Empowering First Time Homebuyers Texas Mortgage Credit Program

What is a Mortgage Credit Certificate (MCC)? A MCC is a federal income TAX CREDIT. Based on the mortgage interest paid each year. Amount of tax credit is established by HFA and can range from 10% - 50% of the annual mortgage interest paid – not to exceed $2,000 per year. This credit reduces the federal income taxes of the buyer and has the potential of saving the MCC holder thousands of dollars over the life of the loan. TDHCA -Texas Homeownership Division

MCC EXAMPLE: ____________________________________________________________ Home Loan Amount: $130,000 Annual Interest Rate (30-year, fixed) 4.50% Approx. Total Mortgage Interest Paid (one year) $5,850 Mortgage Credit Certificate Rate 40% Annual MCC Amount (Line 3 x Line 4) $2,340 $2,000 (subject to $2,000/year max) Remaining $3,850 ($5,850 - $2,000 MCC credit) can be used as a mortgage interest tax deduction, which will reduce the homeowners taxable income therefore reducing their tax liability. A “tax deduction” is subtracted from the adjusted gross income before federal income taxes are computed. Only a percentage of the amount deducted is realized in savings. TDHCA -Texas Homeownership Division

How a Homebuyer Uses the MCC The borrower claims the credit with their annual tax return using IRS Form 8396. The credit may be claimed for the life of the loan as long as the home is their principal residence. The borrowers may, if they choose, adjust their W-4s to reflect the anticipated credit. Anticipated credit may be used to help qualify the borrower for a loan. If the tax credit is $2,000, the monthly adjustment is $166.67 per month. TDHCA -Texas Homeownership Division

TDHCA -Texas Homeownership Division TDHCA MCC HISTORY TDHCA Launched its MCC Program in 2003 Program Size $60 - $525 Million Fees Assessed: 1% of Mortgage Amount Next Program Release May 2015 - $799 Million TDHCA -Texas Homeownership Division

Underwriting/Loan Terms Underwriting Options: FHA – VA – USDA/RHS – Conventional Eligible Loan Terms: All loan types must be 15 or 30 year fixed rate -No ARMs Allowed Homebuyer Education Required: Face to Face or On-Line Counseling Allowed Loan Closing: Must close within 90 days of reservation date TDHCA -Texas Homeownership Division

TDHCA -Texas Homeownership Division TDHCA MCC Process How a Homebuyer Applies Homebuyer Applies For The MCC Through a Participating Lender – Currently Over 100 Lending Institutions - At The Same Time He or She Makes a Formal Mortgage Loan Application. Lender Determines Program Eligibility and Reserves MCC in Loan Reservation System. All Program Documents are Form-Fillable, Auto Populated and Sent to Closing for Signature. Lender Proceeds With Closing Mortgage Loan and Submits MCC Closing Package Within 30 days Following Closing Date MCC Issuance Fee (paid at closing) TDHCA Staff Reviews Closing Package/Issues Certificate On an Annual Basis, (during January) Staff Mails Reminder Notice to Borrower Along With IRS Form 8396 and Copy of Certificate TDHCA -Texas Homeownership Division

TDHCA -Texas Homeownership Division PROGRAM STATISTICS Calendar Year 2014 MCC’s Issued – 1,513 on Loans Totaling $219M Stand Alone 1,084 – Combos 429 (39% of Production) Average Annual Income - $50,695 Average Loan Amount - $146,691 66% of Borrower’s Earn 80% AMFI or Below New Construction 48% - Existing 52% Revenue Generated- $1.5 Million TDHCA -Texas Homeownership Division

TDHCA -Texas Homeownership Division CREDIT RATE & FEES Calendar Year 2014 MCC Credit Rate 40% Fees Assessed 1% of Mortgage Amount If Combined With TDHCA Mortgage Loan/Issuance Fee Waived TDHCA -Texas Homeownership Division

MARKET - MARKET - MARKET Target Existing Lender Network/Builder Partners Utilize Training Materials with Sample Tax Returns Conduct Webinar and Office Trainings as Requested Identify Areas of State, Based on Income, Where MCC is Most Beneficial to Borrowers Develop Marketing Materials for Realtors and Lenders with MCC Example Partner with State Realtor Association to Develop Affordable Housing Continuing Education Course Google Ad Campaign Participate in Realtor and Mortgage Industry Events Online MCC Course TDHCA -Texas Homeownership Division

MARKET - MARKET - MARKET Top Lending Partners DHI Mortgage Company, Ltd. Cornerstone Home Lending, Inc. Premier Nationwide Lending Pulte Mortgage LLC Guild Mortgage Company Network Funding, L.P. TDHCA -Texas Homeownership Division

TDHCA -Texas Homeownership Division THANK YOU Eric Pike 512-475-3356 Eric.pike@tdhca.state.tx.us www.myfirsttexashome.com TDHCA -Texas Homeownership Division