109.00.11 Ark. Code R. 001
The Arkansas Development Finance Authority ("ADFA" or the "Authority") has developed this Mortgage Credit Certificate Program Guide ( the "Program Guide") for the use and benefit of any and all parties having an interest in an MCC program. However, we have attempted to target the information and materials in this Program Guide to the Participating Lenders (as defined in Chapter 2) in order to aid and assist them in complying with the terms and conditions of our Mortgage Credit Certificate program. Participating Lenders should familiarize themselves with all of the conditions and obligations set out in the Program Guide. The requirements discussed herein are mandatory and the failure of the Participating Lender to adhere to the MCC Program requirements may lead to the termination of such Participating Lenders' usage of the program.
The MCC Program was authorized by Congress in 1984 and is codified as Section 25 of the Internal Revenue Code of 1986 (the "Tax Code"). Congress intended the MCC Program as a means of providing housing assistance to low and moderate income First-Time-Homebuyers. ADFA has elected to allocate a part of its Mortgage Revenue Bond authority for single-family housing toward the MCC Program. This Program is being made available through participating lenders on a first-come, first-serve basis, subject to certain targeting requirements imposed by the Tax Code and more fully described herein.
A Mortgage Credit Certificate is a direct dollar for dollar federal income tax credit to the homebuyer. The amount of the credit to the borrower is established by the MCC Tax Rate that is set by the Authority. The Code allows ADFA to set the MCC Tax Rate from ten percent (10%) to fifty percent (50%), and multiple MCC Tax Rates may be established. For the 2010 MCC Program ADFA has set the MCC Tax Rate at twenty-five percent (25%). Subsequent Programs may have different rates. The MCC reduces the federal income tax liability of eligible homebuyers purchasing a qualified residence, thereby making more funds available for the house payment or other household liabilities. The monthly savings the homebuyer receives from using the MCC can be used to gross up the monthly income or reduce the housing expense ratio for qualifying purposes. Examples of MCC calculations can be found later in this chapter.
The benefit to the borrower cannot exceed the amount of Federal taxes owed after all other credits and deductions have been taken into account. The amount of the tax credit benefit may not exceed $2,000 in any given tax year. The homeowner may reduce the amount of monthly federal income tax withheld by filing a revised IRS Form W-4 Employees Withholding Allowance Certificate, in order to have more disposable income for the month. Also, the homeowner has the ability to carry forward for the next three years any unused portion of the credit but he must use the current year's MCC first before carrying forward any additional amounts. 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. An MCC cannot be issued to a homebuyer who is refinancing an existing mortgage or land contract. A borrower may not combine the benefits of an MCC if his/ her purchase is financed using the proceeds of a tax exempt mortgage revenue bond loan.
The Authority is simply a conduit for the granting of the MCC. ADFA will not make or hold MCC-assisted mortgage loans and will not underwrite the loans. The Lenders participating in the Program will perform all underwriting and execution of required ADFA and Federal certifications or affidavits under ADFA agreement. For purposes of the MCC Program, Participating Lenders ( based on the executed MCC Lender Participation Agreement) will be acting as independent contractors. ADFA will receive executed certifications and affidavits from the Lender in order to determine the Borrowers qualification and eligibility.
The allowable fees for this MCC Program can be found in Chapter 4 paragraph J of this Program Guide..
After the Lender has explained the Program and its guidelines, ADFA encourages borrowers who believe they qualify to apply for an MCC in conjunction with their first mortgage financing.
The 2010 Arkansas Mortgage Credit Certificate Program will continue until:
The volume of Mortgage Credit Certificates available in the State of Arkansas is determined by a procedure set forth in the Internal Revenue Code of 1986. Under the Arkansas 2010 MCC Program, the Authority, as an issuer of mortgage revenue bonds, can trade $1.00 of bond authority for $0.25 of MCC authority. When ADFA initially elected to trade in $10,000,000 of bond authority, it received $2,500,000 of MCC authority. Each MCC issued uses up an amount of MCC authority equal to the amount of the mortgage loan multiplied by the 25 percent MCC Credit Rate established by the Authority. Using an average $125,000 mortgage amount uses up $31,250 of MCC authority based on a 25 percent MCC Tax Credit Rate. Based on this average MCC utilization rate, $2,500,000 of MCC authority will allow $10,000,000 in first mortgage loans to be originated.
This initial MCC Program for the State of Arkansas is very small in scope. If it is successful subsequent programs may be established to help a much larger number of Arkansas homebuyers.
Since the majority of the Borrower's that use the MCC Program are required to be First-Time-Homebuyers, the Authority has decided that the first mortgage loan that accompanies an MCC under this Program must be a fixed rate, fully amortisingloan. Because of the higher level of risk, adjustable rate, interest only and other types of "exotic" mortgages are not allowed.
Amount of First Mortgage | $ 150,000.00 |
Interest Rate | x_ 5.00% |
First Year Interest Paid | = $ 7,500.00 |
MCC Tax Rate | x ___25%__ |
Reduced Federal Tax Liability | = $ 1,875.00 |
Maximum Amount Per Year | $ 2,000.00 |
Calendar Months/ Year | Divided By ____12___ |
Monthly Savings | = $ 166.66 |
* With a 25% MCC Tax Rate the maximum amount of tax credit benefit is $2,000 per year.
* Unused tax credits can be carried forward for three years.
* To receive immediate benefit from the MCC Program, Eligible Borrowers should file a revised W-4 Federal Tax Withholding Form with their employer. This revision will reduce the Borrower's yearly Federal tax withholdings and Increase his/her monthly take home pay.
Lenders interested in participating in the MCC Program should contact ADFA, Attn: Single Family Program Manager at 501-682-5974. Each Lender will be required to execute a "Lender Participation Agreement" as found in Appendix 6 of this Program Guide. When requests are received for lender participation in the 2010 Mortgage Credit Certificate Program they will be reviewed and if accepted for the program ADFA will send a "Notice of Acceptance & Assignment of MCC Lender I dentification Number" verifying acceptance. A sample of that notice can be found in Appendix 10 of this Program Guide.
Arkansas Development Finance Authority Mortgage Credit Certificate (MCC) Program
As used in this Program Manual, the following words and terms have the meanings set forth:
ANNUAL HOUSEHOLD INCOME; Annual household income means the current "annualized" income of everyone eighteen years of age or older that is employed and living in the household. Annualized income means the Gross Monthly Income, multiplied by twelve (12), of all borrowers and any other person(s) who is expected to live in the residence being financed, except a person who is under 18 years of age or a full-time student, or any other person who is expected to both live in the residence being financed and to be secondarily liable on the Mortgage Loan.
For purposes of this definition, Gross Monthly Income includes the sum of monthly gross pay; and additional income from overtime, part-time employment, bonuses, dividends, interest, royalties, pensions, VA compensation, and net rental income; and other income such as alimony, child support, public assistance, sick pay, social security benefits, unemployment compensation, income received from trust accounts, and income received from business activities or investments. Overtime pay and bonuses must be projected in an amount consistent with the earnings history of each household member.
Gross Monthly Income shall NOT include casual, sporadic or irregular gifts; amounts that are specifically for or in reimbursement of medical expenses; inheritances; insurance payments; settlement for personal or property losses; foster child care payments; the value of coupons for food stamps; and income from the employment of children under the age of 18 years.
ACQUISITION COST: Acquisition Cost has the meaning given that term under the Tax Code Section 143(k) (3) and the Federal Regulations. Home Purchase Price maximums are set by the Authority and revised from time to time. The current maximum purchase price can be found in Appendix C of this Program Guide..
Acquisition Cost shall include the following:
however, it shall not include the value of services performed by the mortgagor or members of the mortgagor's family in completing the residence.
ADFA: means the Arkansas Development Finance Authority (the "Authority"), a body politic and corporate, not a State agency but an independent instrumentality exercising essential public functions.
AFFIDAVITS; An Affidavit filed in connection with the Program shall be made under oath and subject to the penalties of perjury.
AGREEMENT: Means the Lender Participation Agreement between ADFA and each lender and found in Appendix F of this Program Guide.
BORROWER: The buyer of a Single Family residence and one of the person(s) who signs the Note and Mortgage. Also the applicant for the MCC.
CERTIFICATIONS; A certification filed in connection with the Program shall be made under oath and subject to the penalties of perjury.
CERTIFIED INDEBTEDNESS: An IRS term meaning the amount of debt which is incurred by the taxpayer/borrower to acquire his/her Principal Residence.
CLOSING DATE: The date on which the Loan Closing occurs.
ELIGIBLE BORROWER(S): A person or persons (i) intending to reside in a house as their principal residence within a reasonable time period (not to exceed 60 days) following the date of closing on the Mortgage Loan, (ii) whose Annual Household Income does not exceed the limitations established for the Program, as may be amended by the Authority from time to time, and (iii) who is a First-Time-Homebuyer unless the Single Family Residence is located within a Targeted County.
ELIGIBLE PROPERTY: Means a New Property or an Existing Property which is to be owner occupied. The property must be located in the State of Arkansas. No more than 15% of an otherwise Eligible Property may be used for purposes other than as a Principal Residence.
EXISTING PROPERTY: A property which has been previously occupied or new (never occupied) properties more than one year old.
FIRST-TIME-HOMEBUYER: The buyer of a residence who has not had an ownership interest in a Principal Residence at any time during the three year period ending on the date the Mortgage Loan is closed. Certain Veterans qualify as First-Time-Homebuyers regardless of prior home ownership.
IRS: The Internal Revenue Service.
ISSUER: The Arkansas Development Finance Authority, the entity that actually issues the Mortgage Credit Certificate.
LENDER/PARTICIPATING LENDER A Participating Lender is a financial institution that provides financing for the acquisition of a Single Family Residences. A Lender (i) which has been doing business on a regular basis in the State of Arkansas for no less than twelve (12) months and is currently participating in the local private home lending market, (ii) which can make representations, warranties and covenants set forth in the Lender Participation Agreement and (iii) which has agreed to participate in the Program.
MCC Program (Program): Means the 2010 Mortgage Credit Certificate Program, as authorized by ADFA, and the administrative procedures, forms and exhibits specified in this Program Manual.
MORTGAGE CREDIT CERTIFICATE: Means a certificate issued by ADFA to establish eligibility for a tax credit against the federal income tax liability of an eligible Borrower purchasing an eligible property.
MORTGAGE CREDIT CERTIFICATE TAX RATE: means the rate set by ADFA that is stated in each Mortgage Credit Certificate. The rate for the 2010 MCC Program is set at 25%.
NEW CONSTRUCTION: means a Single Family residence less than one year old that has never been occupied.
NON-ISSUED BOND AMOUNT: The amount of private activity volume cap that the Authority elects not to use to issue qualified mortgage revenue bonds and instead use to issue Mortgage Credit Certificates.
OWNERSHIP INTEREST: Means any of the following interest in an Eligible Property:
PRINCIPAL RESIDENCE: Housing which the Eligible Borrower intends to occupy as a primary residence and which is not to be used in a trade or business, or as investment property.
PROGRAM MANUAL: Means this 2010 Arkansas Mortgage Credit Certificate Program Manual developed by ADFA staff and revised by ADFA from time to time.
PROGRAM ADMINISTRATOR: The Program Administrator is the Arkansas Development Finance Authority (ADFA).
PROHIBITED MORTGAGE: A prohibited mortgage is a mortgage where all or any portion of the financing is provided from the proceeds of a qualified mortgage revenue bond as defined under Tax Code Section 143 (a) and the Federal regulations pertaining to qualified mortgage bonds. Also prohibited are mortgages with other than a fixed rate of interest and other than fully amortizing.
REISSUED MCC: This occurs when there is either a refinance or an assumption of the first mortgage loan to which the MCC is attached. The parties that sign the new note and mortgage must meet all of the requirements of the MCC Program.
SALES PRICE: The maximum Purchase Price paid by an Eligible Borrower to acquire a Single Family ( One or Two units) Residence, in accordance with the Maximum Purchase Price established by the Authority and amended from time to time. The Authority will notify participants of any changes in the Maximum Purchase Price during the term of the Program.
SINGLE FAMILY RESIDENCE: An owner- occupied residential dwelling unit located in the State of Arkansas. These residences can be regular "stick built" homes or manufactured housing having a minimum of 400 square feet of living space and a minimum width in excess of 102 inches.
TAX CODE: Means the Internal Revenue Code of 1986, as amended.
TARGETED COUNTY: A Targeted County is a county that HUD determines is an area of chronic economic distress within the meaning of Section 143 of the Code. There are currently 31 counties in Arkansas that carry this distinction. A listing of Targeted Counties can be found in Appendix 4 of this Program Guide.
Arkansas Development Finance Authority
Mortgage Credit Certificate Program
There are three key elements to the determination of Tax Code compliance with regard to borrower eligibility for participation in the MCC Program:
* The Borrower must be a First-Time-Homebuyer (if property is located in aNon-Targeted County).
* The borrower's Annual Household Income must be within the allowable Maximum Household Income Limits for the county in which the property is located and the number of people that will be living in the residence. (See Appendix 3)
* The Purchase Price of the residence can't exceed the published Purchase Price Maximum for the MCC Program. The current maximum is found in Appendix 3.
ADFA requires documentation to support these three tax code compliance determinations. The documentation and verifications must be inclusive enough to satisfy Internal Revenue Service auditors.
As a general matter, a First-Time-Homebuyer is an Eligible Borrower who has not had a present ownership interest in a principal residence at any time during the three year period prior to the date on which the mortgage is executed (The closing date of the loan). Each Eligible Borrower (including a non-borrower spouse or co-occupant) must meet the First-Time-Homebuyer requirements as set forth in the Tax Code in order to participate in the Mortgage Credit Certificate Program. There is an exception for residences located in a Targeted County and Borrowers and Veterans Borrowers who have not previously had a mortgage revenue bond loan or Mortgage Credit Certificate.
"Present ownership interest" includes not only an outright ownership interest ( a fee simple interest) in a residence; it also includes any of the following interests if held directly by the borrower or in trust for the benefit of the Eligible Borrower:
* A joint tenancy
* A tenancy in common
* A tenancy by the entirety
* A community property interest
* A life estate
* A contract for deed
* The interest of a tenant-shareholder in a co-operative
" Present ownership interest" does not include:
* A remainder interest
* A lease with or without an option to purchase
* A mere expectancy to inherit an interest in a principal residence
* The interest that a purchaser of a residence acquires upon the execution of a Purchase contract
* An interest in other than a principal residence during the previous three (3) years.
* The components which operate only during transportation (hitch and axle) have not Been removed;
* The mobile home is movable and transportable; AND
* No permanent additions have been built around or added to the mobile home structure. Such items include permanently affixed decks, room additions, etc. However, if a deck has been built and the mobile home is merely sitting next to the deck, that would not constitute permanently affixed.
The prior ownership of a "double wide" mobile home will generally disqualify a prospective Eligible Borrower from First-Time-Homebuyer status.
Only the most recently available year of federal tax return is required, including all schedules and copies of W-2's. Copies of state tax returns are not required. ADFA will review the returns to see if the borrower, co-borrower or other occupant of the residence 18 years of age or older has claimed deductions for home mortgage interest or real estate taxes. In addition to looking for deductions, ADFA will check to make sure that the name of the taxpayer shown on the first page of the return matches the name or former name of the Eligible Borrower. The tax returns must also reflect the taxpayer's address and social security number. The tax returns MUST be signed and dated.
IF DEDUCTIONS WERE CLAIMED FOR MORTGAGE INTEREST OR FOR REAL ESTATE TAXES, THE ELIGIBLE BORROWER MUST SUPPLY A WRITTEN EXPLANATION OF THESE ITEMS, ALONG WITH SUPPORTING DOCUMENTATION. THE BURDEN OF PROOF WITH RESPECT TO QUALIFICATION AS A FIRST-TIME-HOMEBUYER RESTS WITH THE ELIGIBLE BORROWER AND THE FAILURE TO ADEQUATELY EXPLAIN ANY MORTGAGE INTEREST OR REAL ESTATE TAX DEDUCTIONS WILL RESULT IN THE DISQUALIFICATION OF THE ELIGIBLE BORROWER FROM THE ADFA MORTGAGE CREDIT CERTIFICATE PROGRAM.
During the period of January through April 15 of each year, the question arises as to which year of tax returns should be submitted. ADFA must have the most recent federal tax returns that have been filed.
* Mortgage Lender should ask the Eligible Borrowers whether they owned a residence during the previous marriage.
* The Mortgage Lender should review the divorced Eligible Borrowers prior federal tax returns to see if deductions were taken for home mortgage interest or real estate taxes. If none were taken you are probably okay.
* Mortgage Lender should obtain a copy of the divorce decree along with any other relevant agreements, such as an agreement for child support, etc. Review the decree to determine if there is any language which may give an indication of prior ownership of a residence. References to such things as a quitclaim deed, a transfer of interest, a release of obligation or a hold harmless agreement are terms often used when settling property issues. If these references are present in the decree, please forward a copy of the document to ADFA for an opinion.
The Eligible Borrower fails to qualify as a First-Time-Homebuyer if he or she has had a prior mortgage loan or other financing on the Eligible Property, with the following exceptions:
Of the three compliance issues we review, determining Household Income is by far the most difficult. In fact, the number one reason for rejection of an MCC application is due to the Eligible Borrower being "over income limits". In the context of this issue, the term "Eligible Borrower" means the Eligible Borrower as well as any Eligible Co-Borrower, and any person who is 18 years or older who will reside in the residence, collectively, including those not taking title. The Eligible Borrower must satisfy each of the following requirements:
HUD publishes median household income figures that are the basis for determining the Maximum Household Income Limits. The Tax Code requires the Authority to set the Maximum Income Limits at the following percentages of the median household income for the area of the State in which the Eligible Borrower intends to reside:
Household Size of | One (1) or two (2) | Three (3) or More |
Targeted County | 120% | 140% |
Non-Targeted County | 100% | 115% |
If a spouse of an Eligible Borrower (or any other occupant who is 18 years of age or older and residing in the home) is not taking title to the residence, such spouse (or resident) must complete and sign an Exhibit I.
* Information obtained from loan application documents.
* A re-affirmation by the Borrower at Closing that the information set forth in the Affidavit of Buyer is still true, correct and complete.
NOTE: IT IS VERY IMPORTANT TO DOCUMENT ANY AND ALL CHANGES WITH RESPECT TO THE FINANCIAL CONDITION OF THE BORROWER THAT MAY OCCUR AFTER INITIAL APPROVAL AND BEFORE CLOSING.
NOTE: A PROFIT AND LOSS STATEMENT MAY ALSO BE REQUIRED FROM AN ELIGIBLE BORROWER WHO IS EMPLOYED FULL TIME, BUT SHOWS OTHER BUSINESS INCOME GAIN / LOSS ON HIS FEDERAL INCOME TAX RETURN (SEE LINE 12 OF FORM 1040).
* Calculate Annual Household Income and include the employer contribution and employee elective contribution/deferrals. If the Borrower's income does not exceed the published limit, then you need do nothing more.
* If the elective deferred income causes the Borrower to exceed the published limit, then the Borrower should obtain from his/her plan administrator a copy of the section from the plan document that provides for any restrictions governing withdrawals from the plan. If the plan document states that the contributions can only be borrowed against and can not be withdrawn, then these amounts are not included in the income calculation.
* In all instances, the Borrower's elective deferrals or contributions must be included in the Annual Household Income calculation.
The residence being financed must be a Qualified Dwelling and must not exceed the Maximum Purchase Price limit for the State of Arkansas. The Purchase Price Maximum can be found in Appendix 3 of this Program Guide. The Eligible Borrower must acquire a fee simple interest in the real estate and the residence being financed must become the Principal Residence of the Eligible Borrower within 60 days after closing of the mortgage loan.
* A single family detached residence, including a manufactured home that is permanently affixed to real property
* A townhouse
* A condominium unit
* A qualified duplex, provided the structure was first occupied as a residence at least 5 years before the execution of the mortgage.
As defined by the Tax Code, Acquisition Cost includes all amounts paid, either in cash or in kind, by the Borrower (or any party related to the Borrower) to the Seller ( or any party related to the Seller) as consideration for the purchase of the residence. This includes the reasonable cost of completing an incomplete or unfinished residence. Completion costs are included in the Tax Code definition of Acquisition Cost whether or not the cost of completing construction is to be financed with a qualified mortgage loan.
Acquisition Cost does not include:
* Usual and reasonable settlement or financing costs ( including title fees, title insurance, survey charges, credit report fees, appraisal expenses, etc.). Please note that, in order for these costs to be excluded from the Acquisition Cost calculation they must not exceed usual and reasonable charges for these expenses.
* The unpaid value of services performed by the borrower or members of the borrower's family in completing or finishing the residence. This is known as "sweat equity".
* Items of personal property which are not fixtures and/or permanently affixed to the property.
* The cost of minor repairs, fix-ups, etc. performed after closing and paid for by the Borrower.
When a Standard Residential Purchase Contract includes personal property, the Borrower and the Seller must establish a fair market value for the personal property. The fair market value may be deducted from the Purchase Price when calculating the Acquisition Cost and the loan-to-value ratio. We are not going to worry about such things as old refrigerators, draperies or other typical items that have no value to the Seller.
The following are additional standards and requirements of a Qualified Dwelling:
In order to determine whether to include the cost of the land or not, you should obtain a certified copy of the deed from the county recorder's office. Likewise, the contract of sale or the settlement statement for the land can be used to substantiate such land cost and the date of purchase.
The Federal government views Eligible Borrowers who purchase a primary residence and apply for and receive a Mortgage Credit Certificate (MCC) as having received a Federal tax "subsidy" because of the Federal tax credit that is available to them as long as that house is used as their primary residence. The Tax Code requires that a Eligible Borrower who has taken advantage of the MCC may be required to repay a part or all of this subsidy to the Federal government if:
Due to this provision in the Tax Code, ADFA requires that the potential Eligible Borrowers be informed of this possible taxation at the time of application for the MCC. The Notice To Borrower(s) of Potential Recapture Tax ( Exhibit A), must be provided to and signed by each Borrower at the time of MCC application. By evidence of the Eligible Borrower's signature, we are assured that the Borrowers have been given appropriate notice. Two (2) additional notices will be provided to the borrowers. One is incorporated into the "Affidavit of Buyer" and the other will be signed by the Eligible Borrowers at Closing.
Year of Resale | Recapture Tax Percentage | Recapture Tax Rate * |
1 | 20% | 1.25% |
2 | 40% | 2.50% |
3 | 60% | 3.75% |
4 | 80% | 5.00% |
5 | 100 % | 6.25 % |
6 | 80% | 5.00% |
7 | 60% | 3.75% |
8 | 40% | 2.50% |
9 | 20% | 1.25% |
10 | No Recapture Tax Due |
* The Recapture Tax Rate is multiplied by the original mortgage loan amount to determine the amount of Recapture Tax to be paid.
There is one additional measure in calculating recapture tax. In no event will the amount of recapture exceed 50%) of the net gain on the sale of the home.
After you have informed your borrower of the potential for a recapture tax, let the borrower know that in most cases (estimated to be around 90% - 95%), a recapture tax will not need to be paid.
Circumstances under which recapture is not paid:
* The Eligible Borrower lives in the residence for more than nine years.
* The Eligible Borrower does not realize a capital gain on the resale.
* The Eligible Borrower dies.
* The Eligible Borrower's Annual Household Income at the time of resale has not increased to an amount greater that the Maximum Household Income Limit for the ADFA MCC Program calculated with a 5% annual growth rate and based on the Maximum Income Limit - not the Borrower's income at time of the loan.
Let's focus on the last reason, since we feel that it will be the primary reason for not having to pay the Recapture Tax. We believe that, in most cases, the Eligible Borrower will not have to pay a Recapture Tax because his or her Annual Household Income likely will not exceed the Maximum Household Income Limit at the time of sale of the property associated with the Mortgage Credit Certificate. As you will see in reviewing the chart, we have taken the Maximum Household Income Limit for the Single Family Program and projected it with a 5% annual growth rate. If the Eligible Borrower's income is at or below this adjusted amount at the time of the sale of the property, the Eligible Borrower pays no Recapture Tax. Since our typical borrower's Annual Household Income is well below the Maximum Household Income Limit, it would require a borrower to realize significant increases (7% - 15% or greater) annually before exceeding the limit.
* Single Eligible Borrowers. If they get married they might double their Annual Household Income overnight.
* Eligible Borrowers who are very close to being over the Annual Household Income Limit at the time of loan application. They will be limited to Annual Household Income growth of no more than an aggregate amount of 5% annually if they expect to stay beneath the allowable limits.
* Young professionals or "career superstars" who anticipate significant salary increases within the near future and do not intend to stay in the property for more than nine years.
The Recapture Tax is reported to the IRS using IRS Form 8828. If the Borrower sells his home and his mortgage loan is subject to the recapture rules, he must file Form 8828 even if no Recapture Tax is owed. See Form 8828 and its instructions for more information. Also, IRS Publication 523 - "Selling Your Home" for more information on recapturing a Federal mortgage subsidy. In all matters dealing with Recapture Tax we recommend that the Borrower consult a professional tax preparer.
Arkansas Development Finance Authority Mortgage Credit Certificate (MCC) Program
ADFA is the Program Administrator for the Mortgage Credit Certificate Program for the State of Arkansas. The Authority will delegate part of the administrative role to participating Arkansas mortgage lenders through the execution of a Lender Participating Agreement with those lenders.
Prospective borrowers may apply for a Mortgage Credit Certificate in conjunction with a standard mortgage loan application for the purchase of a primary residence. The MCC processing is designed to complement the lenders' regular credit underwriting procedures. Since ADFA is not part of the decision making process on credit, under the Equal Credit Opportunity Act, ADFA is not required to give the borrower any formal notice of rejection of an MCC. The Authority recognizes that there will be procedural variations amongst participating lenders; consequently, the procedures outlined here are meant to suggest, not mandate, a particular sequence of events. However, the responsible parties to the MCC transaction must complete ALL of the elements for the processing of an MCC as outlined in this Program Guide.
ADFA will maintain a list of MCC Participating Lenders and will provide the list to prospective borrowers upon request. The list will be updated on a regular basis. The current list will be made available on the ADFA web site - www.arkansas.gov/adfa.
MCC Set-aside:
As Reservations are received, ADFA will monitor the amount of confirmed requests to comply with the Tax Code requirement that for the first year that MCC's are available, twenty percent (20%) of the aggregate amount of MCC's available through the Program shall be set aside by ADFA and allocated to loans in Targeted Counties. A listing of Targeted Counties in Arkansas can be found in Appendix 4 of this Program Guide.
This could result in a Non-Targeted reservation request being placed on a waiting list for funding when the Targeted County requirement has not been met. ADFA may, at its sole discretion, continue to accept MCC reservation requests in the manner specified herein even though the available funds may be fully reserved. These reservation requests may be eligible for issuance on a first-come, first-serve basis under a future MCC Program. Alternatively, ADFA may, at its Discretion, suspend its MCC Program for a period of time for all but Targeted County MCC applications.
Step 1. Borrower applies for mortgage financing from an MCC Participating Lender. The loan must be fixed rate and fully amortizing and it can't be a tax exempt mortgage revenue bond loan.
Step 2. Lender determines if a loan applicant is eligible for an MCC based preliminary on information obtained about annual household income, acquisition costs, prior home ownership, and other factors. The applicant need not have a federal tax liability, either currently or projected, in order to qualify for an MCC.
Step 3. Lender provides Borrower with an MCC Program Disclosure Form
(Exhibit C) and a Application For Conditional Commitment, Certifications & Affidavit (Exhibit B) that explains the MCC Program and contains guidelines for potential applicants. The Lender should advise the Borrower to carefully study his/her present and anticipated federal income tax situation to judge the amount of federal tax liability in order to determine the benefit of the MCC Program.
Step 4. Lender should provide the Borrower with the MCC Worksheet (Appendix 1) to help verify that the Borrowers qualify for an MCC. Lender should also provide the Borrowers with the MCC Household Income Calculation Worksheet (Appendix 2) to verify that Borrowers are under the published income limits for the county where the property is located and the number of people living in the household. A listing of county income limits can be found in Appendix 3 of this Program Guide. The use of Appendix 1 & 2 are optional and are not required to be sent to ADFA.
Step 5. As part of the loan reservation process, the Borrowers read and sign the MCC Application For Conditional Commitment, Certifications & Affidavit . (Exhibit B). This form contains various certifications required by the Tax Code and ADFA.
Those certifications are:
Step 6. To reserve an MCC, the Lender may fax the completed MCC Reservation Form (MCC001) to ADFA at (501) 682-5621 or e-mail it to mcc@adfa.arkansas.gov.
To request a change to a current Reservation, the Lender must use the following procedures:
Step 7. Determination of Recapture Tax:
In 1990 Congress passed a law that provides for a "Recapture Tax" on the gain from the sale of a residence where the seller of the property used a Mortgage Credit Certificate (MCC) in conjunction with the mortgage financing. Recapture Tax is simply the repayment of a portion of a Federal mortgage subsidy the borrower's received from the Internal Revenue Service when they purchased the home.
Chapter 3 -D of this MCC Program Guide lists the guidelines that pertain to Recapture Tax. Internal Revenue Service Publication 523 also gives details on recapture tax. If the taxpayer determines that he/she owes recapture tax it is paid by filing IRS Form 8828 when the taxes are paid for the year that the house was sold.
We strongly recommend that taxpayers seek the advice of a professional tax preparer to determine if "Recapture Tax" applies and to calculate the amount of the tax to be paid.
Step 8. Upon receipt of the faxed MCC Reservation Form (MCC 001), the ADFA Single Family staff will enter the information on the reservation form into the appropriate MCC section of the Internet Reservation System.
Step 9. The lender performs all of the normal mortgage loan credit underwriting procedures. This would include all of the normal verifications of employment, income and borrower assets.
Step 10. The lender considers the value of the MCC when determining the amount of income available to use in calculating the housing ratio of the Borrower's. Some agencies (FHA, RD, VA, FHLMC and FNMA) allow for a reduction in the Borrower's monthly house payment by the MCC credit amount. Others increase the Borrower's income by the credit amount. Agency guidelines must be followed when calculating the benefits of an MCC on borrower's income.
Once the credit decision has been approved by the lender, the lender assembles and submits the Conditional Commitment Package to ADFA. The Authority must receive the commitment package within 30 days of the Reservation Date.
Step 11. The Conditional Commitment Package consists of the following:
* MCC Transmittal Checklist (MCC 003)
* Original executed MCC Application For Conditional Commitment, Certifications & Affidavit (Exhibit B)
* Agency Underwriting and Transmittal Summary:
** Fannie Mae Form 1008
** FHA Underwriting and Transmittal Summary HUD-92900
** Freddie Mac Underwriting and Transmittal Summary 1077
** VA Loan Guaranty Analysis Form
** Rural Development Loan Commitment Form
* Original executed MCC Disclosure (Exhibit C)
* Most recent Federal tax returns with all schedules
* Tri-Merge Credit Report on all borrowers
* Verification Of employment and current pay stubs on all borrowers
* MCC Household Income Calculation Worksheet (Appendix 2) (optional)
* Complete appraisal report of subject property
* Copy of Deed and Invoice for Manufactured Housing
* Notification of Change Form (MCC 002) (If Applicable)
* Original Executed Notice To Borrower(s) of Potential Recapture Tax (Exhibit A)
* Copy of fully executed Real Estate Sales Contract
* Copy of completed and signed Form 1003 Loan Application
NOTE: ADFA must receive the "Commitment Package" within 30 days of reservation date.
Step 12. Lender confirms that the MCC Conditional Commitment has not expired.
Step 13. Lender closes the loan.
Step 14. After the loan has closed, the Lender will assemble the "Closing Package" and submit it to ADFA. ADFA must receive the "ClosingPackage" within 30 days of loan closing. The "Closing Package" consists of the following:
* Original Transmittal Checklist (MCC 003)
* Lender's check payable to ADFA for the following fees:
- MCC Issuance Fee of .50% of loan amount
- MCC Reservation Fee of $25.00
- MCC Reservation Extension Fee (if applicable)
- MCC Reissuance Fee of $125.00 in the event of an assumption or refinance
* Original executed Borrower's Closing Affidavit (Exhibit E)
* Original executed Sellers Affidavit (Exhibit F)
* Original executed Lender's Closing Certificate (Exhibit G)
* Copy of executed Note
* Copy of executed Mortgage
* Copy of the completed HUD-1 Settlement Statement
NOTE: ADFA must receive "Closing Package" within 30 days of loan closing.
Step 15. Upon receipt of the "Closing Package", ADFA staff will review the documents to insure the documents comply with MCC Program guidelines. If all program guidelines are met, ADFA will issue the Mortgage Credit Certificate. The original certificate will be sent to the Borrowers at the address of the subject property. A copy of the certificate will be sent to the designated contact person for the Lender.
The Tax Code provides that discovery of noncompliance with the MCC
guidelines will result in revocation of the Mortgage Credit Certificate and disallowance of the tax credit. Revocation of the MCC occurs whenever:
ADFA, at its sole discretion, may perform a random post issuance audit of the Lender's records pertaining to MCC assisted mortgages.
A loan assumption associated with an MCC will be treated as a new MCC application and the procedures required by this Program Guide will be repeated. Since an MCC will already be outstanding associated with this property, an MCC Commitment Letter will not be issued. All of the documents required for the "Conditional Commitment Package" listed in the MCC Transmittal Checklist (MCC003) should be sent.
If a loan assisted with an MCC is to be assumed by a new borrower, an MCC may be issued to the new borrower under these guidelines:
NOTE: Inability of the new borrower to qualify for an MCC does not preclude the loan from being assumed.
Often there are situations where circumstances of the MCC request change after the issuance of the MCC Reservation. Some of those changes may affect the Borrower's eligibility to qualify for an MCC. Some of those changes are as follows:
Regardless of which party to the loan transaction pays, the fees listed in paragraph a, through d, below are to be paid to ADFA with a check from the Lender or title company.
The MCC holder must provide ADFA with the following documentation in order to begin the reissue process:
In the event that any defects are discovered in the application or any certifications, exhibits or affidavits after the MCC has been issued, the Lender and the MCC Holder will be notified of such defects and given 60 days from the date of the notification to cure the problem. If not cured within that time frame the Issuer (ADFA) has the option to revoke the MCC.
ARKANSAS DEVELOPMENT FINANCE AUTHORITY MORTGAGE CREDIT CERTIFICATE (MCC) PROGRAM
ADFA will provide to each Participating Lender the loan information and the loan detail for all mortgage loans with MCC's attached closed in the previous calendar year. A partially completed IRS Form 8329 will be provided to each Participating Lender in January of each year. It will have an attachment that contains the following information:
The information provided in the attachment should be verified by the Lender. If all information is correct the Lender should add the company Employer Identification Number in Part 1 - Reporting Authority, sign, date and add the title of the person executing the document on behalf of the Lender.
A sample of the cover letter used to send the above information to the
The Lender should mail the completed Internal Revenue Service Form 8329 with the attached listing to the Internal Revenue Service no later than January 31st. The IRS mailing address is:
Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201
When To File:Form 8330 must be filed with the IRS on a quarterly basis beginning with the quarter in which the MCC Election was made. The return for each MCC program is due as follows:
For The Quarter Ending: | Form 8330 Due By: |
March 31 | April 30 |
June 30 | July 31 |
September 30 | October 31 |
December 31 | January 31 |
Reissued MCC's:A "reissued MCC" occurs when there is a refinance of the first mortgage which has an MCC attached. It also occurs when there is an assumption of the first mortgage by qualifying new Borrower's. For both a refinance and an assumption the parties on the new note and mortgage must meet all of the requirements of the MCC Program.
Do not report reissued MCC's on Form 8330. A Reissued MCC is considered to be a continuation of the original MCC. It is reported by the Lender of the replacement loan on
Form 8329 - Lender's Information Return for Mortgage Credit Certificates (MCC).
Form 8329 and attachments for a period of six years from the Closing Date of the loan. The specific information required to be kept is the following:
ARKANSAS DEVELOPMENT FINANCE AUTHORITY MORTGAGE CREDIT CERTIFICATE (MCC) PROGRAM
The following is a list and description of the MCC Program documents and forms referred to in this Program Guide.
Program DocumentDescription
MCC 001"MCC Reservation Form" - fax format for Lender to send to ADFA requesting an MCC for a qualified borrower.
MCC 002"Request For MCC Modification" - A form the Lender faxes to ADFA to request changes in the terms of the MCC reservation.
MCC 003"MCC Transmittal Checklist" - A checklist the Lender follows to submit documents to ADFA when requesting the issuance of an MCC.
****************************************************************************
Exhibit A"Notice To Borrower(s) Potential Recapture Tax" - A
notice signed by the Borrowers indicating that they have been made aware of the possibility of having to pay a recapture tax if they sell the subject property in the first nine years. This document is executed by all Borrowers at time of application for the MCC and is included as part of the Compliance Package that the Lender sends to ADFA.
Exhibit B"Application For Conditional Commitment,
Certifications and Affidavit" - Application for an MCC, signed by the Borrowers at application certifying that they are aware of the compliance requirements to qualify for an MCC.
Exhibit C"MCC Disclosure" - A form signed by the Borrowers at application and notarized by the Lender. It is included in the Compliance Package that the Lender sends to ADFA.
Exhibit D"MCC Conditional Commitment Letter" - After
Reviewing the information submitted in the Compliance Package, if all compliance requirements are met, the MCC Program Manager completes the information in the letter, signs the letter and and sends to the Applicant with a copy to Lender.
Exhibit E"Borrower's Closing Affidavit" - Statements made by
Borrowers concerning changes, or lack of changes, in the statements made in the "Application For Conditional Commitment, Certifications & Affidavit" (Exhibit B) that was signed at application. Form is signed by Borrowers and notarized at closing.
Exhibit F"Seller's Affidavit" - Seller's statement that he/she is the
Seller of the subject qualified residence and stating the total purchase price. Form signed by Seller at closing.
Exhibit G"Lender Closing Certificate" - Certifications made by the Loan Officer as to the details of the mortgage loan transaction.
Exhibit H" Owner Occupancy Certification" - Signed by the new
MCC Holder when there is a refinance or assumption of the first mortgage loan to which the MCC was attached.
Exhibit I"Non-Borrower Occupant Income Affidavit" -
Statement by a non-borrower occupant giving his/her gross monthly income. That income amount is then used to calculate the gross household income.
Exhibit J"Supplemental Affidavit and Certification - Rental
Property" - Borrowers make statements if they have owned rental property within the last three years.
Exhibit K"Supplemental Affidavit and Certification -
Manufactured Home" - Borrowers make statements concerning the prior ownership of a mobile/ manufactured home.
Appendix 1"MCC Worksheet" - A document that the Borrowers and Lender may use to determine if the Borrowers qualify for an MCC and to estimate the possible financial benefit to the Borrowers. Form not required to be sent to ADFA.
Appendix 2"Household Income Calculation Worksheet" - A form used by the Borrowers and Lender to calculate the correct amount of annual household income to qualify for the MCC. Form not required to be sent to ADFA.
Appendix 3"Purchase Price and County Income Limits" - Lists the seventy-five counties in Arkansas and gives the Household Income Limits for small and large households for each County. It also lists the statewide purchase price limit.
Appendix 4"Listing of Targeted Counties" - A listing of counties in
Arkansas that are designated by HUD as "Targeted". In these counties the Borrowers do not have to be First Time Homebuyers.
Appendix 6"Lender Participation Agreement" - The agreement signed by ADFA and each Lender that wishes to participate in the Arkansas Mortgage Credit Certificate Program.
Appendix 7Sample of cover letter that ADFA sends to each Lender giving details of MCC's issued by the Lender during the previous calendar year. IRS Form 8329 is attached to the cover letter.
Appendix 8Sample of a cover letter used by ADFA to send the actual
Mortgage Credit Certificate to the certificate holder.
Appendix 9Sample of a cover letter that ADFA uses to send a copy of the Mortgage Credit Certificate to the Lender. It also outlines the Federal requirement to retain the MCC information for six years.
Appendix 10"Notice of Acceptance & Assignment of MCC Lender
Identification Number" - A sample of the letter ADFA sends to the lender when that lender is accepted as a participating lender in the 2010 Arkansas MCC Program.
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
Notice To Borrower(s)
Potential Recapture Tax
Exhibit A
Because you are receiving a Mortgage Credit Certificate (MCC) with your mortgage loan, you are receiving the benefit of a dollar for dollar credit against your federal income tax liability. As a result, pursuant to Section 143 (m) of the Internal Revenue Code of 1986 ( the "Code"), if you sell, exchange or otherwise dispose of your home (Disposition) during the next nine years a portion of this benefit may be recaptured by the Internal Revenue Service.
The Recapture Tax is based on the gain from the sale or disposition of the property. There is no Recapture Tax if there is no gain on the sale of the property, or if the property is sold nine (9) or more years after the date the loan is closed. There is also no Recapture Tax if, at the time you sell the property, your household income is below the federal qualifying limits. These limits may be adjusted from time to time for inflation and household size.
You may wish to consult with a tax advisor or the local office of the Internal Revenue Service at the time of disposition of your home to determine the amount, if any, of the "recapture tax" you owe to the IRS. At this point in time, there is no way to predict the amount of "recapture tax" borrowers may be required to pay. Also, ADFA will not calculate the amount of "recapture tax" you may owe upon disposition of your home.
Factors which affect "recapture tax":
Year One ************** | 1.25% |
Year Two ************ ** | 2.50% |
Year Three ************* | 3.75% |
Year Four ************** | 5.00% |
Year Five ************** | 6.25% |
Year Six ************** | 5.00% |
Year Seven ************ | 3.75% |
Year Eight ************ | 2.50% |
Year Nine ************ | 1.25% |
The maximum Recapture Tax amount is adjusted to reflect the holding period of the home that is financed. Other special rules may apply in particular circumstances, including, if you refinance your home. Again, we urge you to consult with a tax advisor or an office of the Internal Revenue Service if you refinance, sell or otherwise dispose of your home.
The Recapture Tax amount may also be reduced or eliminated based on a comparison of the Mortgagor's "modified adjusted gross household income" for the year in which the sale of the house takes place. The modified adjusted gross household income is equal to the federal adjusted gross household income increased by any earned tax exempt interest and decreased by the gain on the sale of the house. The adjusted qualifying income for each year based on the year of the sale and the size of the household are as follows:
I understand and acknowledge the potential for Recapture Tax to apply to my Mortgage Credit Certificate as explained above.
___________________________________________________________________________
(Borrower's Signature) (Date) (Co-Borrower's Signature) (Date)
Exhibit B
EXHIBIT C
Exhibit D
EXHIBIT E
EXHIBIT F
EXHIBIT G
Exhibit H
Exhibit I
Exhibit J
Exhibit K
Appendix 1
Appendix 2
Appendix 3
ARKANSAS DEVELOPMENT FINANCE AUTHORITY | |||
Mortgage Credit Certificate Program (MCC) | |||
Appendix 3 | |||
PURCHASE PRICE LIMIT-$225,000 | |||
Income Limits by County and Household Size (Effective June 14, 2010) | |||
N=Non-Targeted | 2010 INCOME LIMITS | ||
T=Ta | rgeted | 1-2 MEMBER | 3-MORE MEMBER |
N/T | COUNTY | HOUSEHOLD | HOUSEHOLD |
N | Arkansas | $50,040 | $58,380 |
N | Ashley | $49,560 | $57,820 |
N | Baxter | $49,100 | $56,465 |
N | Benton | $64,471 | $74,142 |
N | Boone | $51,120 | $59,640 |
T | Bradley | $58,920 | $68,740 |
T | Calhoun | $58,920 | $68,740 |
N | Carroll | $49,100 | $56,465 |
T | Chicot | $58,920 | $68,740 |
T | Clark | $58,920 | $68,740 |
N | Clay | $52,200 | $60,900 |
T | Cleburne | $58,920 | $68,740 |
N | Cleveland | $51,360 | $59,920 |
T | Columbia | $58,920 | $68,740 |
T | Conway | $58,920 | $68,740 |
N | Craighead | $62,880 | $73,360 |
T | Crawford | $58,920 | $68,740 |
T | Crittenden | $69,360 | $80,920 |
T | Cross | $58,920 | $68,740 |
T | Dallas | $58,920 | $68,740 |
T | Desha | $58,920 | $68,740 |
T | Drew | $58,920 | $68,740 |
N | Faulkner | $63,531 | $73,061 |
N | Franklin | $55,200 | $64,400 |
N | Fulton | $52,200 | $60,900 |
N | Garland | $57,360 | $66,920 |
N | Grant | $64,771 | $74,487 |
N | Greene | $56,520 | $65,940 |
N | Hempstead | $52,200 | $60,900 |
N | Hot Spring | $57,720 | $67,340 |
N | Howard | $52,560 | $61,320 |
N | Independence | $55,920 | $65,240 |
N | Izard | $52,200 | $60,900 |
N | Jackson | $52,200 | $60,900 |
T | Jefferson | $58,920 | $68,740 |
N | Johnson | $52,200 | $60,900 |
T | Lafayette | $58,920 | $68,740 |
N | Lawrence | $52,200 | $60,900 |
T | Lee | $58,920 | $68,740 |
T | Lincoln | $58,920 | $68,740 |
N | Little River | $55,200 | $64,400 |
N | Logan | $52,200 | $60,900 |
N | Lonoke | $63,531 | $73,061 |
T | Madison | $67,200 | $78,400 |
N | Marion | $52,200 | $60,900 |
N | Miller | $55,800 | $65,100 |
T | Mississippi | $58,920 | $68,740 |
T | Monroe | $58,920 | $68,740 |
N | Montgomery | $52,200 | $60,900 |
T | Nevada | $58,920 | $68,740 |
N | Newton | $52,200 | $60,900 |
T | Ouachita | $58,920 | $68,740 |
T | Perry | $72,840 | $84,980 |
T | Phillips | $58,920 | $68,740 |
N | Pike | $52,200 | $60,900 |
N | Poinsett | $52,200 | $60,900 |
N | Polk | $52,200 | $60,900 |
N | Pope | $58,680 | $68,460 |
T | Prairie | $58,920 | $68,740 |
N | Pulaski | $63,531 | $73,061 |
N | Randolph | $52,200 | $60,900 |
T | St. Francis | $58,920 | $68,740 |
N | Saline | $63,531 | $73,061 |
T | Scott | $58,920 | $68,740 |
T | Searcy | $58,920 | $68,740 |
N | Sebastian | $55,800 | $65,100 |
N | Sevier | $52,680 | $61,460 |
N | Sharp | $52,200 | $60,900 |
N | Stone | $52,200 | $60,900 |
N | Union | $56,280 | $65,660 |
N | Van Buren | $52,200 | $60,900 |
N | Washington | $64,471 | $74,142 |
T | White | $58,920 | $68,740 |
T | Woodruff | $58,920 | $68,740 |
T | Yell | $58,920 | $68,740 |
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
MORTGAGE CREDIT CERTIFICATE (MCC) PROGRAM
LIST OF TARGETED COUNTIES
Appendix 4
The following 31counties in Arkansas have been designated as Targeted by the U.S. Department of Housing and Urban Development (HUD):
Bradley | Desha | Perry |
Calhoun | Drew | Phillips |
Chicot | Jefferson | Prairie |
Clark | Lafayette | St. Francis |
Cleburne | Lee | Scott |
Columbia | Lincoln | Searcy |
Conway | Madison | White |
Crawford | Mississippi | Woodruff |
Crittenden | Monroe | Yell |
Cross | Nevada | |
Dallas | Ouachita |
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
MORTGAGE CREDIT CERTIFICATE PROGRAM
LENDER PARTICIPATION AGREEMENT
Appendix 6
This Lender Participation Agreement (the "Agreement") is made and entered into by and between the
Arkansas Development Finance Authority (ADFA/ the "Authority") and _____________________
_________________________________________________________________ ("Lender").
WITNESSETH:
WHERAS, Section 25 of the Internal Revenue Code of 1986, as amended (the "Code"), allows ADFA to elect to exchange all or any part of its authority to issue qualified tax-exempt, private activity bonds for the authority to issue Mortgage Credit Certificates (MCCs") as a means of assisting qualified individuals with the acquisition of single-family housing;
WHEREAS, ADFA has elected not to issue $10,000,000 of qualified private activity bonds begining calendar year 2010 and, as a result of such election, has the ability to establish the 2010 Mortgage Credit Certificate Program (the "Program") for the State of Arkansas;
WHEREAS, the Lender wishes to participate in the MCC Program administered by ADFA in connection with mortgage loans which Lender may make available to prospective borrowers for the acquisition of new or existing single-family residences;
NOW, THEREFORE, in consideration of the promises set forth herein, the parties agree as follows:
IN WITNESS THEREOF, ADFA and LENDER have executed this Agreement on the dates indicated below.
Dated: _______________ Lender: _________________________
( Name of Lending Institution)
By _________________________
Title _______________________
Dated: ________________ Arkansas Development Finance Authority
By: ___________________________
Title: Single Family Program Manager
Appendix 7
January 1, 2011
Arkansas Bank & Trust, LLC
Attn: Ashley Vickers 1342 Main Street Little Rock, AR 72201
Re: IRS Annual MCC Report
Dear Ms. Vickers:
Please find the attached IRS Form 8329 covering the 2010 calendar year that must be provided to the IRS by your company. The ADFA loan information has been completed and the loan detail has been provided that should be verified by you and attached to the IRS Form 8329. Add your company employer tax identification number in Part 1 - Reporting Authority, sign, date and add the title of the person executing the document on behalf of your company.
The completed IRS Form 8329 and attached listing should be mailed to the IRS no later than January 31, 2011. The IRS mailing address is:
Department of the Treasury Internal Revenue Service Center Ogden, UT 84201
ADFA does not need a copy of your signed IRS Form 8329.
If you have any questions, please contact me at (501) 682-5974.
Best Regards,
Murray Harding
Manager
Single Family Program
Incl. /as
Appendix 11
January 31, 2010
Mr. John Q. Homeowner
1945 Main Street Little Rock, AR 72201
Re: Mortgage Credit Certificate (MCC)
Dear Mr. Homeowner:
Congratulations, you have been approved for a Mortgage Credit Certificate that will entitle you to a credit that can reduce the amount of federal income taxes you pay.
Attached to this letter is your Mortgage Credit Certificate that entitles you to this federal tax credit. You should read this certificate and keep it with your tax records because you will need it each year when your federal income tax return is prepared.
To claim this federal tax credit on your income tax returns you must complete, each year, IRS Form 8396, Mortgage Interest Credit, and attach it to your Form 1040. We suggest that you use a professional tax preparer to assist you in completing your federal tax return to help you obtain the maximum benefit from this tax credit.
You may want to realize the benefit of this tax credit immediately by filing a revised Form W-4 with your employer.
Please notify this office immediately upon the selling or refinancing of this property. If you have any questions regarding this Mortgage Credit Certificate please contact the undersigned at (501) 682-5974.
Sincerely,
Murray Harding
Manager
Single Family Program
Appendix 9
January 1, 2010
Arkansas Bank & Trust, LLC
Attn: Ashley Vickers 1342 Main Street Little Rock, AR 72201
Re: Mortgage Credit Certificate (MCC) Patrick R. Jones MCC # ___________
Dear Ms. Vickers:
IRS regulations require that you retain in your records the information listed below for six (6) years following the year in which the mortgage loan was made to the above named person(s). All of the information listed below is on the attached copy of the Mortgage Credit Certificate; therefore, all you need to do is retain the copy of the MCC for the required time period. The information required to be retained by you is as follows:
IRS regulations require that you file IRS Form 8329, Lender's Information Return for Mortgage Credit Certificates (MCC's) for all mortgage loans you made during the calendar year which were the subject of a Mortgage Credit Certificate. This report must be filed with the IRS on or prior to January 31 of the year following the calendar year to which the report relates. This is a one time report that is not repeated in subsequent years for the same mortgage loans. ADFA will provide a computer print-out of all MCC assisted mortgage loans issued by you for the calendar year and attach the IRS Form 8329 for your completion.
Mortgage Credit Certificate
Arkansas Development Finance Authority
If the computer print out is consistent with your records, you may execute the IRS Form 8329 and send it to the Internal Revenue Service Center, Philadelphia, PA 19255, no later than January 31st.
If you sell or assign the mortgage loan to another financial institution, you are still required to retain the records described above and file the IRS Form 8329.
If you have any questions concerning this matter, please do not hesitate to contact our office. Best Regards,
Murray Harding
Manager
Single Family Program
Enclosure
Appendix 10
ARKANSAS DEVELOPMENT FINANCE AUTHORITY MORTGAGE CREDIT CERTIFICATE (MCC) PROGRAM
Notice of Acceptance & Assignment of MCC Lender Identification Number
To: ____________________________
(Name of Lender)
Pursuant to the ADFA 2010 Mortgage Credit Certificate Program Guide and the Lender
Parti cipation Agreement, dated _______________
between the Arkansas Development Finance Authority and your company (the "Agreement"), you are hereby notified that you have been accepted and approved for participation in the 2010 Mortgage Credit Certificate Program as a participating lender that may request the issuance of Mortgage Credit Certificates ("MCCs") to be used in conjunction with a qualifying mortgage loan, pursuant to and under the conditions set forth in the Program Guide and the Agreement.
The aggregate principal amount of MCC's which may be issued by ADFA under this notice shall be determined as you request and ADFA confirms reservations of MCC authority pursuant to the documents (particularly the Agreement, the Manual and this Notice) relating to the ADFA 2010 Mortgage Credit Certificate Program.
Your MCC Lender Identification Number is _____________.
ARKANSAS DEVELOPMENT FINANCE AUTHORITY
Murray Harding
Manager
Single Family Program
109.00.11 Ark. Code R. 001