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Home My WebLink AboutRes No. 09-69 - Partcptn in Riv Co. Mortgage Certifcate MCC Prgm CITY OF PALM DESERT STAFF REPORT REQUEST: ADOPT RESOLUTION OF THE CITY OF PALM DESERT AUTHORIZING THE PARTICIPATION IN THE RIVERSIDE COUNTY MORTGAGE CERTIFICATE (MCC) PROGRAM SUBMITTED BY: JANET MOORE, DIRECTOR OF HOUSING JESSICA GONZALES, MANAGEMENT ANALYST - HOUSING DATE: SEPTEMBER 24, 2009 CONTENTS: CITY RESOLUTION NO. 09- 69 Recommendation: By Minute Motion that the City Council: 1) Waive further reading and adopt City Resolution No. 09-69 a resolution of the City Council of Palm Desert authorizing the participation in the Riverside County Mortgage Certificate (MCC) Program, and 2) Authorize the City Manager to execute all documents that may be necessary to facilitate the participation. Executive Summary: Approval of this request will authorize the City of Palm Desert ("City") to participate in the Riverside County Mortgage Certificate (MCC) Program. Under the MCC Program, the Riverside County Board of Supervisors ("County") has authorized the County Economic Development Agency(EDA)to apply to the California Debt Limit Allocation Committee for a new allocation of Mortgage Credit Certificates. Upon receipt of the new allocation, the County intends to issue, in conjunction with the mortgage lenders in the County, mortgage credit certificates to certain eligible home buyers. The City's participation in the MCC Program will allow EDA to undertake the MCC program within City jurisdiction to assist future first-time qualified home buyers that purchase a home within the City. The fiscal impact to the City or the Palm Desert Redevelopment Agency ("Agency") is limited to marketing the Program within the City by publishing a general notice in the local newspaper at least twice a year. Staff Report Riverside County Mortgage Credit Certificate Program Page 2 September 24, 2009 DISCUSSION: 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. The Riverside County MCC Program provides for a fifteen percent(15%) rate which can be applied to the interest paid on the mortgage loan. The borrower can claim a tax credit equal to 15% 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 85% 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. �ffective Home Buying Power With and Without an MCC Without With MCC MCC First Mortgage Amount $300,000 $300,000 Mortgage Interest Rate 7% 7% Monthly Mortgage (Principal & Interest Only) $1,996 $1,996 MCC Rate N/A 15% Monthly Credit Amount N/A $262.25 "Effective" Monthly Mortgage Payment $1,996 $1,733.75 Annual Income Needed * $85,542 $74,304 "Annual Income Needed is based on monthly Principal and Interest(P&I) not exceeding 28% of monthly income. *�The above Table illustration was obtained from Riverside County Economic Development Agency G:\RDA\HOUSING\PROGRAMS\MORTGAGE CREDIT CERTFICATE\STAFF REPORT-MCC PROGRAM.DOC Staff Report Riverside County Mortgage Credit Certificate Program Page 3 September 24, 2009 The MCC is in effect for the life of the loan as long as the home remains the borrower's principal residence. The MCC is not transferable to a new loan when refinancing, nor can it be assigned or transferred to a new buyer or another home. In addition, the MCC Program includes a nine year recapture provision which provides for a return of tax credits taken if the property ceases to be the borrower's primary residence within nine years from the close of escrow. The amount of tax recapture is determined by formula, and provided to the borrower at the time the application is taken. After expiration of the nine year period, the borrower may dispense of the property without incurring penalty, but would lose the future benefits of the MCC. The Program requires that the home purchased in cor�junctian with a MCC must be the borrower's principal residence.LL, T,��..,��_� may be andet�ched Ar attached single family home, condominium unit, a�4-Qp ��jt,,.c�c a,manufactta,t-ed.home.on permanent foundation (new or re-sale). Program guidelic�es.alscx ip.cl.u��.inc.�me restrictions(maximum income for households with 3 or more c,ut'rentl.jr.�.cannox.exceetl.$_8D,960.�0), as well as limits to the purchase price of the home (currentl�.$3�9,146.00), -Tlais-program allows and may be used in conjunction with the�Agency--or City'S f�rst #ime homebuyer programs. , . _ __ . ._ _ . _ __ Interested qualified homebuyers can qualify for the MGG on their own through a Participating Lender, 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 the 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. Submitted by: Department Head� --�. i /n �� Jessica G n ales J net oore Management Analyst- Housing Dir or of Housing Approval: . C�, sti McCarthy n Wohlmuth ACM Redevelop nt ity Manager G:\RDA\HOUSING\PROGRAMS\MORTGAGE CREDIT CERTFICATE\STAFF REPORT-MCC PROGRAM.DOC REGULAR PALM DESERT CITY COUNCIL MEETING SEPTEMBER 24, 2009 XII. RESOLUTIONS A. RESOLUTION NO. 09-69 — A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT, CALIFORNIA, AUTHORIZING PARTICIPATION IN THE RIVERSIDE COUNTY MORTGAGE CERTIFICATE (MCC) PROGRAM. Rec: Waive further reading and adopt. C1TY COUNCIL A�N APPROVF,D DF.NTF,D R CEI�D OTHER � MF,FTII�G DATF. "C AYF,S. � ~ i�d' �Cl�� i`� / 1VO�S: A�35[;1VT: A��TA[N: VF,I2iFiI;D I3Y: Or6nin�il c�n File with City '! rk's Office RESOLUTION NO. 09-69 A RESOLUTION OF THE CITY OF PALM DESERT AUTHORIZING THE PARTICIPATION IN THE COUNTY OF RIVERSIDE MORTGAGE , 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 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"). Section 3. The Board of Supervisors of the County of Riverside adopted Resolution 87-564 on December 22, 1987 establishing a Mortgage 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") has applied to the California Debt Limit Allocation Committee ("CDLAC")for a mortgage credit certificate allocation. Section 6. The City of Palm Desert ("City") wishes to participate in the MCC Program administered by the 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 residence located in the City. Section 9. The City by adopting this Resolution, hereby gives notice of its election to participate in the County's MCC Program. RESOLUTION NO. 09-69 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 day of 2009, by the following vote to wit: AYES: NOES: ABSENT: ABSTAIN: Robert A. Spiegel, Mayor ATTEST: Rachelle D. Klassen, City Clerk G:\rda\HOUSING\PROGRAMS�MORTGAGE CREDIT CERTIFICATHCITY OF PALM DESERT RESOLUTIOt�4 MCC Program-2009.doc Klassen, Rachelle From: Burt[Burt@cdaronline.com] Sent: Thursday, September 24, 2009 11:56 AM To: Klassen, Rachelle Cc: Greg Berkemer Subject: [NEWSENDER] - - Message is from an unknown sender Mayor Spiegel and Council Members, I write on behalf of the more than 3500 members of the California Desert Association of REALTORS to urge your support for item XII on your agenda today, participation in Riverside County's Mortgage Certificate Program for first time homebuyers. Initiatives like the mortgage certificate program are of great help to first time homebuyers struggling to purchase a home. Such innovative programs also will help the city rebuild its housing market and tax base as we recover from the economic downturn. The real estate community applauds this action of the Palm Desert City Council and looks forward to working with you to make it a success for homebuyers and the city. Sincerely, Burt McChesney Governmental Affairs Director California Desert Association of REALTORS 760-702-0651 email to: burt c(D.cdaronline.com Visit our website: www.CalDesertRealtors.Com r.,7 O - O -.. .._ tD � '_ �� '+_I'... �� '. �� .. Cl'+J 3 ';C:, _,�ti c7- W T��`�; � P•7 1