1. CalHFA sponsored (MCC) MORTGAGE CREDIT CERTIFICATE Increase your disposable income. Increase your buying power. Decrease your tax liability 1 6/12/2016

2. What is an MCC and what are the Benefits? The MCC is a federal income tax credit reducing the borrower potential federal income tax liability. This creates more spendable income which the borrower may use toward their monthly mortgage payment. This enables first-time homebuyers to convert 20% of their annual mortgage interest into a direct income tax credit on their income tax return for the life of the loan. According to the IRS, a first-time home buyer is any individual who had no present ownership interest in a qualifying principal residence during the three-year period ending on the date of purchase of the principal residence.home 6/12/2016 2

3. CalHFA MCC Borrower Eligibility Each CalHFA MCC Tax Credit Applicant must be a US citizen or permanent resident alien. All CalHFA MCC Tax Credit Applicants must meet the credit, income and loan requirements of the CalHFA MCC Tax Credit program handbook, the Lender, and the mortgage insurer/guarantor. 6/12/2016 3

4. CalHFA MCC Tax Credit Program 2014 Exception to a 1 st time homebuyer Home is located in a Targeted Area - A targeted area has been identified as an area where 70% of the families have an income which is 80% or less than the statewide median income. Qualified Veteran – defined as a person who served in the active military, naval or air service and was discharged or released under conditions other than dishonorable. 6/12/2016 4

5. What products can I use with the MCC? *FHA *Conventional *SAPPHIRE *USDA (coming soon to Essex) **CHDAP 2 ND *Tax Credit can help with qualifying –  The tax credit can be used as income to qualify. Or, if DU allows, it can be used to offset debt. ** A tax credit allowed, but not for credit qualifying purposes. 6/12/2016 5

6. Example of Monthly Savings 6/12/2016 6

7. CalHFA MCC Program Things to considered: Sales Price Limits - see CalHFA sales price charts Income Limits – see CalHFA MCC income charts Ownership status – 3 years tax returns will be required. No homeownership training classes required of the borrower. $350.00 fee collected at closing. 6/12/2016 7

8. It starts here…. The applicant applies for a loan with Broker. Broker determines if the Applicant is a possible candidate for a CalHFA MCC Tax Credit based on income, acquisition costs, prior ownership and tax liability. Buyer and seller sign and execute purchase and sale agreement. Broker provides proper paperwork to Lender (later listed in this PowerPoint). Essex will require 3 year tax returns, or Affidavit due to low income and no returns filed. Essex will reserve the funds for 90 days at time docs are drawn. Expired funds are subject to availability of MCC funds. Essex reviews all documentation and provides MCC Certificate after closing. Essex closes the loan and submits to CalHFA after closing Essex does not need to submit paperwork to CalHFA prior to our closing, allowing for a quick close. 6/12/2016 8

9. Where to find MCC Forms 6/12/2016 9

10. Required CalHFA MCC Forms at Submission Notice to Borrower of Potential Recapture Tax Tax Credit Certification of No Income (if applicable) Statement of Citizenship, Alienage, and Immigrations Status MCC Tax Credit Tax Return Affidavit Note: Any other required MCC forms will be sent out at time of docs for signature. 6/12/2016 10

11. Lender vs. CALHFA Review of Income 6/12/2016 11

12. Notes of Interest on how CalHFA calculates maximum household income for family or anyone who is living in the house – not just borrowers. Schedule C or E Income – do not add back in depreciation. Negative is a wash, not deducted. Do not back out 2106 expenses. 2013 and YTD income (no 2012 income is reviewed since we are in 2014). P&L’s are okay for 2014. In question, CalHFA will always take the higher income. Child Support Payments Social Security Benefits Welfare Payments Spousal support Sick pay Disability payments Deferred income Any regularly occurring additional income including but not limited to earnings 6/12/2016 12

13. CalHFA MCC Property Eligibility 6/12/2016 13

14. ELIGIBLE COUNTIES – All Counties In California! 14 6/12/2016

15. CalHFA Sales Price Limits 6/12/2016 15

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17. CalHFA Sales Price Limits 6/12/2016 17

18. CalHFA Sales Price Limits 6/12/2016 18

19. HTTP://WWW.CALHFA.CA.GOV/HOMEOWNER SHIP/FDTA/TARGET-AREA.PDF TO ASSIST YOU IN FINDING MAPS OF FEDERALLY DESIGNATED TARGETED AREAS WITHIN EACH COUNTY, CLICK ON THE CENSUS TRACT CODES OF EACH FEDERALLY DESIGNATED TARGETED AREA. IF YOU HAVE A STREET ADDRESS, YOU AN FIND THE CENSUS TRACT NUMBER IN WHICH THE PROPERTY IS LOCATED TO COMPARE WITH THE LIST ABOVE BY VISITING FFIEC WEB SITE How to determine if a target area? 6/12/2016 19

20. CHDAP MCC INCOME LIMITS 6/12/2016 20

21. CalHFA MCC INCOME LIMITS 6/12/2016 21

22. CalHFA MCC INCOME LIMITS 6/12/2016 22

23. CalHFA MCC INCOME LIMITS 6/12/2016 23