Section 25 of the Internal Revenue Code authorizes “issuers” to issue Mortgage Credit Certificates (“MCC”) in lieu of qualified mortgage bonds. The State of Hawaii’s Hawaii Housing Finance and Development Corporation (“HHFDC”) is an issuer of MCCs.

The MCC Program provides homeownership opportunities for qualified households through a federal income tax credit. The MCC can help first-time homebuyers qualify for a mortgage loan by increasing their buying power at their current income. MCCs entitle an eligible borrower to a direct tax credit against the eligible borrower’s federal income tax liability, making more income available both to qualify for a mortgage loan and to make the monthly mortgage payments.

The MCC can be applied to most types of mortgage loans for new or existing single family dwellings, including townhouse/condominium and manufactured homes.

MCC ELIGIBILITY REQUIREMENTS:

Borrowers interested in participating in the HHFDC’s Mortgage Credit Certificate Program must meet the following eligibility requirements/criteria:

1. Residence Requirement: The borrower must use the residence as the borrower’s principal residence within a reasonable time (thirty days) after loan closing and the borrower must notify the HHFDC or Participating Lender if the residence ceases to be the borrower’s principal residence.

2. 3-Year Requirement: The borrower cannot have had any ownership interest in a principal residence at any time during the preceding three year period prior to the date on which the mortgage on the residence in connection with which an MCC is provided is executed. The 3- year no prior ownership requirement does not apply to loans made in targeted areas as defined under the Program.

3. Purchase Price Requirement: The acquisition cost of the residence cannot exceed the following:

County New Construction or Existing

Honolulu $644,429
Hawaii $556,875
Maui $644,429
Kauai $644,429

The above limits apply only to fee simple, fully completed units. Leasehold residences and uncompleted units are subject to certain adjustments in determining their “acquisition cost” as defined by the Internal Revenue Service. The purchase price requirement may be (1) increased by the HHFDC for mortgage loans made in targeted areas; or (2) increased or decreased by the HHFDC pursuant to Internal Revenue Service guidelines.

4. Income Limits: Borrowers must not have income that exceeds the following limits:

Families of Families of
County less than 3 3 or more

Honolulu $92,760 $108,220
Hawaii $76,080 $88,760
Maui $87,360 $101,920
Kauai $80,160 $93,520

The income limits may be (1) increased by the HHFDC for mortgage loans in targeted areas; or (2) increased or decreased by the HHFDC pursuant to Internal Revenue Service Guidelines.

5. New Mortgage Requirement: A MCC cannot be issued in conjunction with the acquisition, replacement or refinancing of an existing mortgage. However, the MCCs can be used in conjunction with the replacement of construction period loans, bridge loans, or similar financing of a temporary nature with a term of twenty-four (24) months or less. A MCC must be issued to a borrower who did not have a mortgage on the residence with respect to which the MCC is issued at any time prior to the execution of the mortgage.

6. Prohibited Mortgages: A MCC cannot be issued in connection with the acquisition of a residence for which the financing of the residence is provided from the proceeds of (1) a qualified mortgage bond or (2) a qualified veterans’ mortgage bond.

7. Interest Paid to Related Persons: Interest on the amount of the indebtedness, which is incurred by the borrower to acquire the borrower’s residence, must not be paid to a related person.

METHODS BY WHICH MCCS ARE ISSUED:

The MCC is applied for at the time the borrower makes a formal application for a home loan. Borrowers may apply for a loan with any lender but MCCs are only available through Participating Lenders and issued on a first-come, first-served basis. Current Participating Lenders are as follows:

Advantage Mortgage, Inc. MetLife Bank NA
American Savings Bank HawaiiUSA Federal Credit Union
Bank of Hawaii Homestreet Bank
Central Pacific HomeLoans, Inc. House of Finance, Inc.
Colorado Federal Savings Bank Island Mortgage, LLC
CUSO of Hawaii Services, LLC Point Financial, Inc.
First Hawaiian Bank Wells Fargo Home Mortgage of Hawaii, LLC

The lender providing the financing can establish the interest rate, loan term, down payment requirement, credit and underwriting criteria, loan type, mortgage insurance requirement, fees, points, closing costs and all other loan terms. MCCs can be used in conjunction with conventional fixed rate loans, variable rate loans, FHA and VA loans and privately insured loans.

Borrowers who are interested in obtaining a MCC may contact any participating lender listed above. For further information, the borrower may call the HHFDC at (808) 587-0567, visit our website at www.hawaii.gov/dbedt/hhfdc or write to us at:

Hawaii Housing Finance and Development Corporation
677 Queen Street, Suite 300
Honolulu, Hawaii 96813
Attention: Finance Branch

Please be advised that the HHFDC does not provide tax advice. Should you have any questions about how your taxes will be affected as a result of participating in the MCC Program, please consult with your tax accountant or the IRS.

HHFDC does not discriminate against any person because of race, color, religion, sex, including gender identity or expression, sexual orientation, disability, familial status, ancestry, age, marital status, or HIV infection.

If you require special needs/auxiliary aids (i.e. large print, taped materials, sign language interpreter, etc.) call Sherrie Kagawa at (808)587-0567.