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Home My WebLink AboutRes 2014-03 - Mortgage Crdt Certificate Pgrm CITY 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: Jessica Gonzales, Management Analyst - Housing DATE: January 23, 2014 CONTENTS: City Resolution No. 2014 - � Attachment K Recommendation By Minute Motion that the City Council: 1) Waive further reading and adopt City Resolution No. 2014 -03 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 Mo�tgage 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. Backs�round: 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 Resolution No. 2014-03 Staff Report Riverside County Mortgage Credit Certificate Program January 23, 2014 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 8� 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 The MCC is in effect for the iife 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 G lNnl/SIN<�\PAT7Y LEON\JMM\STAFF REPpRl\MCC PR()GRAM 1-23�14.D()C Resolution No. 2014-03 Staff Report Riverside County Mortgage Credit Certificate Program January 23, 2014 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 Analvsis The fiscal impact to the City orthe Palm Desert Housing Authority("Authority")is limited to marketing the Program within the City. Submitted by: Department Head: � �--�!� JesSi�a Gonzal anagement Analyst- Housing � Jan M. Moore, Director of Housing v ��_.�. Approval: CITY COUNCILA,Q'1`ION APPROVED ✓ D� RECEIVED OTHER EET A - — hn M. Wohlmuth, City Manager AyES: � NOES: ABSENT: � AI3STAIN: VERIFIED BY: Original on File with City C�er 's Offiee G:\HOUSING\PA7N LEON\JMM\STAFF REPORT\MCC PROGRAM t-23-14.DOC RESOLUTION NO. 2014-�� A RESOLUTION OF THE CITY OF PALM DESERT AUTHORIZING THE PARTICIPATION IN THE COUNTY OF RIVERSIDE MORTGAGE CREDIT CERTIFICATE (MCC) PROGRAM THE ClTY 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 16, 2014 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. 2014-�� 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 day of 2014, by the following vote to wit: AYES: NOES: ABSENT: ABSTAIN: Van G. Tanner, Mayor ATTEST: Rachelle D. Klassen, City Clerk �—.i.,5:''.ii�PaC��Le0'i J'.1'.I�stefl ie�:CitHLSOLU�IONS`:CITY CF PALL1 DESERT R'cSOLUTiON��.1CC P�ogram-2014.doc ATTACHMENT K IIOUSING I�:LEMENT CERTIFICATION FURVI FOR AYYLICAT[ON FOR AN ALLOCATION OF QUALIFIEU YRIVATE AC'I'IVI7'Y 130\US FOR A SINGLE FAVIILY HOUSING MORTGAGE CREDIT CERTIFICATE I'ROGRAM ,1'��lc�: 7o be cnmpleted by eacl�pn�•ticipatit��juri.ti�dictia��. Certific��tion of the CIlY OF PALM Dt;S1;R"I� (Participating Jurisdiction) In cc�nn�ctioii ��ith the following Qualified I'rivlte Acti��it�� F3ond Application: .al'YLICANT: Count� ot�ltiverside Economic Development A l�v fur a �lc�rt`,a��c Crcdit Ccrtific:ate Program. I�hc undcrsi��necl officer of CIl_Y,OF P�1I.'vt DC'SEIt"!�(Participating Jurisdiction) hereb` certifics as (ol lu��s: 1. I. JOI IN '�1. W'OHLMUt�H (Namc), am thc CITY MAN/\GI:R ("(�itic) of CI"T'Y OF PA1.�1 I)L:SI:K�I (Participating Jurisdiction); �ihich is a participating jurisdiction of thc proposed Singlc I�nmil� I lousin�; :Vlortgage Credit Certificate program. �'. l hr ��ruposed Single I�amily Housing Program is consistent ��ith the adopted housing elcmrnt f��r C_I'I.l'_(�I�.I'i�l...I�1.[)I:SI:R"I�(Participating J�n•isdiction) in �vhich the proposed program ��ill c�perate. E�w�suai�t to Section �267 of�thc Calitc�rnia Dcbt I.imit Allocation Cummittcc Rcgulations. JO1IN M. WOf-I[,MU"I�H �i`�nat�u•c of Senior Off ici11 Print or�l'ype Name C1�I�Y '�1A\ACEIZ I itic I�atc