12-13-2011 CC RPT 37 - Laserfiche WebLink

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City Council Memorandum TO: HONORABLE MAYOR AND CITY COUNCILDATE: December 13, 2011 FROM: DEVELOPMENT DEPARTMENT ITEM NO: WARD: ALL SUBJECT: RESOLUTION AUTHORIZING THE CITY OF RIVERSIDE TO PARTICIPATE IN THE COUNTY OF RIVERSIDE MORTGAGE CREDIT CERTIFICATE PROGRAM ISSUE: The issue before the City Council is whether to approve the attached Resolution (Exhibit A) that authorizes the City of Riverside to participate in the County of Riverside Mortgage Credit Certificate (MCC) Program. RECOMMENDATIONS: That the City Council: 1. Adopt the attached Resolution that authorizes the City of Riverside to participate in the County of Riverside Mortgage Credit Certificate Program. 2. Authorize the City Manager, or his designee, to execute any and all documents to implement the City’s participation in the County of Riverside Mortgage Credit Certificate Program. BACKGROUND: The Riverside County Board of Supervisors has authorized the County of Riverside Economic Development Agency (EDA) to apply for an allocation of Mortgage Credit Certificates (MCC) from the California Debt Limit Committee that will be available countywide. The MCC Program provides a 15 percent tax credit that can be applied against the interest paid on a mortgage loan during any given year. For example, if a prospective first-time homebuyer seeks to purchase a home for $250,000 with a 30-year mortgage at a simple 5 percent interest rate, the amount of interest that will be paid during the first year of the loan is $12,500 ($250,000 x 0.05). With a MCC, the borrower can then claim 15 percent of the interest they have paid, or $1,875 ($12,500 x .15), as a tax credit. This tax credit would have the effect of increasing the borrower’s available net income by $156.25 ($1,875/12) per month. When underwriting the loan, the lender will take into consideration this additional net income, thereby helping to ensure that the potential homebuyer will more easily qualify for a loan.