CHFA Eliminates Federal Recapture Tax On All CHFA Mortgages. One of the negative features of a Connecticut Housing Finance Authority (CHFA) Mortgage has always been the Federal Recapture Tax Provision on CHFA Loans. This Provision has been pointed to by many Brokers and Lenders who are NOT approved to do CHFA Mortgages, as a reason for Borrowers to NOT do a CHFA Mortgage, even though I cannot ever remember this Provision ever being enforced on a CHFA Mortgage.
The reason why I have never seen the Federal Recapture Tax be enforced on a CHFA Mortgage is because the three requirement for it to be imposed on a loan never happen at the same time, and all three, NOT just one or two have to happen in order for the Recapture Tax to be imposed. Those three requirements are:
- The house is sold or disposed of within nine (9) years of being purchased, for reasons other than death.
- There is a capital gain on the sale of the home.
- The household income exceeds Federal Recapture Tax limits at the time of the sale.
If ALL three of these requirements do not happen at the time of the sale of the property, the Federal Recapture Tax does not apply.
Well CHFA has finally come to this realization that the rest of us have known for a long time, and has decided to do away with the Federal Recapture Tax for All CHFA Mortgages, by reimbursing ALL CHFA Borrowers who are subject to Federal Recapture Tax payments on loans that Closed on or after March 18, 2013.
The following CHFA forms pertaining to the Federal Recapture Tax have been revised and are available on the CHFA Website:
- Form #051-0597 - Connecticut Housing Finance Authority Notice of Potential
- Recapture Tax Form #052-1195 – Notice to Mortgagor of Maximum Recapture Tax and Method to Compute
Recapture Tax on Sale of Home
CHFA agreeing to reimburse ALL CHFA Borrowers who are subject to Federal Recapture Tax payments on loans that Closed on or after March 18, 2013, is really not that much of a risk for them. As I stated above, I do not know of a Borrower that ever had to pay a Federal Recapture Tax on a CHFA Mortgage. But it eliminates the scare tactic used by Brokers and Lenders who are NOT approved to do CHFA Mortgages, as a reason for Borrowers to NOT do a CHFA Mortgage. I guess now now Brokers and Lenders who are NOT approved to do CHFA Mortgages, will have to come up with a new scare tactic for Borrowers to not do CHFA Loans.
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Info about the author:
George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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