HomeMy WebLinkAboutRes 2018-24 - Participation in County MCC Program RESOLUTION NO. 2018-24
STAFF REPORT
CITY OF PALM DESERT
HOUSING DEPARTMENT
MEETING DATE: May 10, 2018
PREPARED BY: Jessica Gonzales, Senior Management Ana M iV4
REQUEST: Adopt Resolution of the City of Palm Desert Authorizing the
Participation in the Riverside County Mortgage Credit Certificate
(MCC) Program
Recommendation
1) Waive further reading and adopt City Resolution No. 2018 - 24 a
resolution of the City Council of Palm Desert authorizing the
participation in the Riverside County Mortgage Credit Certificate
(MCC) Program, and
2) By Minute Motion, City Council authorize the City Manager to execute
all documents that may be necessary to facilitate the participation.
Strategic Plan
This request does not apply to a specific strategic plan goal.
Executive Summary
Approval of this request will authorize the City of Palm Desert ("City") to continue to
participate in the Riverside County Mortgage Credit Certificate (MCC) Program. The
County Economic Development Agency (EDA) will apply to the California Debt Limit
Allocation Committee for a new allocation of Mortgage Credit Certificates. The County,
once approved for allocation, will provide mortgage credit certificates to certain eligible
home buyers. The City's participation in the MCC Program will allow qualified home
buyers to purchase a home, within the City, utilizing the certificates to reduce the
amount of their federal income tax liability.
Background:
A Mortgage Credit Certificate (MCC) entitles qualified home buyers to reduce the
amount of their federal income tax liability by an amount equal to a portion 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 stated income of the buyer.
MAY 10, 2018 — STAFF REPORT
City — Riverside County Mortgage Credit Certificate Program
PAGE 2 OF 3
The Riverside County MCC Program provides for a twenty percent (20%) rate which
can be applied to the interest paid on the mortgage loan. The borrower can claim a tax
credit equal to 20% of the interest paid during the year. Since the borrowers taxes are
being reduced by the amount of the credit, this increases the take-home pay by the
amount of the credit. The buyer takes the remaining 80% interest as a deduction. When
underwriting the loan, a lender takes this into consideration and the borrower is able to
qualify for a larger loan than would otherwise be possible.
Effective Home Buying Power With and Without an MCC
Without MCC With MCC
First Mortgage Amount $300,000.00 $300,000.00
Mortgage Interest Rate 4% 4%
Monthly Mortgage (Principal & Interest
Only) $1,432 $1,432
MCC Rate N/A 20%
Monthly Credit Amount N/A $200.00
"Effective" Monthly Mortgage
Payment $1,432 $1,232
Annual Income Needed * $61,371 $52,800
*Annual Income Needed is based on monthly Principal and Interest(P&l)not exceeding 28%of monthly income. **The above
Table illustration was obtained from Riverside County Economic Development Agency.
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 a return of tax
credits taken 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 is taken. After expiration of the
nine year period, the borrower may sell the property without incurring penalty, but would
lose the future benefits of the MCC.
The Program requires that the home purchased in conjunction with a MCC must be the
borrower's principal residence, within the city limits of participating cities. The home
may be a detached or attached single family home, condominium unit, a co-op unit, or a
manufactured home on permanent foundation (new or re-sale). Program guidelines also
include income restrictions (maximum income for households with 3 or more currently
cannot exceed $84,295), as well as limits to the purchase price of the home (currently
$349,411). This program allows and may be used in conjunction with first time
homebuyer programs.
MAY 10, 2018 — STAFF REPORT
City — Riverside County Mortgage Credit Certificate Program
PAGE 3 OF 3
Interested qualified homebuyers can apply for the MCC on their own through a
Participating Lender, as identified by Riverside County for the MCC Program, even if the
City is not providing any down payment assistance. The Participating Lender will
perform an initial qualification and assist the borrower in completing the MCC
submission forms. The fee that may be incurred by interested qualified homebuyers is a
maximum total fee of $400 (which includes a $300 non-refundable application fee and
up to $100 that the participating lender may charge).
Staff recommends approval of the attached resolution authorizing the City's participation
in the Riverside County Mortgage Certificate (MCC) Program to assist first time
homebuyers purchase a home in Palm Desert.
Fiscal Analysis
The fiscal impact to the City or the Palm Desert Housing Authority ("Authority") is limited
to marketing the Program within the City.
LEGAL REVIEW DEPT. REVIEW FINANCIAL REVIEW CITY MANAGER
N/A e-e j 1 1 -t4)
Robert H. Janet Moore Janet Moore aun ylaian
Hargreaves Director of Finance Director of Finance City Manager
City Attorney _
ATTACHMENTS: City Resolution No. 2018-24
Attachment K
RESOLUTION NO. 2018- 24
A RESOLUTION OF THE CITY OF PALM DESERT AUTHORIZING
THE PARTICIPATION IN THE COUNTY OF RIVERSIDE MORTGAGE
CREDIT CERTIFICATE (MCC) PROGRAM
THE CITY OF PALM DESERT HEREBY FINDS, DETERMINES,
RESOLVES AND ORDERS AS FOLLOWS:
Section 1. The Tax Reform Act of 1986 established the Mortgage
Credit Certificate Program ("MCC Program") as a means of assisting qualified home
buyer with the acquisition of new and existing single family housing.
Section 2. Pursuant to Division 31, Part 1, Chapter 3.5,Article 3.4 of
the California Health and Safety Code Sections 50197 et. Seq., local issuers are
authorized to issue Mortgage Credit Certificates ("Certificates") and administer MCC
Program.
Section 3. The Board of Supervisors of the County of Riverside
adopted Resolution 87-564 on December 22, 1987 establishing a Mortgage Credit
Certificate Program.
Section 4. The Board of Supervisors of the County of Riverside has
authorized 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.
Section 5. 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.
Section 6. The City of Palm Desert ("City") wishes to participate in
the MCC Program administered by EDA in connection with mortgage credit
certificates it will make available for the acquisition of new and existing single-family
housing in the County.
Section 7. The adoption of this resolution is necessary to include the
City as a participating unit of general government under County's MCC Program.
Section 8. The City agrees to cooperate with the County to undertake
the MCC program including marketing within City jurisdiction to assist persons or
households of limited income to purchase new and existing single family residences
located in the City.
RESOLUTION NO. 2018- 24
Section 9. The City by adopting this Resolution, hereby gives notice
of its election to participate in the County's MCC Program.
Section 10. The officers of the City are hereby authorized and
directed, jointly and severally, to execute and deliver any and all necessary
documents and instruments and to do all things which they may deem necessary or
proper in order to effectuate the purposes of this Resolution and the transaction
contemplated hereby; and any such actions previously taken by such officers are
hereby ratified, confirmed and approved.
PASSED,APPROVED and ADOPTED this 10th day of May 2018, by the
following vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Sabby Jonathan, Mayor
ATTEST:
Rachelle D. Klassen, City Clerk
C\-IOUSING\PROGRAMS\MORTGAGE CREDIT CERTIFICATE(MCC)1CITY OF PALM DESERT RESOLUTION-MCC Program 2018 aoo
ATTACHMENT K
HOUSING ELEMENT CERTIFICATION FORM
FOR APPLICATION FOR AN ALLOCATION OF QUALIFIED PRIVATE ACTIVITY BONDS FOR A
SINGLE FAMILY HOUSING MORTGAGE CREDIT CERTIFICATE PROGRAM
Note: To he completed by each participating jurisdiction.
Certification of the City of Palm Desert (Participating Jurisdiction)
In connection with the following Qualified Private Activity Bond Application:
APPLICANT: County of Riverside Economic Development Agency
for a Mortgage Credit Certificate Program.
The undersigned officer of City of Palm Desert(Participating Jurisdiction) hereby certifies as follows:
1. I, Lauri Aylaian (Name), am the City Manager(Title)of City of Palm Desert(Participating Jurisdiction);
which is a participating jurisdiction of the proposed Single Family I lousing Mortgage Credit Certificate program.
2. The proposed Single Family Housing Program is consistent with the adopted housing element for City of
Palm Desert(Participating Jurisdiction) in which the proposed program will operate, pursuant to Section 5267 of
the California Debt Limit Allocation Committee Regulations.
Lauri Aylaian
Signature of Senior Official Print or Type Name
City Manager
Title Date