HomeMy WebLinkAboutResolution 2011-88 Participation in County Mortgage Credit Certification ProgramCITY OF PALM DESERT
STAFF REPORT
REQUEST: ADOPT RESOLUTION OF THE CITY OF PALM DESERT
AUTHORIZING THE PARTICIPATION IN THE RIVERSIDE COUNTY
MORTGAGE CREDIT CERTIFICATE (MCC) PROGRAM
SUBMITTED BY: Janet M. Moore, Director of Housing
DATE: December 8, 2011
CONTENTS: City Resolution No. 2011-88
Attachment K
Recommendation
By Minute Motion that the City Council:
1) Waive further reading and adopt City Resolution No. 2011-88 a
resolution of the City Council of Palm Desert authorizing the
participation in the Riverside County Mortgage Credit 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 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.
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
Staff Report
Riverside County Mortgage Credit Certificate Program
December 8, 2011
Page 2
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.
Effective 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 & $1,996 $1,996
Interest Only)
MCC Rate N/A 15%
Monthly Credit Amount N/A $262.25
"Effective" Monthly Mortgage $1,996 $1,733.75
Payment
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
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 conjunction with a MCC must be the
borrower's principal residence. The home may be a detached or attached single family
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Staff Report
Riverside County Mortgage Credit Certificate Program
December 8, 2011
Page 3
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 $80,960.00), as well as limits to the
purchase price of the home (currently $450,000). This program allows and may be used in
conjunction with the Agency or City's first time homebuyer programs.
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 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.
Fiscal Analysis
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.
Submitted by: ; Department Head:
Jan t Moore, Director of HousiXs�n
McCarthy, ACM/Red�Iopment
Approval:
M Wohlmuth, City Manager
CITY COWCII�CTION
APPROVED DFNWID
III
MEETING DA
AYES. ' I ►�I
NOES:)%
ABSENT:�-
ABSTAIN:
VERIFIED BY: IWO
Original on File with
Office
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RESOLUTION NO. 2011- 88
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").
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") 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 residences
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. 2011-88
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 2011, by
the following vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
Jean M. Benson, Mayor
ATTEST:
Rachelle D. Klassen, City Clerk
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Program - 2011.doc
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 be 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, JOHN W. MOHLMUTH (Name), am the CITY MANAGER (Title) of CITY OF PALM
DESERT (Participating Jurisdiction); which is a participating jurisdiction of the proposed Single
Family Housing 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.
Signature of Senior Official
CITY MANAGER
Title
JOHN M. WOHLMUTH
Print or Type Name
Date