PUBLIC NOTICE TO QUALIFIED HOMEBUYERS - MORTGAGE CREDIT CERTIFICATE PROGRAM
PUBLIC NOTICE TO QUALIFIED HOMEBUYERS
SOUTH DAKOTA HOUSING DEVELOPMENT AUTHORITY
MORTGAGE CREDIT CERTIFICATE PROGRAM
The South Dakota Housing Development Authority (“Authority”) is proposing to implement a program (the “MCC Program”) to issue Mortgage Credit Certificates (“MCCs”). An MCC reduces the amount of federal income tax a qualified homeowner pays by providing a non-refundable, federal tax credit during the life of a mortgage loan as long as the homeowner occupies the home as a principal residence. No sooner than 90 days following the posting of this Notice, the Authority intends to issue MCCs to qualified homebuyers purchasing homes in the State of South Dakota (the “State”) according to the guidelines noted below. The total credit authority available under the MCC Program is $12,500,000.
An MCC entitles the homebuyer to an annual federal income tax credit equal to between 10% and 50% of the annual yearly interest paid or accrued on a qualified mortgage loan; provided however, that if the MCC credit rate exceeds 20%, the amount of the tax credit may not exceed $2,000 annually. The amount of the tax credit may not exceed the homeowner’s total federal tax liability for a specified year, but excess MCC tax credits may be carried forward for up to three subsequent tax years. NOTE: Use of an MCC will reduce the deduction for home mortgage interest on the homeowner’s tax return. An MCC expires on the date the mortgage loan relating thereto is paid in full or refinanced and is revoked on the date the residence to which it relates ceases to be the taxpayer’s primary residence. Current federal tax law may require a payment to the federal government of a “recapture” tax if the homeowner sells or otherwise transfers his or her home to someone else within nine years after the MCC is issued. The Authority reserves the right to adjust the MCC credit rate, issue multiple credit rates, or make allocations to specific sectors of the housing industry or to conform to market demand or future tax legislation.
To be eligible for an MCC, an applicant must (1) not have had an ownership interest in a principal residence within the preceding three years, except for qualified homebuyers purchasing homes in federally-designated Targeted Areas and eligible veterans, (2) purchase a new or existing single family home in the State, (3) enter into a new mortgage or home loan, (4) continuously occupy the home as a primary residence within 60 days of its purchase, (5) purchase a home which has a total cost that does not exceed the maximum purchase price limits as established by the Authority (currently $410,000 in non-Targeted Areas and $460,000 in Targeted Areas), (6) have a household income, including all household members 18 years or older, that does not exceed the maximum household income as established by the Authority for each County in in the State, which currently ranges from $103,400 to $119,800 for one‑ or two‑person families in non-Targeted Areas and $124,080 for one‑ or two‑person families in Targeted Areas, and from $118,910 to $137,770 for three‑or‑more‑person families in non-Targeted Areas and $144,760 for one‑ or two‑person families in Targeted Areas, and (7) pay application fees to the lender and/or the Authority, as applicable. The applicant must sign all documents and affidavits which are needed to demonstrate eligibility for an MCC, and the regulations, rulings and interpretations issued by the Internal Revenue Service shall control in the event of a conflict with other requirements. The Authority may adjust and/or waive any fees or change purchase price and income limits for the MCC Program at any time to reflect changes in maximum purchase prices or incomes prescribed by federal law and regulations, housing market conditions, and other factors. The Authority reserves the right to adjust, modify or amend the MCC Program guidelines at its sole discretion and without further notice.
Until the total credit authority is exhausted, a qualifying homebuyer may obtain an MCC in connection with obtaining financing relating to the purchase of an eligible residence from any participating lender. The applicant must meet the credit and underwriting criteria established by the participating lender which provides the mortgage loan. MCC applications will be accepted on a first come, first served basis; however, for the first year of the MCC Program, 20% will be targeted to persons purchasing single family homes in Targeted Areas. MCCs cannot be used with any mortgage loans subsidized or otherwise financed by mortgage revenue bonds or other tax-exempt obligations, including bonds of the Authority.
Banks, savings and loan associations, credit unions, mortgage companies and other financing institutions and individuals are invited to participate as lenders. The Authority will make a list of participating lenders available to the public upon request. An applicant may also obtain a loan from a lender not on such list if the lender agrees to participate in the MCC Program. Any lender who wishes to participate will be required to sign a participation agreement, which outlines the lender’s loan review and reporting responsibilities. The Authority may collect a participation fee to participate in the MCC Program. There is no allocation of MCCs by lender.
For more information on the MCC Program or for a copy of the participating list of lenders, contact the South Dakota Housing Development Authority, 3060 East Elizabeth Street, Pierre, South Dakota 57501 or call (605) 773-3181.