internal
Revenue Code. The Borrower certifies that no portion of the interest on
the Borrower's mortgage will be paid to any Related Person by signing the
Application Affidavit.
5. As specified above, MCC's are totally non-transferable.
6. Riverside County MCC Program will only be used for fixed interest rate
15-year, 30-year or 40-year term loans, including FHA 203 (b), VA, FNMA,
FHLMC and privately insured loans. MCC’s may not be used in
conjunction with bond backed loans such as Cal-Vet or California Housing
Finance Agency (CalHFA) first mortgage loans and no negative
amortization loans.
SECTION VI. MCC PROCESSING
A. Order of Processing
MCC applications will be processed by the Program Administrator on a first-
come, first-served basis, in chronological order as received from Lenders.
Program Administrator maintains a cumulative-to-date total of aggregate amount
of MCC's to be issued. After the total available under the MCC program has been
issued, Lenders will be notified and no further issues will be made.
B. Application and Initial Screening
1. The formal application process begins when the Program Administrator
receives the MCC Submission Package. The Submission Package
consists of original signed copies of the documents listed in Appendix E.
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2. Program Administrator and Lender perform an initial screening for
compliance with program guidelines (See Section IV). If the applicant and
residence fall within the guidelines, the Program Administrator will notify
the Lender within ten County working days that the Application is received
and an MCC Commitment has been made. A code number is then
assigned to the MCC Commitment. If the subject property escrow closes
prior to issuance of the MCC Commitment, the MCC application will be
declined.
C. MCC Closing Package
1. After the commitment is issued and the code number assigned, Lender is
responsible for compiling the Closing Package and submitting this
package within 5 days of loan closing. The closing package should be
signed at or as close to close of escrow as possible. There will be a $50
penalty for not meeting the deadline. The Closing Package consists of
originally signed copies (originals) of the documents listed in Appendix F.
2. Lenders are responsible to make reasonable efforts to verify the
information provided.
D. Resubmission of Rejected Applications
Submission Packages and Closing Packages that are rejected by the Program
Administrator may be corrected and resubmitted once. This second submission,
which must be re-verified wherever appropriate, will receive a second review,
and a final determination will be made. No additional fee will be charged for the
re-submission. No further re-submissions above the second submission will be
considered.
E. MCC Commitments, Extensions, Cancellations
1. As described in Section III(B) in this handbook, the Commitment is issued
by the Program Administrator after an acceptable Submission Package is
received and screened. The MCC Commitment expires on the earlier of (i)
60 days plus one 30 day extension if approved or (ii) the expiration date of
the MCC credit allocation. The extension can be granted upon request
with payment of a $50 extension fee at any time during the 60 day original
term. If the extension is requested, income must be re-verified during the
extension period. The Program Administrator can waive the $50 fee if the
County or Program Administrator caused a delay, other than in the normal
course of duty.
2. Lender must notify Program Administrator of any MCC Commitments
which should be canceled, and provide a reason for cancellation within
five (5) working days of such cancellation.
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F. Changes in Information
In some cases there may be changes in information between the date the
Application Affidavit is submitted and the date of the closing.
1. Change in Home Being Purchased. If a borrower changes homes after
issuance of the Commitment letter, the Lender must assist the borrowers
in completing a new application affidavit and submit the application
affidavit to the MCC Coordinator with a cover letter explaining the reason
for the change. The MCC Coordinator will issue a new Commitment if all
of the following is determined: (1) the home being purchased is located in
a participating location; and (2) the home being purchased meets the
purchase price limits for the MCC Program. In addition, if the
indebtedness amount for the home being purchased will be more than the
original residence, the reissued commitment is contingent upon the
County having sufficient MCC funds for the new amount.
2. Changes in MCC current income. Once the income at the time of the
commitment has been verified, it is not necessary to cancel the application
based on changes in income or in the working status of family members
except to the extent that a new source of income not included in the
application affidavit is being received. Income must be re-verified if the
closing of the mortgage does not occur within 60 days of the execution of
the application affidavit.
3. Marriage. If the Borrower gets married after issuance of the MCC
Commitment and before the closing, the Program Administrator must be
notified, and the new spouse must meet the "first time home buyer"
requirements in Section IV(A)(2). The new spouse's income is a new
source of income and must be taken into account in determining income
eligibility.
4. Homeownership. If the Borrower or their spouse acquires an ownership
interest in improved-upon residential real property at any time prior to
closing, the MCC Commitment shall be revoked (unless the MCC-assisted
mortgage is for a home located in a Targeted Area; see Section IV(A)(2)
"Exception").
5. Purchase Price. If the cost of the residence is being purchased with an
MCC-assisted mortgage increases, the Program Administrator must be
notified. If the new price exceeds the Purchase Price Limits, the MCC
Commitment will be revoked.
6. Indebtedness Amount. If the amount of the MCC-assisted mortgage or
Certified Indebtedness Amount increases, the Program Administrator must
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15
be notified. In the unusual case where this increase causes the total value
of MCC Certificates issued to go above the maximum available, the
increase may be disapproved.
Program Administrator must be notified by Lender of any other change in
information provided prior to closing.
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APPENDIX A
Riverside County
Mortgage Credit Certificate Program
Income and Purchase Price Limits
OUTSIDE TARGET AREA CENSUS TRACT
Income Limits
Effective: April 14, 2017
Household Size Maximum Annual Income
One to Two people $73,300
Three or more people $84,295
Purchase Price Limits
Effective: April 3, 2017
Type of Home Maximum Purchase Price
New Construction & Resale $349,411
INSIDE TARGET AREA CENSUS TRACT
Income Limits
Effective: April 14, 2017
Household Size Maximum Annual Income
One to Two people $87,960
Three or more people $102,620
Purchase Price Limits
Effective: April 3, 2017
Type of Home Maximum Purchase Price
New Construction & Resale $427,058
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APPENDIX B
Riverside County
Mortgage Credit Certificate Program
Participating Jurisdictions
The Riverside County Mortgage Credit Certificate Program may be utilized to purchase
a home in the following locations:
Within the City Limits of the following jurisdictions:
Banning Beaumont
Calimesa Canyon Lake
Cathedral City Coachella
Corona Desert Hot Springs
Indio Jurupa Valley
Lake Elsinore La Quinta
Menifee Moreno Valley
Norco Palm Desert
Palm Springs Perris
Riverside San Jacinto
Temecula
Please note that the following cities are not participating in the County's MCC Program
and MCC's cannot be issued to purchasers of homes located within the City Limits of
these cities:
Eastvale Hemet
Indian Wells Murrieta
Rancho Mirage Wildomar
and
All unincorporated areas of Riverside County
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18
APPENDIX C
COUNTY OF RIVERSIDE
FEDERALLY-DESIGNATED TARGETED AREAS
(Qualified Census Tracts from the 2000 Census)
City/Community* Census Tract(s)
Banning 440.01, 422.00
Beaumont 440.00
Blythe 461.02, 462.00
Cabazon 9404.00
Canyon Lake 429.01
Cathedral City 449.15, 449.16, 450.00
Coachella 456.04, 456.09, 457.03, 457.04, 457.05,
457.06, 469.00
Corona 414.01, 415.00, 416.00, 417.02, 417.04
Desert Hot Springs 445.09, 445.10, 445.15, 445.07, 445.16,
472.01
Indio 452.07, 453.01, 454.00, 455.01, 455.02,
456.03¹
Jurupa Valley 402.03, 402.04, 403.01, 405.03
Lake Elsinore 429.01, 429.02, 430.01, 430.03, 430.06,
464.02
La Quinta 452.13, 456.05, 456.09
Moreno Valley
424.04, 425.04, 425.05, 425.08, 425.10,
425.11, 425.12, 425.12, 425.15, 425.18,
425.19, 425.20, 467.00
Palm Desert 451.18
Palm Springs 448.06, 449.07, 449.26, 9414.00
Perris 420.10, 426.17, 427.06, 428.00, 429.01,
429.04
Riverside
303.00, 304.00, 305.01, 305.02, 305.03,
310.02, 313.00, 317.01, 410.01, 410.02,
411.01, 422.09, 422.10, 425.05, 465.00,
467.00
San Jacinto 429.03, 436.01, 436.02, 436.09
¹-This census tract covers city of La Quinta, Indio, Coachella and unincorporated
Riverside County
*All of the federally-designated Targeted areas listed above participate in the MCC
Program.
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19
APPENDIX D
HOW TO CALCULATE MCC CREDIT AND ADJUST W4 FORM
Calculating the MCC Tax Credit. The MCC federal income tax credit is based on the
interest paid on a mortgage loan. In Riverside County, the MCC federal income tax
credit is equal to 20% of the interest paid on the mortgage loan.
Example: A Sample Mortgage Loan Analysis with MCC credit (next page) is to be used with the example.
The sample shows the MCC credit which is equal to 20% of the interest paid for each year of the 30 year
mortgage loan. In the first year of ownership, the interest paid on the mortgage loan equals $10,000.00 ,
($100,000.00 x 10% = $10,000.00). Fifteen percent of that interest is the MCC credit, which amounts to
$1,500.00, ($10,000.00 x 20% = $2,000.00). Every year the amount of interest paid will decrease, thus
the MCC credit will decrease over time.
This example can be translated into the following formula:
MCC Credit = Mortgage Loan Amount x Interest Rate x 20% MCC Rate
Adjusting the Borrowers W4 Form. The MCC tax credit may be taken throughout the
year by the borrower(s); therefore, the W4 Form must be adjusted accordingly.
Using the first example of a $2,000.00 federal income tax credit, we can determine the
amount of credit earned each month by dividing by 12 months, ($2,0000/12 = approx.
$166.00 per month). When taking the credit throughout the year the borrower must add
additional withholding allowances to their W4 Form. The borrower must add the
number of withholding allowances that approximate their MCC credit. In our example,
the MCC credit amounts to $166.00 per month. By adding additional withholding
allowances, the borrower will not be taxed as heavily and should see an increase in
their paycheck equal to the amount of their monthly credit. You can calculate the credit
weekly, bi-weekly, monthly, etc. to suit the borrowers’ payroll needs. All Participating
Lenders should obtain a copy of Circular E for adjusting W4 Forms. Circular E is
available at any IRS office. The following example illustrates this calculation.
Important: Inform the borrower that they need to be aware of the amount of credit
being earned every year. The borrower will have to adjust their W4 Form to reflect the
decreasing credit if necessary.
Example: Mr. Smith has borrowed $100,000 at 10% interest to purchase his house. He has received an
MCC and his credit is $1,500 for the first year (see chart). Mr. Smith is single with no children (claims 1
on his W4 Form) and earns $2,200 per month ($26,400 per year). On the following page is an excerpt
from an IRS Circular E which shows the federal income tax withholdings according to the number of
withholding allowances claimed on a W4 Form. According to the Circular E, Mr. Smith pays $305 per
month in federal income tax. When we apply his $125 MCC credit the amount is reduced to $180 ($305 -
$125 = $180). The amount of federal income tax withheld from Mr. Smith's paycheck is reduced by $125
to $180. To determine the number of withholding allowances to claim, find the number (in the same row)
that comes closest to $180. The new tax amount falls between 4 and 5 withholding allowances on his W4
Form; Mr. Smith's paycheck should be increased approximately $103 every month ($305 - $202 = $103).
The remainder of the credit can be claimed at the end of the year at tax time. Should Mr. Smith's MCC
credit exceed his tax liability at the end of the year, he can carry forward any remaining credit for up to
three years.
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20
Circular E (Sample):
Sample Mortgage Loan Analysis with MCC Credit
Principal $100,000.00
Annual Interest Rate 10.00%
Term (years) 30
Start date 4/30/90
Yearly Payment $10,607.92
No. of Payments 30
Payment
No. Payment
Dates Beginning
Balance Interest Principal Ending
balance Cumulative
Interest MCC
CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
4/90
4/91
4/92
4/93
4/94
4/95
4/96
4/97
4/98
4/99
4/00
4/01
4/02
4/03
4/04
4/05
4/06
4/07
4/08
4/09
4/10
4/11
4/12
4/13
4/14
4/15
4/16
4/17
4/18
4/19
$100,000.00
99392.08
98723.36
97987.77
97178.62
96288.56
95309.49
94232.51
93047.84
91744.70
90311.24
88734.44
86999.96
85092.03
82993.31
80684.72
78145.27
75351.87
72279.13
68899.12
65181.11
61091.29
56592.50
51643.82
46200.28
40212.38
33625.69
26380.34
18410.45
9643.57
$10,000.00
9939.21
9872.34
9798.78
9717.86
9628.86
9530.95
9423.25
9304.78
9174.47
9031.12
8873.44
8700.00
8509.20
8299.33
8068.47
7814.53
7535.19
7227.91
6889.91
6518.11
6109.13
5659.25
5164.38
4620.03
4021.24
3362.57
2638.03
1841.04
964.36
$607.92
668.72
735.59
809.15
890.06
979.07
1076.98
1184.67
1303.14
1433.45
1576.80
1734.48
1907.93
2098.72
2308.59
2539.45
2793.40
3072.74
3380.01
3718.01
4089.81
4498.80
4948.68
5443.54
5987.90
6586.69
7245.36
7969.89
8766.88
9643.57
$99,392.08
98732.36
97987.77
97178.62
96288.56
95309.49
94232.51
93047.84
91744.70
90311.24
88734.44
86999.96
85092.03
82993.31
80684.72
78145.27
75351.87
72279.13
68899.12
65181.11
61091.29
56592.50
51643.82
46200.28
40212.38
33625.69
26380.34
18410.45
9643.57
0.00
$10,000.00
19939.21
29811.54
39610.32
49328.18
58957.04
68487.99
77911.24
87216.02
96390.49
105421.62
114295.06
122995.06
131504.26
139803.59
147872.06
155656.59
163221.78
170449.69
177339.60
183857.71
189966.84
195626.09
200790.47
205410.50
209431.74
212794.31
215432.34
217273.39
218237.74
$1500.00
1490.88
1480.85
1469.82
1457.68
1444.33
1429.64
1413.49
1395.72
1376.17
1354.67
1331.02
1305.00
1276.38
1244.90
1210.27
1172.18
1130.28
1084.19
1033.49
977.72
916.37
848.89
774.66
693.00
603.19
504.39
395.70
276.16
144.65
SINGLE Persons - MONTHLY Payroll Period (For Wages paid After December 1991)
And the wages are- And the number of withholding allowances claimed is -
At least But less
than 0 1 2 3 4 5 6 7 8 9 10
The amount of income tax to be withheld shall be -
$1,800
1,840
1,880
1,920
1,960
2,000
2,040
2,080
2,120
2,160
2,200
2,240
2,280
2,320
2,360
$1,840
1,880
1,920
1,960
2,000
2,040
2,080
2,120
2,160
2,200
2,240
2,280
2,320
2,360
2,400
$257
263
269
280
292
303
314
325
336
348
359
370
381
392
404
$228
234
240
246
252
258
264
272
283
294
305
316
328
339
350
$199
205
211
217
223
229
235
241
247
253
259
265
274
285
296
$171
177
183
189
195
201
207
213
219
225
231
237
243
249
255
$142
148
154
160
166
172
178
184
190
196
202
208
214
220
226
$113
119
125
131
137
143
149
155
161
167
173
179
185
191
197
$84
90
96
102
108
114
120
126
132
138
144
150
156
162
168
$56
62
68
74
80
86
92
98
104
110
116
122
128
134
140
$27
33
39
45
51
57
63
69
75
81
87
93
99
105
111
$0
4
10
16
22
28
34
40
46
52
58
64
70
76
82
$0
0
0
0
0
0
5
11
17
23
29
35
41
47
53
49
Revised12/21/2017
21
APPENDIX E
MORTGAGE CREDIT CERTIFICATE PROGRAM
IRS FORMS
All of the form numbers listed can be obtained from local IRS office or by calling (800)
829-1040 or visit www.irs.gov
Form 8329
Must be filed by the lender for any MCC's issued for the borrower for the calendar year.
Part II - Issuing Authority:
Issuer's Name: Riverside County Economic Development Agency
Issuer's Address: 5555 Arlington Avenue
Riverside, California 92504
Employer I.D. No.: 956000-930
Election Date: January 14, 2010 (2009 Allocation)
February 14, 2011 (2011 Allocation)
April 5, 2012 (2012 Allocation)
Note: The first two digits of the Mortgage Credit Certificate Number indicate the year of the allocation.
For example: MCC 09-001 is the 2009 Allocation and MCC 11-001 is the 2011 Allocation.
Part IV - Computation of the Total Amount of MCC:
Certified Indebtedness Amount of each MCC issued is equal to the mortgage loan
amount times the certificate credit rate. The credit rate for MCC with a 94- or 95-
number is twenty (20%) percent. The credit rate for MCC with a number of 96- or
higher is fifteen (15%) percent. The credit rate for certain MCC with a number of 2012
to current is twenty (20%) percent.
Form 8396
This form must be filed by the Borrower with the 1040 long form every year they live in
and own their house.
Form 4506-T
If the Borrower does not have copies of tax returns he must file this form with the IRS
requesting his filing status for the year(s) in question.
W4 Form
The Lender must provide and assist with filling out a new W4 Form when the borrower's
loan closes.
50
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22
51
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23 52
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24
53
Revised 12/21/2017
26
54
Revised 12/21/2017
26
55
Revised 12/21/2017
27
56
Revised 12/21/2017
28
57
Revised 9/7/11
29
58