HomeMy WebLinkAboutMINUTES - 12061994 - 1.136 Contra
Costa
BOARD OF SUPERVISORS . f r
TO: � ' '
FROM: Harvey E. Bragdon J County
Director of Community Development C ,;a
DATE: December 6, 1994
SUBJECT: Recommendation to encourage existing underwriting policy for
Mortgage Credit Certificates.
SPECIFIC REQUEST(S) OR RECOMMENDATIONS (S) & BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS
Authorize the Chair of the Board of Supervisors to execute and submit
a letter to the Federal National Mortgage Association to encourage the
existing policy of valuing the credit for underwriting purposes of the
Mortgage Credit Certificate Program.
FISCAL IMPACT
None
BACKGROUND/REASONS FOR RECOMMENDATIONS
The Federal National Mortgage Association is proposing a change in
their current underwriting guidelines for the Mortgage Credit
Certificate (MCC) Program. The proposed change would significantly
reduce the benefit of the Mortgage Credit Certificate Program to
homebuyers in Contra Costa County. This proposed change would, if
implemented, change the effective interest rate reduction of the
Mortgage Credit Certificate Program from the current two points to
about three-quarters of a point. If this underwriting approach is
adopted by the Federal National Mortgage Association, it is likely
that future MCC Recipients will be the more moderate-income households
who do not need the Mortgage Credit Certificate Program to obtain a
mortgage, while lower-income households will no longer qualify.
Since the inception of the Mortgage Credit Certificate Program in
1990, Contra Costa County has issued 'over 1, 200 Mortgage Credit
Certificates to households purchasing homes in the County. The income
ranges of 85% of these households has been at or under 80% of the area
median income.
CONTINUED ON ATTACHMENT: YES SIGNATURE: ,0
RECOMMENDATION OF COUNTY ADMINISTRATOR REDATIO OF BOARD COMM TEE
APPROVE OTHER
7
SIGNATURE(S) :
ACTION OF BOARD ON December 6 , 1994 APPROVED AS RECOMMENDED X OTHER
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A
X UNANIMOUS (ABSENT 2 , 4 ) TRUE AND CORRECT COPY OF AN
AYES: NOES: ACTION TAKEN AND ENTERED ON THE
ABSENT: ABSTAIN: MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Source: Kelly Calhoun
646-4208
ATTESTED December 6 , 1994
Orig. Dept. Community Development PHIL BATCHELOR, CLERK OF
cc: County Administrator THE BOARD OF SUPERVISORS
1KC3/jb/undrite..MCC AND COUNTY ADMINISTRATOR
BY ° , DEPUTY
Phil
The Board of Supervisors Contra Clerk ooffthe Board
Costa and
County Administration Building County Administrator
651 Pine Street, Room 106 ' I (510)646-2371
Martinez, California 94553-1293 County
Tom Powers,1 st District
s
Jeff Smith,2nd District ?E_•_••• oma,
Gayle Bishop,3rd District
Mark DeSaulnier,4th District
Tom Torlakson,5th District
ST'9 C01J21'�
December 6, 1994
Mr. Larry Dale
Federal National Mortgage Association
3900 Wisconsin Avenue N. W.
Washington, DC 20016-2899
Dear Mr. Dale:
We have learned from lenders and mortgage insurers participating in our Mortgage Credit Certificate
(MCC) Program that Fannie Mae plans to change the way in which MCC loans are underwritten.
Specifically, we understand that the amount of the credit will no longer be added to the principal and
interest (PITI) payment but, instead will simply be considered as additional income. We believe that this
will undermine the County of Contra Costa's efforts to encourage homeownership.
The MCC Program has been successful in California, particularly in high cost areas due precisely to
Fannie Mae's current approach to valuing the credit. Many homebuyers have been able to purchase homes
that would not have been able to do so otherwise. In addition, Contra Costa County has combined the
MCC Program with the Silent Second Mortgage Program to fiuther encourage homeownership, especially
in lower income and minority communities.
FHA already treats the credit in the way Fannie Mae proposes, and lenders attending our training sessions
often point out that they will not process an MCC with an FHA mortgage because there is little if any
benefit to the homebuyer. The effect of the Fannie Mae approach is an effective interest rate reduction
of two points; the new approach will be about three-quarters of a point. If the new approach is
implemented, it is likely that future MCC recipients will be the more moderate income households who
do not need the MCC to obtain a mortgage, while lower income households will no longer qualify.
Contra Costa County believes that this proposed underwriting change will have critical effects which may
jeopardize our commitment to affordable housing.
Sincerely,
Tom Powers, Chair
Board of Supervisors
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CC 119.3(Axq