Federal Subsidy Recapture

AAA

DEFINITION of 'Federal Subsidy Recapture'

The Federal subsidy recapture is the repayment of all or part of a federal mortgage subsidy if the home is sold or otherwise disposed of within nine years of receiving a federally-subsidized loan. If a home is financed using a federally-subsidized program, all or part of the benefit received from the program may need to by repaid (recaptured) by increasing the federal income tax for the year of the sale.

INVESTOPEDIA EXPLAINS 'Federal Subsidy Recapture'

A federal mortgage subsidy occurs when a homebuyer receives:



  • A mortgage loan that had a lower interest rate than was usually charged because it was funded from a tax-exempt qualified mortgage bond (QMB) issue; or

  • A mortgage credit certificate (MCC) with the mortgage loan that can be used to reduce the homebuyer's federal income taxes; or

  • An assumed seller's obligation on a QMB-funded loan, provided the homebuyer is qualified to obtain a loan from the proceeds of a QMB; or

  • The seller's MCC that is transferred with the approval of the issuer, and the homebuyer meets the eligibility requirements for the MCC.

RELATED TERMS
  1. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually ...
  3. Mortgage Bond

    A bond secured by a mortgage on one or more assets. These bonds ...
  4. Mortgage Revenue Bond - MRB

    A funding source for home mortgages. Mortgage revenue bonds help ...
  5. Mortgage Credit Certificates

    A certificate provided by the originating mortgage lender to ...
  6. Mortgage Subsidy Bond

    One of the few types of municipal bonds ever issued that may ...
Related Articles
  1. Fannie Mae and Freddie Mac, Boon Or ...
    Insurance

    Fannie Mae and Freddie Mac, Boon Or ...

  2. Understanding FHA Home Loans
    Retirement

    Understanding FHA Home Loans

  3. Behind The Scenes Of Your Mortgage
    Insurance

    Behind The Scenes Of Your Mortgage

  4. Insuring Federal Housing Authority Mortgages
    Home & Auto

    Insuring Federal Housing Authority Mortgages

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center