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INNOVATIVE SOLUTIONS. PROVEN RESULTS. COLUMBIA

Columbia Capital played a substantial role in developing and implementing a new and innovative program with the Missouri Housing Development Commission (MHDC) that leveraged federal tax credits to provide down payment assistance for first-time homebuyers. Through this program, qualified participants were able to borrow against the unprecedented first-time homebuyer federal income tax credit (created in 2008) on a short-term basis to assist with down payment and closing costs. (The credit otherwise, for most buyers, did not have value at closing—the homebuyer would receive it as part of his/her Federal tax refund.)

This innovative program advanced funds on behalf of MHDC and secured them with a second mortgage on the home. Repayments were expected through the federal tax credit and did not bear interest if repaid by June 1, 2010. MHDC purchased any tax credit loans not repaid by a set date from the master servicer. To protect against potential losses on the loans, several processes were implemented by MHDC such as providing clear homebuyer information on the program, pre-determining through a set formula the maximum amount of loan, providing online counseling and adjusting interest rates to account for non-payment risks.

Columbia worked diligently with MHDC, the master servicer and lenders to launch this first-in-the-nation program which allowed MHDC to continue to serve homebuyers during difficult market conditions by providing up-front assistance which might not have been available from other funding sources. MHDC served over 1,200 borrowers under the Tax Credit Advance Loan Program.

This MHDC TCAL program became the model for similar programs by other state housing agencies around the country and underwriting standards developed by MHDC for the TCAL loans were ultimately the same standards adopted by HUD for FHA-insured loans with second mortgages tied to the federal tax credit.

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