Mortgage Credit Certificate (MCC) Program
How Does it Work?
If you apply for an MMC loan / mortgage you are eligible for 20% of your annual mortgage interest as a direct federal tax credit, resulting in a dollar for dollar reduction of your annual federal income tax liability. The remaining 80% of your annual mortgage interest will continue to qualify as an itemized tax deduction.
The home you buy must be your principal residence.
You can not have an ownership interest in a principal residence at any time in the last three years.
The mortgage loan must be a new loan (not a refinance).
The federal government considers the MCC tax credit to be a subsidy. As such, you may be subject to federal “recapture tax” if you sell your home within nine years of purchase or you sell your home at a gain and your income increases above a specific level.
QUESTIONS AND ANSWERS
What is a Mortgage Credit Certificate?
The Mortgage Credit Certificate Program was authorized by Congress in the 1984 Tax Reform Act as a means of providing housing assistance to families of low and moderate income. The Hawaii Housing Finance and Development Corporation (HHFDC) is an Issuer of Mortgage Credit Certificates.
The Mortgage Credit Certificate (MCC) reduces the amount of federal income tax you pay, thus giving you more available income to qualify for a mortgage loan and assist you with house payments.
The MCC is available to homebuyers who meet household income and home purchase price limits established for the MCC Program, as well as other federal eligibility regulations.
How will a Mortgage Credit Certificate assist my home purchase?
The federal government allows each homeowner to claim an itemized federal income tax deduction for the amount of interest paid each year on a mortgage loan. For a homeowner with a MCC, this benefit is even better: 20% of your annual mortgage interest will be a direct federal tax credit, resulting in a dollar-for-dollar reduction of your annual federal income tax liability. The remaining 80% of your annual mortgage interest will continue to qualify as an itemized tax deduction.
The amount of your mortgage credit depends on the amount of interest you pay on your mortgage loan. However, the amount of your mortgage credit cannot exceed the amount of your annual federal income tax liability. Unused mortgage credit can be carried forward for three years to offset future income tax liability.
What are the loan terms?
You are free to seek financing from any lender. However, MCCs are available only through participating lenders.
QUESTIONS AND ANSWERS listed on this brochure. The lender providing the financing is allowed to establish the interest rate, loan term, down payment requirement, credit and underwriting criteria, loan type, mortgage insurance requirement, fees, points, closing costs, and all other terms.
A MCC can be used in conjunction with a conventional fixed rate loan, variable rate loan, FHA loan, VA loan or privately insured loan. However, a MCC cannot be used with a Hula Mae loan.
How long does the Mortgage Credit Certificate last?
The MCC will remain in effect for the life of your mortgage loan, so long as the home remains your principal residence. The amount of your annual mortgage credit will be calculated on the basis of 20% of the total interest paid on your mortgage loan for that year.
What are the requirements?
The MCC requirements include the following:
The home you buy must be used as your principal residence after you obtain your mortgage. If it stops being your principal residence, your MCC will be automatically revoked and you will no longer be entitled to claim the mortgage credit.
You cannot have an ownership interest in a principal residence at any time in the last three years.
The mortgage loan must be a new loan. You cannot be issued a MCC for the acquisition, replacement or refinancing of an existing mortgage loan. However, you may (on a case-by-case basis) be issued a MCC for the replacement of construction period loans, bridge loans, or similar financing of a temporary nature with a term of twenty-four months or less.
The federal government considers the MCC tax credit to be a subsidy. As such, you may be subject to federal “recapture tax” if (1) you sell you home within nine years of purchase, (2) you sell your home at a gain, and (3) your income increases above a specified level
What are the income and purchase price limits?
The purchase price limits vary by county, while the income limits vary by county and family size.
Income limits by county:
2 or less, 3 or more
Honolulu $123,600 $144,200
Maui $107,160 $125,020
Kauai $98,880 $115,360
Hawaii $88,080 $102,760
The income limits may be increased or decreased by the HHFDC pursuant to U.S. Internal Revenue Service guidelines.
Purchase price limits:
County Newly Constructed or Existing Residences
91277 Makalauna Pl 6 Single Family Home in Ewa Gentry Cortebella
|ML#: 1105188||SOLD||List: $310,000||FS – Fee Simple|
|Addr: 91277 Makalauna Pl 6|
|City: Ewa Beach||HI||Zip: 96706|
|Regn: Ewaplain||Neighborhood: EWA GEN CORTEBELLA|
|Roofd Liv Ar: 1,150||New Dev/Const: No||Bedrms: 3|
|Roofd Oth Ar:||Yr Built: 2001||Baths: 2 / 1|
|Opn Lanai Ar: 24||Remod Yr:||Furnished: Partial|
|Garage SF: 370||Mon Maint Fees: $243|
|Land SF: 3,000||Fractional: No||Mon Assn Fees: $35|
|Acres: 0.069||Flood: D||Other Mon Fees: $|
|Zoning: 11 – A-1 Low Density Apartment||Mon Rental Inc: $||Total Mon Fees: $278|
|Assd Val Land: $174,100||Tax Year: 2011||Elem School: Holomua|
|Assd Val Imprv: $168,700||Mon Taxes: $94||Middle School: Ilima|
|Assd Val Total: $342,800||Home Exemp: 0||High School: Campbell|
|Community Assn: Gentry Cortebella||Community Assn #: 352-5144||CPR: Yes Public Rpt #: 4602|
|LO:East Oahu Realty, Inc.||LO#: (808) 396-2000||LT: ER||Comp: 3||Dual/Var: Yes|
|LA: Frank Diaz||LA#: (808) 791-2277||Desig: RA||GE Tax by Seller: Yes||Method: Dual/V|
|Comp Subj To: LNDR|
|LA Email: email@example.com||Pgr#: (808) 791-2277||LA Cell#: (808) 723-0900||Fx#: (808) 396-2020|
|LD: 4/29/2011||XD: 10/25/2011|
|DOM: 5||Lock Box: Y|
|Call Frank at 723-0900. On Sentrilock. Tenant’s lease may be negotiable. Subject to HAP approval. Estimate 90-150 days to close. Use Julie Deguair – ORTC Kapolei.|
|Well maintained Cortebella. A/C units and ceiling fans keep it cool. Large Master Suite and 2 BRs upstairs. Ground floor with kitchen. Pool and recreation center within 200 yards. This is a HAP(Homeowner’s Assistance Program) sale and subject to approval from the US of A. Estimate 3-6 months to close. Tenant lease until 04/2012. Extra (3rd) parking pass available for overnight/guests.|
Subject to HAP Program approval. Estimate 90-150 days to close. Use Julie Deguair – ORTC Kapolei.
Military Hap Program – Housing Assistance Program – Military Expanded Hap Program
The Housing Assistance Program for military personnel has changed a lot over the last year. In the Sacramento office, the staff went from 3 to more than a dozen and the number of applications went from a few hundred to over 3000 thousand!
Expansion HAP by the American Recovery and Reinvestment Act of 2009
These FAQs and more can be found at the Homeowners Assistance Program (HAP) website.
- A. Congress created in the HAP program in 1966 (see Section 3374, Title 42 United States Code) to financially compensate eligible military and civilian Federal employee homeowners when the real estate market was adversely affected directly related to the closure or reduction-in-scope of operations due to Base Realignment and Closure (BRAC). The Army Corps of Engineers runs it on behalf of all the military branches. The American Recovery and Reinvestment Act of 2009 (ARRA), Public Law 111-5, expanded the HAP to provide assistance to:
- Wounded members of the Armed Forces (30% or greater disability) and wounded Department of Defense (DoD) and Coast Guard civilian homeowners reassigned in furtherance of medical treatment or rehabilitation or due to medical retirement in connection with their disability;
- Surviving spouses of the fallen
- Base Realignment and Closure (BRAC) 2005 impacted homeowners relocating during the mortgage crisis; and
- Service member homeowners undergoing Permanent Change of Station (PCS) moves during the mortgage crisis.
- Q. How do I apply?
- A. Visit the HAP web site: http://hap.usace.army.mil/ and download the application package. Complete the application and mail to the U.S. Army Corps of Engineer District responsible for the area in which your home is located.
- Q. Will the application packages be handled in a first come first served manner?
- A. Applications will be processed as quickly as possible according to eligibility in the following order:
- Wounded, Injured, and Ill. Within this category, applications will generally be processed in chronological order of the wound, injury, or illness.
- Surviving Spouses. Within this category, applications will generally be processed in chronological order of the date of death of the member or employee.
- BRAC 2005 Members and Civilian Employees. Within this category, applications will generally be processed in chronological order of the date of job elimination.
- Permanently Reassigned Members of the Armed Forces. Within this category, applications will generally be processed beginning with the earliest report-not-later-than date of PCS orders.
- Q. If I am eligible, what should I do after I mail in my completed application?
- A. Each individual’s situation is unique. Contact the CoE District office where your home is located for assistance.
Q: Who is eligible for Expanded HAP assistance?
- A. ARRA Expanded HAP applies to certain:
- Wounded, Injured, or Ill service members and DoD (including Coast Guard) civilian employees
- The surviving spouse of a member of the Armed Forces or of a civilian employee whose spouse dies as the result of a wound, injury, or illness incurred in the line of duty
- Base Realignment and Closure 2005 impacted service members and civilians
- Permanent Change of Station (PCS) servicemembers
- Q. What are the specific eligibility requirements for Permanent Change of Station (PCS)?
- A. PCS refers to the assignment or transfer of a member to a different permanent duty station (PDS), to include relocation to place of retirement, under a competent authorization/order that does not specify the duty as temporary, provide for further assignment to a new PDS, or direct the military service member return to the old PDS.To qualify, a service member must have:
- owned home prior to July 1, 2006.
- have PCS orders dated between February 1, 2006 and September 30, 2010
- be reassigned to a new duty station or home port outside a 50-mile radius of the member’s former duty station or home port. The orders must specify a report-no-later-than date of on or before February 28, 2010. These dates may be extended to September 30, 2012 at the discretion of the DUSD(I&E) based on availability of funds.
- suffered at least a 10% home value loss between July 1, 2006 and date of application for Expanded HAP benefits for the county/parish/city in which the primary residence is located, and
- 10% decline of personal home value loss from the date of purchase to date of sale.
- Q. Is there a cap on the benefits the Expanded HAP will pay per applicant?
- A. The Primary Fair Market Value (PFMV) may not exceed an amount equal to the 2009 Fannie Mae/Freddie Mac conforming loan limits (as amended by the ARRA of 2009). These conforming loan limits range from $417,000 to $729,500. These apply for the duration of the Expanded HAP and are established for each city/county/parish as appropriate.
- Q. Will my Expanded HAP benefits be taxable?
- A. No. President Obama signed HR 3548, Unemployment Compensation Extension Act of 2009 into law and thereby exempted Expanded HAP benefit payments from taxation. Payments to military members are not subject to social security or Medicare taxes.Tax documents will be certified by the HQUSACE Finance Center, and distributed to applicants and the Internal Revenue Service (IRS) on an annual basis.
- Q. I had a contract to purchase my home prior to July 1, 2006, but closed after that date, do I qualify?
- A. If you are a Military PCS eligible applicant and were under contract to purchase prior to 1 July 2006 and closed after that date, you would qualify. For applicants eligible as Wounded, Injured or Ill and Surviving Spouses the requirement to purchase the primary residence prior to July 1, 2006 does not apply.
If you have further questions regarding the Military Housing Assistance Program, call me, Senior Chief (USN, Retired) Frank Diaz, at 808 723 0900. I have listed and sold more HAP homes in Hawaii than any other agent.