Q. What is a Mortgage Revenue Bond Program?
A. It is a program sponsored by governmental housing agencies that help make loans to qualified borrowers for purchase of owner occupied single family residences. The program provides low-interest rate home loans for eligible families and individuals through the sale of tax-exempt mortgage revenue bonds. These programs are also accompanied with additional funds for use by the qualified borrower to help them with their down-payment and closing costs.
Q. Who is eligible for a Mortgage Revenue Bond Program?
A. Homebuyers who have not owned a home in the last three years and meet income guidelines are eligible to apply for the loan under a mortgage revenue bond program.
Q. Is a mortgage revenue bond program only for first-time homebuyers?
A. No. If a borrower has not owned a principal residence for the past three years, you may be eligible to utilize the program. If a borrower has owned a principal residence in the past three years, they may still be eligible to utilize the program if the home purchased is in a designated “target” area.
Q. Why are copies of tax returns from the past three years required when applying for a bond program?
A. The federal tax code that authorizes Tax-Exempt Bond Programs prescribes that borrowers must submit copies of their tax returns so that the Compliance Agent can verify that no deduction has been taken for mortgage interest in the past three years. CitiMortgage, Inc., when acting as Compliance Agent for a bond program, must perform this review of the borrower’s tax returns and verify that they have not treated mortgage interest as a deduction.
Q. Does the acquisition cost, mentioned in the bond program Affidavit, mean the sales price or the loan amount?
A. Acquisition cost is considered to be the sales price. In the case of a loan used to finance a newly constructed property, it is defined as the construction cost of the dwelling, plus the value of the applicable land, if acquired within the last 24 months.
Q. What type of home can be purchased?
A. Any new or existing home meeting FHA, VA, USDA-RD, Fannie Mae or Freddie Mac guidelines, as applicable, that is located anywhere within the Eligible Loan Area of the program and does not exceed the maximum purchase price limits of the program.
Q. If a married couple intends to occupy the property, but only one borrower executes the Note, would we require the disclosure of both incomes from the couple, in order to determine their qualification for the bond program?
A. Yes, the income of all persons planning to occupy the property, who are over 18 years of age, must be included to determine loan eligibility under program guidelines.
Q. Why must a borrower submit all pay stub information covering a period of time within 60 days of the loan closing date, even if the underwriter has not requested them?
A. In order for us to verify bond compliance income for the loan, we need to calculate current income for all borrowers. Most bond programs stipulate that the borrower must disclose this pay information for the period of time within 60 days of the loan closing date.
Q. Does CitiMortgage, Inc. underwrite bond program loans?
A. All lenders in our bond programs who have received delegated underwriting authority are required to serve as full-service originators, and the underwriting responsibilities are strictly delegated to them. Our review is generally for tax code and program compliance purposes and we would not underwrite or re-underwrite the loan. Lenders who are not granted delegated underwriting authority may submit files to CitiMortgage, Inc. for underwriting or may use Automated Underwriting Systems and/or MI Company contract underwriting, as applicable.
Q. Where do we send our final loan documents?
A. After CitiMortgage, Inc. purchases a loan from the Correspondent, all final recorded documents and the final title polices must be sent when received ( but no later than 120 days after purchase) to:
| Express Mail: | Phone Number: |
| CitiMortgage, Inc. | 800-967-2205 option 1, 0, 1 |
| 1000 Technology Drive | |
| MS 321 Document Processing | |
| O'Fallon, MO 63368-2240 |
Q. How can I obtain a copy of my purchase confirmation?
A. Please contact our Correspondent Special Programs Division listed on our Contact List, or call 1-800-967-2205. When communicating with our Correspondent Special Programs Division by e-mail or voice-mail message, please provide as much information as possible, for example, the CitiMortgage, Inc. loan number; borrower name; lender name; and the fax number where we can send you the purchase confirmation.
Q. To whom do we send the loan files?
A. We request that the files be sent to us at the following address:
CitiMortgage, Inc.
Correspondent - Special Programs/TVLB
Mail Code: N3B-345
4000 Regent Blvd. , 3rd Floor
Irving, TX 75063
We also recommend that you use a mailing company, which tracks and guarantees the delivery.
Q. What is the Federal Recapture Tax?
A. It's a federal tax that some borrowers with a mortgage revenue bond program home loan may be required to pay from the net profit they receive from the sale of their home. If the borrower is subject to recapture tax, it would be due when they file their federal income tax for the year in which they sell their home. The maximum tax is limited to the lesser of 6.25 percent of the original loan amount or 50% on the gain on the sale of the home.
Q. Is this tax dependent on the profit made when the borrower sells their home?
A. There must be a profit before any tax is due. However, the borrowers may have a profit and no tax will be due if their income does not exceed the allowable income in the year of the sale.
Q. What do you mean by “exceeding the allowable income?”
A. Federal maximum income limits apply to the borrower at the time of purchase of their home. Certain regulations automatically increase these maximums at the rate of five percent per year for recapture tax purposes. If at the time the borrower purchases a home their income is near the federal maximum, annual income increases would have to exceed five percent per year before they would be subject to any recapture tax. If the borrower’s income is considerably below the federal maximum at the time of home purchase, their income can increase at a greater rate before they would be subject to the recapture tax.
Q. How can a borrower determine if they will have to pay a recapture tax?
A. There is no way to predict the exact recapture tax liability, if any, since it is based upon the situation when the home is sold. At any time, it will depend on income, family size, and the amount of net profit realized from the sale of the home.
Q. When the borrower sells the home, how will they determine if they are subject to recapture tax, and how will they know the amount of the tax?
A. Lenders should provide the borrower with a recapture tax form and the allowable federal income limits, which will help them determine their tax later when they sell the house. IRS Form 8828, "Recapture of Federal Mortgage Subsidy", and Publication 551, "Basis of Assets" are available from the Internal Revenue Service to assist you.
Q. If the borrower is subject to recapture tax, is there any way to reduce or minimize the tax?
A. Yes. If the property is sold within the first year of purchase, the maximum amount of recapture tax due, depending on borrower income and net profit on the sale, amounts to 1.25 percent of the original mortgage amount. This percentage increases by 1.25 percent each year through year five (maximum of 6.25 percent) and then decreases by 1.25 percent each year until it is completely eliminated after year nine. This means that if the borrower were subject to the recapture tax, they could reduce or eliminate the tax altogether by timing when the home is sold.
