HomeMy WebLinkAbout9/2/2009 - STAFF REPORTS - 2.W. QALMS
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City Council Staff Report
DATE: September 2, 2009 CONSENT CALENDAR
SUBJECT: APPROVE PARTICIPATION IN THE RIVERSIDE COUNTY MORTGAGE
CERTIFICATE (MCC) PROGRAM
FROM: David H. Ready, City Manager
BY: Department of Community & Economic Development
SUMMARY
The Riverside County Board of Supervisors has authorized the County's Economic
Development Agency (EDA) to re-apply to the California Debt Limit Allocation Committee
(CDLAC) for an allocation of Mortgage Credit Certificates (MCC) on or about October 16,
2009. The City of Palm Springs began participation in the County's MCC .Program for
mortgage loans available for first-time homebuyers in Palm Springs last year. Adopting of
the attached resolution is necessary for the City to continue its participation in the coming
year's MCC Program.
RECOMMENDATION:
Approve Resolution No. , "APPROVE PARTICIPATION IN THE RIVERSIDE
COUNTY MORTGAGE CERTIFICATE (MCC) PROGRAM",
STAFF ANALYSIS:
A Mortgage Credit Certificate (MCC) entitles qualified homebuyers to reduce the amount of
federal income tax liability on a home mortgage. This tax credit allows the buyer to qualify
more easily for a loan by effectively increasing the stated income of the buyer.
The Riverside County MCC Program allows a 15% rate, which can be applied against the
interest paid on the mortgage loan. The borrower can then claim a credit on their taxes equal
to 15% of the interest paid during the year. Since the taxes paid by the borrower are
being reduced, the annual take-home pay is effectively increased. The borrower can still
deduct the remaining part of the interest paid as a standard deduction. When underwriting a
loan, a lender takes this potential increase in income into consideration and the borrower is
able to qualify for a larger loan than would otherwise be possible.
This program can be used with all types of homes, including foreclosures, newly
constructed and existing resale single-family, condominium and manufactured homes, and
may be the "extra cushion" to assist future first-time homebuyers will need to purchase in
the City. The following table illustrates how a MCC increases a borrower's "effective home
buying power":
ITEM INO. Z . .
City Council Staff Report
September 2, 2009-Page 2 of 2
Mortgage Credit Certificate Program
Effective Home Buying Power With and Without an MCC
Without MCC With MCC
First Mortgage Amount $300,000 $300,000
Mortgage Interest Rate 7% 7%
Monthly Mortgage (P & I Only) $1,996 $1,996
MCC Rate N/A 15%
Monthly Credit Amount N/A $262.25
"Effective" Monthly Mortgage Payment $1,996 $1,733.75
Annual Income Needed * $85,542 $74,304
Annual Income Needed is based on monthly Principal & Interest (P&I) not
exceeding 28% of monthly income.
The EDA will be submitting an application for approximately $3.4M on or about October
16, 2009 for applicants acquiring homes within the County. Program guidelines include
Income restrictions, as well as limits to the purchase price of the home. Future Palm
Springs' homebuyers can qualify for the MCC on their own through an approved lender,
even if the City does not provide down-payment assistance.
The City started participating in the MCC Program last year. Staff recommends approval
of the attached Resolution, to provide another tool for qualified first-time homebuyers to
purchase a home in Palm Springs.
FISCAL IMPACT:
No impact to the City or the Redevelopment Agency budget. Potential homebuyers can
qualify through a lender to receive the MCC from the County.
/(Gyt
DALE E. COO , JR.
Community Development Administrator
THOMAS J. WILSON DAVID H. READ , s h. D
Assistant City Manager City Manager
ATTACHMENT: Resolution DaleC/Housing/CC_Rlvro_MCC_StafReport Aug09
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RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL. ,OF THE
CITY OF PALM SPRINGS APPROVE
PARTICIPATION IN THE RIVERSIDE COUNTY
MORTGAGE 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 on October 16, 2009 or thereabouts; and
WHEREAS, the City of Palm Springs ("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
Palm Springs 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, the City by adopting this Resolution, hereby gives notice of its
election to participate in the Riverside County MCC program.
THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY
RESOLVE AS FOLLOWS,
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Resolution No
Page 2
SECTION 1. 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;
SECTION 2. 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.
ADOPTED THIS day of September 2009.
David H. Ready, City Manager
ATTEST:
James Thompson, City Clerk
CERTIFICATION
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF PALM SPRINGS )
I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that
Resolution No. is a full, true and correct copy, and was duly adopted at a
regular meeting of the City Council of the City of Palm Springs on
by the following vote-
AYES:
NOES:
ABSENT:
ABSTAIN:
James Thompson, City Clerk
City of Palm Springs, California
oaleC/Housing/CC_RwCo_MCC_ResoJWg09 4