FLORIDA HOUSING FINANCE Partners/Lenders...information is correct in online reservation system. Closer then submits closing documents to closing agency/attorney. ... Florida Housing Finance Corporation

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  • FLORIDA HOUSING

    FINANCE CORPORATION

    MORTGAGE CREDIT CERTIFICATE

    (MCC)

    PROGRAM

    LENDER TRAINING

    1

  • WHAT IS A MORTGAGE

    CREDIT CERTIFICATE

    A MCC creates a non-refundable federal income tax credit and is issued to first time homebuyers in conjunction with their mortgage.

    A MCC allows a qualified homebuyer to write off a portion of the annual mortgage interest as a special tax credit, not to exceed $2,000, during each year that they occupy the home as their principal residence.

    The portion or amount of the tax credit is equal to the mortgage credit rate of 50% (Florida Housings rate) multiplied by the annual mortgage interest paid.

    This credit reduces the federal income taxes of the buyer and has the potential of saving the MCC holder thousands of dollars over the life of their mortgage loan.

    2

  • TAX CREDIT" VS. TAX DEDUCTION

    A tax credit entitles taxpayers to subtract the

    amount of the credit from their total federal income

    tax liability, receiving a dollar for dollar savings.

    A tax deduction is subtracted from the adjusted

    gross income before federal income taxes are

    computed. Therefore, with a deduction, only a

    percentage of the amount deducted is realized in

    savings.

    3

  • 2012 MORTGAGE CREDIT

    CERTIFICATE PROGRAM

    The program administration and

    compliance will be handled by Florida

    Housing staff- not by eHousing or US Bank

    A MCC is an enhancement to YOUR first

    mortgage, not Florida Housings as in the

    Bond Program

    All loans are retained and serviced or sold off

    by the originating lender

    4

  • 2012 MORTGAGE CREDIT

    CERTIFICATE PROGRAM

    Program Period Expiration December 31, 2014 or until funds have been fully utilized. However, Florida Housing has resources available in case additional MCC allocation is needed.

    MCC Credit Rate = 50% (.50 x amount of annual mortgage interest paid = Tax Credit Amount).

    Credit is capped at a maximum of $2,000 annually.

    5

  • BORROWER

    QUALIFICATION

    Homebuyer may not have owned a home as their primary residence in the last three years (First Time Homebuyer-some exceptions apply).

    Homebuyers household income and the purchase price must not exceed the maximum limits set by the Program.

    Homebuyer must complete homebuyer education through a HUD approved counseling agency. Online education is acceptable if provided by a HUD approved counseling agency.

    Homebuyer must occupy the home as their principal residence within 60 days of closing.

    6

  • BORROWER

    QUALIFICATION

    Homebuyer must apply for the MCC through a participating lender.

    Homebuyer applies for the MCC at the same time he or she makes a formal application for a mortgage loan.

    Funds will be available on a first-come first-served basis.

    7

  • HOW A HOMEBUYER USES

    THE MCC

    The borrower claims the tax credit with their annual tax return using IRS Form 8396

    The credit may be claimed for the life of the loan as long as the home is their principal residence

    The borrowers may, if they choose, adjust their W-4s to reflect the anticipated credit

    8

  • HOW A LENDER USES THE

    MCC

    Following Agency and/or Investor guidelines, the anticipated credit may be used to help qualify the borrower for a loan. If the tax credit is $2,000, the monthly adjustment is an additional $166.67 per month in qualifying income or is used to lower the housing expense depending upon loan type.

    9

  • MCC WORKFLOW

    Step 1: Loan Officer qualifies borrower(s) for the MCC Program based on FTHB, income & purchase limit

    requirements.

    Step 2: Loan Officer collects 3 years' tax returns from

    borrower/co-borrower or spouse, completes Income Calculation Worksheet, Tax

    Credit Worksheet, & provides borrower(s) with Notice to

    Buyer.

    Step 3: Loan Officer reserves loan & prints Reservation Form for submission to Underwriting.

    Step 4: Underwriter certifies loan upon review of 3 years' tax

    returns, applicable income documentation, Income Calculation Worksheet

    completed by LO, and sales contract.

    Step 5: Closing generates applicable MCC Program

    documentation; Borrower/Co-Borrower Closing Affidavit,

    Seller Affidavit & confirms loan information is correct in online reservation system. Closer then submits closing documents to

    closing agency/attorney.

    Step 6: Post Closing submits closed loan file & all applicable MCC Program documents to FL Housing for issuance of MCC to

    borrowers.

    Step 7: FL Housing reviews loan files for eligibility & issues

    actual mortgage credit certificate upon approval to borrower & forwards copy of

    MCC to lender for record retention & reporting as

    required by the IRS.

    Step 8: FL Housing contacts lender if there are file

    deficiencies & works with lenders to clear exceptions . Ineligible loans may result in

    non-issuance of MCC to borrowers.

    Step 9: Lender reports MCC recipients to the IRS annually

    as required by the Internal Revenue Service.

    10

  • ELIGIBLE LOAN TYPES

    Underwriting Options:

    FHA

    VA

    USDA/RHS

    Fannie Mae Conventional

    Freddie Mac Conventional

    Eligible Loan Terms:

    All loan types must be 30 year fixed rate purchase money mortgage

    NO ARMs or Interest Only Loans

    All loans must be originated in accordance with agency guidelines

    Prevailing market ratesset by lending institution

    Cannot be used with bond financing

    11

  • ELIGIBLE PROPERTY TYPES

    ELIGIBLE PROPERTY TYPE New or Existing Single Family Units Town homes Condos Manufactured Homes Must meet FHA Standards

    PROPERTIES NOT ALLOWED Rental Homes Co-ops Investment Properties Recreational, Vacation, or Second Homes

    Must be borrowers primary residence. Homebuyers must not use more than 15% of the residence in a trade or business, including child care.

    11

  • TARGETED AREA

    *Definition of Targeted Area Census tract in which seventy percent (70%) or more of the families have an income which is eighty percent (80%) or less of the statewide median family income.

    Properties within a Targeted Area-

    First Time Homebuyer Requirement is waived No tax returns required

    Higher Income Limits Up to 120 and 140% of AMI

    Higher Purchase Price Limit

    Refer to the 2012 MCC Program Guide for a list of the Qualified Census Tracts.

    13

  • IRS CODE REQUIREMENTS

    FIRST TIME HOMEBUYER REQUIREMENT

    Homebuyers using the program cannot have had a present ownership interest in any principal residence during the last three years. This will be determined by the following:

    Past three years signed tax returns (2009, 2010 and 2011 tax returns are currently required). Review for mortgage interest deduction or any type of homeowner tax credit which may indicate homeownership.

    14

  • IRS CODE REQUIREMENTS

    Signed tax returns are required from all borrowers who will be on title as well as non-borrowing spouses.

    IRS transcripts will be accepted in lieu of the 1040 EZ, 1040 A, or 1040

    If a borrower was not required to file federal tax returns in a particular year(s), an IRS printout stating No Record Found must be provided or other confirmation issued by the IRS confirming borrower was not required to file a return for that year.

    15

  • INCOME REQUIREMENTS

    Definition of Household Income means all sources of revenue or income of the mortgagor (or mortgagors) and any other person 18 years of age or older, who is expected to permanently reside in the home being financed.

    All forms of income including but not limited to: overtime, bonus, Social Security Income, child support, alimony, seasonal/part-time jobs, self-employment, interest and dividend income, and rental income.

    16

  • INCOME REQUIREMENTS

    Income is annualized over a 12-month period (see Program Guide).

    Spouses income must be verified and included, regardless if they are on the loan, mortgage, deed/title, or are legally separated (not recognized in Florida).

    17

  • IRS CODE REQUIREMENTS

    RECAPTURE TAX Recapture Tax is a federal tax that some homeowners that utilize these programs may be required to pay from the net profit they receive from the sale of their homes. The homeowner pays recapture tax with their federal income tax for the year in which they sell their home. The maximum tax is the lesser of 6.25% of the original loan amount or 50% of the gain on the sale of the home. For Recapture Tax to apply, they must meet all of the following conditions:

    Sell the home within nine years of purchase; Make a net profit on the home, after adjusting the value of the home

    for any improvements or repairs the homebuyers have made, and after deducting all costs of sale, including sales commission, and;

    The homebuyers household income must have increased at least 5% each year, above the applicable AMI used to qualify borrower.

    18

  • IRS CODE REQUIREMENTS

    Fear of paying Recapture Tax should not stop a homebuyer from utilizing the programs because of the above. Also, if the homebuyer refinances their home at a later date to obtain a better interest rate, or to use the equity they have in t

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