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.
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