The Michigan State Housing Development Authority (the “Authority”) is the authorized program administrator for Mortgage Credit Certificates (MCCs) in Michigan. MCCs are a form of federal income tax credit to qualified homebuyers. The Authority has received an allocation of bond volume cap from the State of Michigan Treasurer. The Authority has made an election not to issue bonds in order to obtain authority to issue MCCs. The Authority intends to issue MCCs to qualified homebuyers in Michigan according to the requirements noted below no sooner than ninety days after the date this notice is published.
Purchasers of a new or existing single-family home may apply for an MCC through participating lenders when they obtain financing from the participating lender for purchase of a single-family home.
An MCC cannot be issued in connection with a loan that pays off an existing mortgage or land contract. There are exceptions for certain construction period and temporary loans. The MCCs are also available to purchasers of certain qualified mobile homes or manufactured housing used as a principal residence.
The MCC will reduce the amount of federal income taxes otherwise due to the federal government from the homebuyer, and the homebuyer may be able to have more disposable income to make mortgage payments. The amount of the credit will vary depending upon the applicant's annual household income, which cannot exceed the limits set forth in this notice. For all applicants, the credit will be 20 percent of the yearly interest paid or accrued on a qualified mortgage. All applicants must meet the income limits set forth below.
The MCC is not refundable; therefore, the benefit to the homeowner cannot exceed the amount of federal taxes owed in the year after all other credits and deductions have been taken into account. The homebuyers may reduce the amount of federal income tax withheld so as to benefit on a weekly or monthly basis from the MCC.
The Borrower must meet the lower of the State and Federal law income limits. The Federal law income limits are subject to change based upon the determination of the statewide and area median gross incomes published by the Department of Housing and Urban Development. The figures set forth below are based upon the currently published median incomes.
Currently, the purchaser's annual household income may not exceed the limits set forth below:
All overtime income must be included in computing annual household income.
In order to obtain an MCC, acquisition cost of the residence being purchased must meet the lower of the limits established by state or federal law. The limits established by federal law will change when the Internal Revenue Service publishes new safe harbor limitations for the average area purchase prices. Therefore, the limits set forth below are subject to change.
Currently, in order to obtain an MCC, the acquisition cost of the residence being purchased may not exceed $544,233.
Qualified homebuyers must occupy the residence as their principal residence within 60 days after the closing on the financing by a participating lender. Generally, qualified homebuyers must not have had an ownership interest in a principal residence within the preceding three years. However, those purchasing homes in targeted areas are exempt from this federal regulation.
A homebuyer receiving an MCC in connection with a mortgage loan may be subject to a "recapture" requirement upon the sale or disposition of the owner's interest in the home. Sale or disposition generally means sale, gift or other transfer of the owner's interest in the home. (However, a sale or disposition does not include transfers by reason of death, or conveyances from one spouse to another, or to a former spouse as the result of a divorce.) The Internal Revenue Code provides that a party selling a home purchased with an MCC-assisted mortgage loan may be required to pay to the federal government a certain amount upon the sale or disposition of the owner's interest in the home. This "recapture tax" must be included with the seller's federal income tax return for the year the sale or disposition occurs. This provision applies to any sale or disposition of the home within nine years of the date of the closing on the MCC-assisted mortgage loan. The recapture tax will (i) increase during the first five years of ownership with full recapture occurring if the sale or disposition occurs during the fifth year following the date of mortgage loan closing and (ii) decrease ratably for a sale or disposition occurring in years six through nine. The recapture tax will not exceed 50 percent of the gain realized by the sale or disposition. The amount of recapture tax that may have to be paid will be based, in part, on the owner's income at the time of the sale or disposition. The information needed to compute the recapture tax will be provided when the MCC is issued. In the event the seller is required to pay a recapture tax, MSHDA will reimburse the seller for any recapture tax paid by the seller to the IRS.
MCC applications will be treated on a first-come, first-served basis. The application must be made through participating lenders, including banks, savings and loan associations, mortgage banking firms and credit unions. A list of participating lenders is available to the public and is updated at least annually. Purchasers may obtain an MCC in connection with financing from any lender, so long as the lender is willing to sign a participation agreement with the Authority. There is no allocation of MCCs by lender or by geographic area.
Homebuyers must be qualified for an MCC pursuant to the Internal Revenue Code and the regulations, rulings, and interpretations issued by the Internal Revenue Service, which shall control in the event of conflict with other requirements. The homebuyer must meet the credit and underwriting criteria established by the participating lender that provides the mortgage loan. The Authority does not make mortgage loans in connection with MCCs and makes no loan underwriting decisions. The applicant for an MCC must sign all documents and affidavits which are needed to demonstrate the homebuyer's eligibility for an MCC.
For more information on the Authority’s MCC program, a copy of the participating lenders list and specifics regarding the above Notice, visit the Web site at www.michigan.gov/mshda, and click on the Homeownership tab, Homebuyers, then Mortgage Credit Certificate Program, or contact MSHDA, 735 E. Michigan Ave., Lansing, MI 48912, (517) 335-2039.
