MORTGAGE CREDIT CERTIFICATES (MCC) Financing Future Borrowers: A Panel Discussion 2014 Delaware...

MORTGAGE CREDIT CERTIFICATES (MCC)Financing Future Borrowers: A Panel Discussion2014 Delaware Governor’s Conference on HousingOctober 7, 2014

Stephen D. Silver, CFO

Maryland Department of Housing & Community Development

Overview of the MCC

• The program serves first-time home buyers in the low- to moderate-income ranges

• The program is administered by state and local housing finance agencies, but not all states issue the certificates

• Issuance of MCCs is based on conversion of each agencies’ private activity bond volume cap

October 7, 2014Maryland Department of Housing and Community Development

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History of the MCC

• The Mortgage Credit Certificate (MCC) program is a federal home buyer assistance program designed to help lower-income families afford home ownership

• The program was established in the U.S. Treasury by the Deficit Reduction Act of 1984; modified by the Tax Reform Act of 1986

• The MCC allows the home buyer to claim a dollar-for-dollar tax credit for a portion of the mortgage interest paid per year, up to $2,000


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MCC Mechanics

• The MCC is issued to the home buyer/owner, who receives a tax credit each year • The tax credit is equal to the mortgage interest paid times and the

“Certificate Credit Rate” which is set by the administering agency between 10 and 50 percent

• The home owner must file the appropriate IRS form each year to claim the credit


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There are other factors that will impact the size of the homeowner’s tax credits…

•Certificate Credit Rate

•Mortgage Size

•Interest Rate


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Maryland’s MCC Program

• Called Maryland HomeCredit

• Started June 1, 2014

• Maryland’s Certificate Credit Rate = 25%

• Best savings for borrower is to couple with DHCD’s Maryland Mortgage Program (MMP)

• Tied to MMP: $450 DHCD Fee plus $350 Lender Fee

• MCC Only: $1,100 DHCD Fee plus $700 Lender Fee


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A sample MCC calculation


Mortgage Amount $200,000

Interest Rate 4.25%

Interest Paid $8,435

MCC Credit Rate 25%

Eligible Credit Amount $2,000

Itemized Deduction Amount $6,435

The Value of a Maryland HomeCredit


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Maryland HomeCredit Calculations


An Excel spreadsheet is used to estimate benefit to individual borrowers:

Mortgage Credit Certificate (MCC): Homeowner Benefit Schedule 4.250% 4.625% 4.875%

MMP Loan Type Use Drop down box if this a Maryland Mortgage Program (MMP) loan. If not, leave the mortgage type blank.

Mortgage Interest Rate 4.500% Enter Mortgage Interest Rate (preferred)(if this is a MMP Loan and a loan type is entered above; the rate can be blank and spreadsheet will default to a rate)

1st Mortgage Amount $175,000 Enter the expected First Mortgage amount

1st Mortgage Payment Date Enter the expected First Payment Date on First Mortgage; No entry will default to the beginning of the calendar year.

Monthly Principal & Interest Payments $886.70 This is a calculated field in Model based

mortgage amount and interest rate entered

MCC Credit Rate Applied to the Eligible Mortgage 25% This is the MCC Credit Rate being used by the MD

Department of Housing and Community Development (DHCD) ; it is a default in Model. All loans must use this MCC Rate.

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Results for Maryland

•Since start, about 25% of borrowers have utilized the MMP/MCC option

•Steady growth since inception


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Benefits for Borrowers

• Lowers monthly costs of being a homeowner

• Some lenders treat tax credit as income, which could increase borrowing power by about 3%

• If treated as a reduction in mortgage payment, can increase purchase power by almost 10%


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Questions?• Contact:

• Stephen D. Silver, CFO at [email protected]• The Maryland Mortgage Program at 1-800-638-7781


MORTGAGE CREDIT CERTIFICATES (MCC) Financing Future Borrowers: A Panel Discussion 2014 Delaware...

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