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Clarification of FHA's Policy When Using an MCC to Qualify
This is a reminder that a CalHFA Mortgage Credit Certificate may not be used to offset the borrower's PITI, but can be added as income.
FHA's underwriting policy, found in its Single Family Handbook 4000.1 and as described in CalHFA's Master Servicer's recent bulletin (Lakeview Loan Servicing Bulletin H2017-02), states that a Mortgage Credit Certificate may only be used to offset the borrower's PITI payment if the government entity issuing the certificate is subsidizing the borrower's payment to the servicer either directly or through a tax rebate. CalHFA does not subsidize the borrower's payment to its servicer (Lakeview Loan Servicing), so the MCC may only be added as income.
Loans submitted to CalHFA for program compliance where an MCC has been used to offset PITI will be suspended, and the loan must be re-underwritten using the MCC as income. Lenders should review all loans which have been underwritten using an MCC to ensure they comply with FHA's policy.
Thank you for your continued partnership with CalHFA.
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