Affordable Housing Bond Enhancement Act
Mortgage Revenue Bonds and Mortgage Credit Certificates historically have been state housing finance agencies’ primary means of financing affordable homeownership loans for working families, having helped nearly four million home buyers combined. Still, these programs have the potential to do so much more.
Mortgage Revenue Bonds (MRBs) are a type of municipal bond used by state housing finance agencies (HFAs) to finance low-interest mortgages for low- and moderate-income home buyers. Investors are willing to accept a lower rate of return for Housing Bonds than they would get on other investments because the interest on the bonds is exempt from federal income tax. The lower rate is then passed on to lower the interest rate paid by lower-income home buyers. MRBs have made first-time homeownership possible for more than 3.4 million lower-income families, historically 100,000 every year.
MRB mortgages are restricted to first-time home buyers who earn no more than the area median income (AMI). Larger families can earn up to 115 percent of AMI. In 2021, state HFAs provided MRB mortgages to families with an average income of $50,744, just 63 percent of the national median income.
HFAs also use their MRB authority to issue Mortgage Credit Certificates (MCCs), which provide a nonrefundable federal income tax credit for part of the mortgage interest qualified home buyers pay each year. State HFAs have used MCCs to provide critical tax relief to more than 386,000 families.
Affordable Housing Bond Enhancement Act: 2023 Introduction and Next Steps
On June 6, 2023, Senators Catherine Cortez Masto (D-NV) and Bill Cassidy (R-LA) introduced the Affordable Housing Bond Enhancement Act (S. 1805). The bill would implement several simple but impactful changes to MRBs and MCCs that would expand the supply of affordable homes and improve access to homeownership for low- and moderate-income home buyers.
Some of the changes in the bill include:
- Increasing the MRB home improvement loan limit
- Allowing MRBs to be used for refinancing loans
- Providing HFAs additional flexibility in how they utilize Housing Bond authority
- Simplifying how a borrower’s MCC benefit is calculated
- Reducing the time period for the MRB and MCC recapture tax from nine years to five
- Extending the amount of time HFAs can use converted MCC authority from two years to four
- Allowing HFAs to reconvert MCC authority back into MRBs two years after the conversion, rather than one
Help NCSHA build cosponsorship support for this critical legislation: Below are links to advocacy materials you can use to make your case to your members of Congress.
This bipartisan legislation is endorsed by the National Association of REALTORS, National Association of Home Builders, Mortgage Bankers Association, and LISC.
Read the Section-by-Section Analysis
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