Additional Local Loan Programs

Mortgage Credit Certificate (MCC) Program:

The Mortgage Credit Certificate (MCC) Program allows an eligible home buyer to claim an annual federal income tax credit. This annual credit results in a dollar-for-dollar reduction that is applied on the home buyer's federal income tax return. The MCC credit is either 15% or 20% (depending on property location) and is applied to a portion of the total mortgage interest paid every year for the duration of the first mortgage loan. An MCC increases a borrower's disposable income by reducing their federal income tax obligation. This tax savings provides a borrower with more available income to qualify for a home loan and meet mortgage payment requirements. An MCC will reduce the amount of a borrower's federal income taxes otherwise due not to exceed the amount of federal taxes owed for the year after other credits and deductions have been taken. However, the unused tax credits can be carried forward three years, until used. If your clients refinances, your client is eligible to apply for a Reissued Mortgage Credit Certificate.

Example: If a buyer has a 30-year mortgage of $130,000 with a 6.25% fixed interest rate, the interest rate amount would be approximately $8,082 during the first year. With a 20% credit, $1,616 of the payment would be given back to the buyer, providing more purchasing capabilities by allowing a lower annual household income to qualify for the mortgage.

- This tax credit is in addition to the standard mortgage interest deduction for which all U.S. homeowners are eligible. The remaining 80% or 85% of the mortgage interest is taken as a deduction from your client's gross income in the usual manner.

- The program can be used with any 30- or 40-year fixed-rate or qualifying adjustable-rate mortgage. The MCC cannot be used in conjunction with bond-backed loans such as California Housing Finance Agency (CalFHA) or CalVet bond loans. In addition, the MCC cannot be combined with the Mortgage Revenue Bond (MRB) Program.

- If a residence is sold within nine years of purchase, it may be subject to a recapture tax. At the time of the close of escrow, the lender will provide a copy of the Recapture Notice and Computation Worksheet.

- Your client may wish to adjust his or her federal income tax withholding (W-4) in order to receive the MCC benefit on a monthly basis. Advise your client to talk to the payroll department at his or her place of employment. By reducing the monthly withholding, more disposable (after-tax) income will be available with which to make mortgage payments.


Reissued Mortgage Credit Certificate (RMCC) Program

MCC holders can refinance their mortgage loans without voiding their current MCCs by applying for a Reissued MCC (RMCC) from a participating lender. IRS regulations allow existing recipients of MCCs to refinance their original mortgage loans on their principal residence and obtain a new MCC with a tax credit rate the same as that of their original MCC. RMCCs are not available to persons who did not previously hold an MCC certificate. An RMCC entirely replaces the existing MCC, and the MCC holder cannot retain the existing MCC with respect to any portion of the outstanding balance of the certified indebtedness amount specified on the existing MCC. RMCC applicants are not required to re-qualify for a RMCC on the basis of household income or the property's appraised value.

The following counties currently offer the MCC program: Alameda, Contra Costa, Fresno, Los Angeles, Orange, Riverside, Sacramento, Santa Clara, San Diego, and San Francisco.


Mortgage Revenue Bond (MRB) Program

MRBs are tax-exempt bonds that state and local governments issue through housing finance agencies to help fund low-interest rate mortgages. Eligible borrowers are first-time home buyers with low-to-moderate incomes below 115% of median family income. MRB loans are offered at a 30-year below-market interest rate. Check with your local housing agency for price limits and interest rates, as they vary within each area.