Implementation of a Mortgage Credit Certificate (MCC) Program

by July 9, 2021


The North Carolina Housing Finance Agency (NCHFA) is publishing this notice to provide information to the public and mortgage lenders, regarding the implementation of a Mortgage Credit Certificate (MCC) Program.

The MCC Program provides housing assistance to low and moderate-income homebuyers. This Program will generally be made available through participating North Carolina Mortgage lenders on a first-come, first-served basis.  NCHFA may allocate MCCs to particular housing developments, but only if the developer provides a certification to the purchaser of the residence and NCHFA stating that the purchase price of the residence is not higher than the price would be if NCHFA had not allocated MCCs to the development. NCHFA may allocate MCCs for cities or nonprofit organizations to use with affordable housing programs targeted to low-income households. Such allocations will not exceed 30% (thirty percent) of this election amount.

NCHFA may convert up to $400 million of private activity bond authority for an MCC Program of up to $100,000,000 or sufficient funding authority for approximately 1,500 households.

An MCC operates as a federal income tax credit. The MCC reduces the federal income taxes of eligible homebuyers purchasing qualified residences, in effect assisting buyers with their house payments.  NCHFA may offer different tax credit percentages for households below certain family income limits or with different needs for tax credit assistance. Use of the MCC will reduce the mortgage interest deduction for federal tax purposes.

MCCs are generally subject to the recapture of subsidy when disposition of the MCC-assisted home takes place at a significant gain within nine years (excluding transfers to a spouse or former spouse when no gain or loss is recognized and dispositions by reason of death).  The owner is responsible to pay the recapture as an additional federal tax liability from the realized gain on the disposition for the tax year in which the disposition takes place.

A purchaser of a new or existing single family residence may apply for an MCC through a participating lender at the time of obtaining financing. Lenders may process home loans of different types, although NCHFA reserves the right to exclude adjustable rate mortgages or other mortgage types that may affect repayment ability and/or pose hardship with later re-financings. Lenders will process loans using normal procedures, with certifications and affidavits being executed at relevant points to satisfy federal requirements for an MCC.  NCHFA will charge a nonrefundable MCC processing fee, and the lender is permitted to charge an additional fee. The fees charged by NCHFA and the lender will reimburse their expenses in processing MCCs and will be amended from time to time. An MCC can be reissued once to a homebuyer who is refinancing an existing mortgage previously assisted with an MCC provided that specific requirements have been met.  An MCC cannot be issued to a homebuyer who is assuming an existing mortgage that was not previously assisted with an MCC.

To receive an MCC, these general eligibility requirements must be met:

  1. NCHFA reserves the right to require a purchaser or property be determined ineligible for NCHFA’s low interest rate Home Advantage Mortgage Program.
  1. The purchaser must be a North Carolina resident and within 60 days of closing must occupy the home purchased as his or her principal residence.
  1. The purchaser must be a first-time buyer and cannot have had an ownership interest in a principal residence during the 3-year period preceding the issuance of the MCC, except in certain targeted areas where the requirement will not apply, or the purchaser must be an eligible military veteran who has not previously received an MCC or a loan financed by certain tax-exempt housing bonds.
  1. The purchaser must buy a home located in North Carolina which has an acquisition cost not exceeding 90% of the average area purchase price published by the Department of Treasury or other acceptable data, except in certain targeted areas where 110% of the average area purchase price may be allowed.
  1. The purchaser must not have family income exceeding 115% of the applicable median family income published by the Department of Housing and Urban Development, except in certain targeted areas where 140% of the median family income may be allowed. If a purchaser is an individual or a family of fewer than three individuals, then the family income cannot exceed 100% and in targeted areas 120% of the applicable median family income.
  1. The purchaser must secure new financing and an MCC will not be originally issued in connection with the acquisition or replacement of an existing mortgage. In addition a purchaser must receive an MCC reservation prior to mortgage closing; the purchaser cannot finance the home with the proceeds of a qualified mortgage bond or qualified veterans mortgage bond.

Any mortgage lender operating in North Carolina, meeting NCHFA standards, may participate in the MCC program by executing a participation agreement.  This Public Notice is a request for mortgage lenders to contact NCHFA regarding participation agreements, and to be included on a list of lenders that have stated that they will make loans to qualified holders of MCCs.  Lenders must contact NCHFA, Home Ownership Lending Group, by October 01, 2021 to be included on the list of participating lenders; the list will be updated at least annually.  Holders of the MCCs will not be required to obtain financing from lenders on the NCFHA list, although to ensure compliance with federal regulations, holders of MCCs must obtain financing from a lender that has executed an MCC participation agreement with NCHFA.

Other eligibility requirements may be added, or the above requirements may be amended, by NCHFA to meet public policy objectives. Regulations for the Program will be promulgated in accordance with state law. NCHFA can make available both a list of targeted areas that have been approved by federal procedures, and average area purchase price and median family income figures for all areas of North Carolina.

NCHFA will advertise the availability of MCCs by providing information to licensed real estate agents, homebuilders and participating lenders. Further information regarding the Program can be obtained by calling NCHFA at (919) 877-5700 or inquiring at 3508 Bush Street, Raleigh, NC 27609.

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