1. Mortgage Credit Certificates how they May work for you
Mountain West Financial
7/18/2018

2. What is a Mortgage Credit Certificate (mcc)?
Offers low-to-moderate income first time homebuyers a federal tax credit to assist in achieving homeownership.
A direct dollar-for-dollar tax credit.
Has the potential to save the Homebuyer thousands of dollars over the life of the mortgage.
MCCs are not mortgages; they are tax credits that put extra cash in the Borrower’s pocket each month so the Borrower can more easily afford the housing payment.
A tax credit is not the same as a tax deduction.
Many first-time homebuyers have never heard about a Mortgage Credit Certificate (MCC). Which is unfortunate because an MCC can save a homeowner some serious money over the life of their mortgage loan, starting the very first year.
When an MCC is issued to a homeowner, he/she can file for a tax credit on their federal income taxes equal to a portion of the annual mortgage interest paid. It is a dollar-for-dollar reduction in federal income tax liability.
7/18/2018

3. how does A MCC help the homebuyer?
Reduces federal income tax the Borrower pays annually.
More available income to qualify for mortgage due to reduction in tax liability (Excluding CalHFA first mortgages)
Tax credit “effectively” reduces the interest rate on the mortgage loan.
MCC programs are fantastic as they allow First-Time Homebuyers to take advantage of a special federal income tax credit (ranging from 15% to 25%).
Example: MCC rate for the 20% of the annual mortgage interest paid can be taken as a tax credit. (The remaining 80% of mortgage interest paid can still be taken as an itemized tax deduction.
The MCC remains in effect for the life of the mortgage loan, so long as the home remains as principal residence. The amount of the annual mortgage credit is calculated on the basis of 20% of the total interest paid on the mortgage loan for that year
Again, the Mortgage Credit Certificate allows a homebuyer to claim a tax credit for a portion of the mortgage interest paid per year. It is a dollar-for-dollar reduction against your federal tax liability. The Mortgage Interest Credit is a non-refundable tax credit, so the homebuyer must have tax liability in order to take advantage of the tax credit.
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4. Tax Credit vs Tax Deduction?
A mortgage interest deduction differs from a mortgage tax credit in a number of ways. For example, all homebuyers, regardless of income, may take a mortgage interest deduction, whereas mortgage tax credits are available only to holders of MCCs.
A tax deduction or a tax-deductible expense affects a taxpayer's income tax. A tax deduction represents an expense incurred by a taxpayer. They are variable amounts that a taxpayer can subtract, or deduct, expenses from gross income when computing his/her income taxes. As a result, the tax deduction lowers the overall taxable income and thus lowers the amount of tax paid.
A tax credit is a similar concept, but is different in that it reduces the tax owed, rather than reducing taxable income. This amount of tax savings is not dependent on the rate the taxpayer pays.
An MCC provides a tax credit, based on a percentage (as determined by the Program guidelines) of the mortgage interest paid annually. The remaining mortgage interest paid annually may still be taken as a tax deduction when the taxpayer computes his or her income taxes.
MCC programs are fantastic as they allow First-Time Homebuyers to take advantage of a special federal income tax credit (ranging from 15% to 25%).
Example: MCC rate for the 20% of the annual mortgage interest paid can be taken as a tax credit. (The remaining 80% of mortgage interest paid can still be taken as an itemized tax deduction.
The MCC remains in effect for the life of the mortgage loan, so long as the home remains as principal residence. The amount of the annual mortgage credit is calculated on the basis of 20% of the total interest paid on the mortgage loan for that year
Again, the Mortgage Credit Certificate allows a homebuyer to claim a tax credit for a portion of the mortgage interest paid per year. It is a dollar-for-dollar reduction against your federal tax liability. The Mortgage Interest Credit is a non-refundable tax credit, so the homebuyer must have tax liability in order to take advantage of the tax credit.
7/18/2018

5. Who qualifies for a MCC?
First-time homebuyers (exceptions for targeted areas and veterans)
Meet income limits
Meet sales price limits
Must occupy home as primary residence.
The program is open to those individuals and families who:
Meet the income and sales price limits requirements
Have not owned a home as a primary residence in the past three years
Meet the qualifying requirements of the mortgage loan
Will reside in the home as their primary residence
7/18/2018

6. Statewide MCC Providers California
CalHFA: Provides a 20% tax credit, statewide in all areas where an MCC is not currently available through a CalHFA partnering county at the time the loan is originated. Review the MCC County Resource List on the CalHFA website.
GSFA: Provides a 20% tax credit, in over 44 counties of California. Check the GSFA MCC Income and Sales Price Limits for current eligible counties:
LASSEN
SIERRA
TEHAMA
MODOC
PLUMAS
NEVADA
EL DORADO
SISKIYOU
DEL NORTE
TRINITY
BUTTE
LAKE
HUMBOLDT
SHASTA
MENDOCINO
YOLO
SONOMA
NAPA
SUTTER
PLACER
SACRAMENTO
SOLANO
MARIN
CONTRA
COSTA
SAN
JOAQUIN
SAN FRANCISCO
SAN MATEO
ALAMEDA
STANISLAUS
MERCED
MADERA
SANTA
CLARA
CRUZ
MONTEREY
KINGS
SAN LUIS
OBISPO
KERN
SAN BERNARDINO
VENTURA
BARBARA
LOS ANGELES
ORANGE
RIVERSIDE
SAN DIEGO
IMPERIAL
TUOLUMNE
MONO
ALPINE
CALAVERAS
MARIPOSA
INYO
AMADOR
GLENN
COLUSA
TULARE
FRESNO
YUBA
BENITO
Includes City of Vacaville (Solano County)
7/18/2018

7. MCC Benefits Assumptions
For ease of math, let’s first assume:
$200,000 mortgage (30-year fixed)
5.00% interest rate
Borrower pays $10,000 in interest the first year
MCC Tax Credit = 20% or $2,000 (20% of $10,000)
$10,000 (interest payments) minus $2,000 (MCC tax credit) leaves $8,000 remaining interest that can be used as tax deduction
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8. Benefit: #1 Reduction in Taxes Owed
$2,000 is the tax credit which can directly reduce the overall amount due to the IRS.
If the Borrower owes $5,000 in taxes, they would be able to reduce it to only $3,000 owed by applying the $2,000 MCC tax credit.
(Advise borrower to consult tax advisor regarding savings)
As you can see, it’s a direct dollar for dollar reduction in the amount owed.
7/18/2018

9. Benefit 2: Helps with Qualifying
Benefit 3 ($2,000 tax credit example)
For Conventional loans, the $2,000 tax credit converts to $166 ($2,000/12 months) in additional disposable income.
For FHA loans, the $2,000 tax credit, converts to $166 ($2,000/12 months) in additional disposable income.
For VA loans, the $2,000 tax credit, converts to $166 ($2,000/12 months) which can be added to the residual income to meet the VA minimum residual income requirement.
For USDA loans, the $2,000 converts to $166 ($2,000/12 months) in a deduction from the monthly payment which is underwritten as a reduction in PITI.
IMPORTANT NOTE: MCCs cannot be used for qualifying purposes on CalHFA first mortgages. However, CalHFA MCCs can be used for qualifying purposes on non-CalHFA first mortgages.
OLD Handbook: For FHA loans, the $2,000 tax credit, converts to $166 ($2,000/12 months) in a deduction from the monthly PITI payment which will reduce the borrower's qualifying ratios and increase the size of mortgage available to them.
7/18/2018

10. Benefit 3: “Effective” Rate Reduction
Benefit 2 (Example is for illustration purposes only):
Because after-credit interest paid on the mortgage is reduced, the MCC “effectively” reduces the interest rate from 5.00% to 4.00% in the first year.
Without the MCC, the annual interest of 5% on $200,000 would be $10,000.
With the MCC, the annual interest amount would be $8,000 (reduced by $2,000) which corresponds to a 4.00% interest rate on the same $200,000 mortgage in the first year. .
7/18/2018

11. MCC Tax Credit Percentage
Each MCC Provider determines the percentage of their MCC program.
If MCC tax credit rate is above 20%, then max annual credit allowed by the IRS is $2,000.
If MCC tax credit rate is at or below 20%, there is no maximum dollar amount for the annual credit.
If the amount of MCC credit exceeds the homebuyer’s tax liability or the annual limit of $2,000 (if MCC rate is above 20%), the unused portion of the credit may be carried forward to the next three years or until used, whichever comes first. The borrower may want to consider amending his/her W-4 form on file with their employer to allow the maximum MCC credit.
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12. 7/18/2018

13. How to Claim Credit?
The MCC holder may receive the complete MCC tax credit saving annually at the time they file their tax return. Or they may receive the benefits monthly by adjusting their federal income tax withholding by filing a revised W-4 with their employer. By filing a revised W-4, the number of exemptions will increase, reducing the amount of taxes withheld and increasing the disposable net income.
Note: Homebuyers are encouraged to consult with a tax advisor and employer to help them with the necessary tax forms and, if they so choose, to properly adjust their tax withholding.
7/18/2018

14. MCC Documentation and Fees
Three years Federal tax returns are typically required to show that applicant is a first time homebuyer.
Since the application fee may vary by the MCC administrator, please refer to the Agency’s training material and guidelines for the specific program details.
Depending upon agency guidelines, the fee is either collected upfront or added to the closing costs. Currently, both CalHFA and GSFA allow the fee to be paid through the loan documents.
The potential tax savings over the course of a 30 year mortgage far surpasses the fee.
MWF Doc Prep Fee: $295
CalHFA MCC Fees:
With CalFHA 1st Mortgage: $450
Without CalFHA 1st Mortgage: $750
GSFA MCC Fees:
With GSFA Platinum First Mortgage: $0
(promotion through 12/31/2018)
Without GSFA Platinum First Mortgage: $350
The Broker will be responsible to collect, from the Borrower, any fees required by the Agency and forward the fee check to the Agency directly, or to the Post Closing - Underwriting Specialist with the Closing Phase documentation if acceptable to the specific Agency.
If permitted by the Agency, the Broker can wait and collect the fees from the Borrower through the loan documents.
The Broker will also be responsible to ensure the mcc fee is properly disclosed to MWF. A copy of mcc fee check or invoice may be required for Closing Disclosure purposes.
Additionally, the Broker must properly disclose all MWF fees, including the MCC Document Processing Fee of $295 when applicable.
The Post Closing - Underwriting Specialist will then follow up directly with the Accounting Department to obtain the fee check after funding and include it in the Closing Phase package.
7/18/2018

15. Recapture Tax
Although uncommon, recapture tax may apply under certain conditions within the first nine years of ownership. The recapture tax is designed to "recapture" some of the financial benefit of the MCC if all 3 conditions occur:
The home is sold before 9 years AND
The recipient’s household income has risen significantly AND
The value of the purchased house has risen.
(Advise borrower to consult tax advisor about recapture tax)
7/18/2018

16. MCC Training Requirements
CalHFA: Required one-time (not annually) through eHousingPlus
housing-finance-agency/
GSFA: Required one-time (not annually). Pre-registration is strongly recommended, as space is limited.
Local Providers (Cities/Counties): Varies
Broker Approval
The Broker will be responsible to attend any required training offered by the MCC provider.
Once on the Agency’s approved list of Loan Officers (if applicable), Brokers will then be able to participate in the various MCC programs according to the specific Agency’s guidelines.
Commonly, if the MCC Agency allows the Broker to participate, the Agency permits the Broker to complete everything except the Closing Phase.
GSFA
Pre-registration is strongly recommended, as space is limited.
Tuesday, September 19, 2017 | 02:00 PM - 03:00 PM PDT | Register Now
Wednesday, October 04, 2017 | 10:00 AM - 11:00 AM PDT | Register Now
Thursday, October 19, 2017 | 02:00 PM - 03:00 PM PDT | Register Now
Tuesday, October 31, 2017 | 10:00 AM - 11:00 AM PDT | Register Now
7/18/2018

17. MWF MCC Specialist
For MCC programs, submit an MCC reservation request to the MWF MCC Specialist.
The MWF MCC Specialist will review the reservation request and if complete, they will proceed with reserving the MCC funds with the specific MCC agency requested.
If the reservation request is incomplete, MWF MCC Specialist will contact the requestor for additional information.
. A Post Closing - Underwriting Specialist will be assigned to assist Brokers with the MCC process. Most MCC Agencies allow the Mortgage Broker to participate in the process while a few require the Lender to complete the entire process on behalf of the Broker. Following are two processes; one for Agencies that permit the Broker to participate directly, and another for Agencies that require the Lender to act on the Broker’s behalf. Every Agency requires, at the minimum, for the Lender to complete the Closing Phase of the MCC process. MWF will rely on the Broker to determine and understand the requirements of the Agency.
Refer to the Affordable Housing Center on the MWF website for details of the various MCC programs that MWF has to offer.
Also on the website is an MCC Calculation Worksheet. It can be found at:
Forms >Origination & Submission>Mortgage Credit Certificate Calculation Worksheet. 
Each Agency’s website includes templates of the forms that the Broker is authorized to complete (if applicable), or information on how to request them.
7/18/2018

18. MWF MCC Broker Process 7/18/2018
. A Post Closing - Underwriting Specialist will be assigned to assist Brokers with the MCC process. Most MCC Agencies allow the Mortgage Broker to participate in the process while a few require the Lender to complete the entire process on behalf of the Broker. Following are two processes; one for Agencies that permit the Broker to participate directly, and another for Agencies that require the Lender to act on the Broker’s behalf. Every Agency requires, at the minimum, for the Lender to complete the Closing Phase of the MCC process. MWF will rely on the Broker to determine and understand the requirements of the Agency.
Refer to the Affordable Housing Center on the MWF website for details of the various MCC programs that MWF has to offer.
Also on the website is an MCC Calculation Worksheet. It can be found at:
Forms >Origination & Submission>Mortgage Credit Certificate Calculation Worksheet. 
Each Agency’s website includes templates of the forms that the Broker is authorized to complete (if applicable), or information on how to request them.
7/18/2018

19. MWF MCC Broker Process 7/18/2018
. A Post Closing - Underwriting Specialist will be assigned to assist Brokers with the MCC process. Most MCC Agencies allow the Mortgage Broker to participate in the process while a few require the Lender to complete the entire process on behalf of the Broker. Following are two processes; one for Agencies that permit the Broker to participate directly, and another for Agencies that require the Lender to act on the Broker’s behalf. Every Agency requires, at the minimum, for the Lender to complete the Closing Phase of the MCC process. MWF will rely on the Broker to determine and understand the requirements of the Agency.
Refer to the Affordable Housing Center on the MWF website for details of the various MCC programs that MWF has to offer.
Also on the website is an MCC Calculation Worksheet. It can be found at:
Forms >Origination & Submission>Mortgage Credit Certificate Calculation Worksheet. 
Each Agency’s website includes templates of the forms that the Broker is authorized to complete (if applicable), or information on how to request them.
7/18/2018

20. Refinancing / MCC Reissuance
What if the person refinances the property in the future? Does he/she lose the MCC? In some cases, the MCC Issuer may reissue a MCC under their own specific guidelines. .
The MCC may be reissued in the event the homeowner refinances, if the Reissue MCC Application (RMCC) is submitted and approved by GSFA within one year of the refinance and if the homeowner qualifies under the program guidelines. The term on the RMCC will be for the remaining term of the original loan. In addition, an RMCC non-refundable application fee may apply. \
CalHFA Reissuance Requirement Example:
The Lender refinancing must be a CalHFA-approved Participating Lender
The original MCC was issued by CalHFA.
The reissued MCC is issued to the Holder of an existing MCC with respect to the same property to which the existing MCC has been issued.
The reissued MCC entirely replaces the existing MCC.
The new mortgage indebtedness specified on the reissued MCC does not exceed the remaining outstanding balance of the mortgage indebtedness on the existing MCC.
The reissued MCC does not increase the MCC credit rate specified on the existing MCC.
The expiration date on the reissued MCC is no later than the expiration date on the existing MCC.
The reissued MCC does not result in an increase in the tax credit that would otherwise have been allowed to the Holder under the existing MCC for any taxable year.
A MCC Reissuance fee $500 is paid to the Administrator.
MWF does not charge a doc prep fee for re-issuance of an MCC
7/18/2018

21. In a nutshell, you may….. 7/18/2018
Receive a dollar-for-dollar tax credit which reduces your potential federal income tax liability.
Save money and increase the amount of your disposable income available to purchase a home.
More easily qualify for a higher first mortgage.
Take advantage of the tax credit every year for the life of the original first mortgage.
​Reapply for a Reissued Mortgage Credit Certificate (RMCC) when you refinance your mortgage.
7/18/2018

22. QUESTIONS?
If you have any program specific questions, please search the intranet and you will find more detailed information. Thank you again for your time today.
THANK YOU!
7/18/2018