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HomeMy WebLinkAboutItem No. 08 Riverside County Mortgage Credit Certificate ProgramText File City of Lake Elsinore 130 South Main Street Lake Elsinore, CA 92530 www.lake-elsinore.org File Number: ID# 19-525 Agenda Date: 3/24/2020 Status: Approval FinalVersion: 2 File Type: Council Consent Calendar In Control: City Council / Successor Agency / Facilities Financing Authority Agenda Number: 8) Page 1 City of Lake Elsinore Printed on 3/19/2020 Page 1 of 3 REPORT TO CITY COUNCIL To: Honorable Mayor and Members of the City Council From: Grant Yates, City Manager Prepared by: Richard J. MacHott, Planning Manager Date: March 24, 2020 Subject: Riverside County Mortgage Credit Certificate Program Participation Recommendation adopt A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING PARTICIPATION WITH THE COUNTY OF RIVERSIDE MORTGAGE CREDIT CERTIFICATE (MCC) PROGRAM. Overview The County of Riverside Economic Development Agency (EDA) has requested that the City participate in the Mortgage Credit Certificate (MCC) program for the 2020 and 2021 calendar years. The City Council has authorized participation in the MCC program in previous years and since 2012, fifteen homebuyers in the City of Lake Elsinore have taken advantage of the benefits afforded by the MCC program. A Mortgage Credit Certificate (MCC) entitles qualified homebuyers to reduce the amount of their federal income tax liability for an amount equal to 20% of the mortgage interest paid during the year on their primary mortgage loan. The advantages to the homebuyer include:  The homebuyer’s federal income tax liability is directly reduced by the amount of the tax credit;  Homebuyers can qualify more easily for their primary mortgage because loan-lenders may factor in the tax credit when underwriting the loan application, which may allow the borrower to (i) qualify for a larger loan amount, or (ii) improve the borrower’s qualifying debt ratios. It should also be noted that if the amount of the MCC exceeds the homebuyer’s tax liability, the unused portion of the credit can be carried forward to the next three years or until used, whichever comes first. Homebuyer Eligibility Criteria The three basic criteria for determining a homebuyer’s eligibility for MCC tax credits are as follows: Page 2 of 3 1. The borrower must be a first time homebuyer defined as a person who has not had an ownership interest in improved-upon residential real property for the previous three (3) years. However, if the prospective home is located in a Target Area census tract, then the first-time buyer requirement does not apply and the income and purchase price limits are higher. Target Area census tracts within Lake Elsinore are shown on the attached map. (Exhibit B). 2. The borrower’s annual income must fall within the MCC income limits as follows: Maximum Income Outside Target Area  Household w/ 1-2 persons: $77,500  Household w/ 3+ persons: $89,125 Max Income Inside Target Area  Household w/ 1-2 persons: $93,000  Household w/ 3+ persons: $108,500 3. The home being purchased must fall within the following program purchase price limits:  Max Home Purchase Price Outside Target Area: $388,131  Max Home Purchase Price Inside Target Area: $474,382 Furthermore, the residence purchased in conjunction with an MCC must be the borrower’s principal residence and may not be used as a business, rental or vacation home. The home may be a new or re-sale, detached or attached single-family home, condominium unit, a co-op unit, or a manufactured home on a permanent foundation. The home must be located within the City limits of participating cities. Mortgage Credit Certificate Application Process The jurisdiction in which the home is located must be a participant in the County MCC program administered by the EDA. The application process is as follows: 1. Borrowers must apply for an MCC through a Participating Lender. 2. The Participating Lender will perform an initial qualification and assist the borrower in completing the MCC submission forms. 3. Buyer makes offer on home and goes into escrow. 4. The Lender then submits the MCC application to the County. 5. The County reviews Borrower and property qualifications and, if they meet the program guidelines, issues a letter of commitment to the Lender. 6. The Commitment Letter must be issued prior to the close of the loan. 7. The loan must close within 60 days of the commitment. 8. Upon loan closing, the Lender submits the MCC Closing Package to the County and the County issues the MCC, with the Lender and borrower each receiving a copy. 9. The borrower may then claim the tax credit on their Federal Income Tax Returns. 10. Borrowers can realize the tax credit annually as a tax refund or adjust their W-4 withholding allowances form to receive the benefit via an increased paycheck. Page 3 of 3 The following table is an example, provided by EDA, which illustrates how an MCC may increase a borrower’s potential home buying power: Effective Home Buying Power With and Without an MCC Without MCC With MCC First Mortgage Amount $300,000 $300,000 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 "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&I) not exceeding 28% of monthly income. Fiscal Impact The fiscal impact to the City’s General Fund will be minimal as the entire program is implemented by the County of Riverside Economic Development Agency. The only participation requirement of the City is the noticing of the program in the local newspaper twice a year. Exhibits A. - Mortgage Credit Certificate Program Resolution B. - Designated Target Areas RESOLUTION NO. 2020-__ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, PARTICIPATING WITH THE COUNTY OF RIVERSIDE MORTGATE CREDIT CERTIFICATE (MCC) PROGRAM Whereas, the Tax Reform Act of 1986 established the Mortgage Credit Certificate Program (“MCC Program”) as a means of assisting qualified individuals with the acquisition of new and existing single family housing; and Whereas, 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; and Whereas, the Board of Supervisors of the County of Riverside adopted Resolution No. 87-564 on December 22, 1987 establishing a Mortgage Credit Certificate Program; and Whereas, the Board of Supervisors of the County of Riverside has authorized the 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; and Whereas, 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; and Whereas, the City of Lake Elsinore (“City”) wishes to participate in the MCC Program administered by the EDA in connection with mortgage loans it will make available for the acquisition of new and existing single-family housing in Riverside County; and Whereas, the adoption of this resolution is necessary to include the City of Lake Elsinore as a participating unit of general government under County’s MCC Program; and Whereas, the City agrees to cooperate with the County of Riverside to undertake the MCC Program within City jurisdiction to assist persons or households of limited income to purchase new and existing single family residences located in the city; and Whereas, by adopting this Resolution, the City Council hereby gives notice of the City’s election to participate in the Riverside County MCC Program. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: Section 1: The City of Lake Elsinore agrees to participate in the MCC Program administered by the EDA in connection with mortgage loans that EDA will make available for the acquisition of new and existing single-family housing in Riverside County. Section 2: The City of Lake Elsinore agrees to assist the County of Riverside to market the MCC Program within the city’s jurisdictional boundary by publishing a general public notice in the local newspaper at least twice a year. Res. No. 2020-___ Page 2 of 2 Section 3: This Resolution shall take effect immediately upon its adoption. Passed and Adopted on this _____day of __________, 2020. __________________ Brian Tisdale Mayor Attest: Candice Alvarez City Clerk STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF LAKE ELSINORE ) I, Candice Alvarez, City Clerk of the City of Lake Elsinore, do hereby certify that Resolution No. 2020-____, was adopted by the City Council of the City of Lake Elsinore at the regular meeting of ________, 2020, by the following vote: AYES: NOES: ABSENT: ABSTAIN: __________________ Candice Alvarez City Clerk 430.01 429.02 430.06 464.02 430.03 ORTEG A GRANDLAKE G R A P E LAKESHORE BUNDY CANYONRIVERSIDE R A I L R O A D C A N Y ON JOY MAINN E W PORTMACHADOTEMESCALCANYON CORYDONSUMNER COLLIER CHANEYGRAHAM DEXTER SCOTT FRAN K L I N MINTH ORN N I C H OLS C ASIN O MISSIONFLINT NEWPORT D E XTERGRAND LAKESHORE Copyright:© 2014 Esri CITY OF LAKE ELSINORE FEDERALLY-DESIGNATED TARGETED AREAS City Boundary Interstate 15 Highway 74 Federally-Designated Targeted Areas Prepared by: City of Lake Elsinore GIS March 10, 2020 Data Sources: County of Riverside GIS City of Lake Elsinore GIS Stateplane NAD 83 The Mortgage Credit Cer tificate (MCC) program entitles qualified home buyers to reduce the amount of their federal income tax liability for an amount equal to 20% of the mortgage interest paid during the year on their primar y mortgage loan. MORTGAGE CREDIT CERTIFICATE PROGRAM