IRS Updates Safe Harbor Rules for 2024 Mortgage Loan Pricing
The Internal Revenue Service (IRS) has released Revenue Procedure 2024-21, effective April 16, 2024, updating safe harbor numbers for average area purchase prices in mortgage loans financed with tax-exempt bonds or mortgage credit certificates (MCCs). These changes will impact issuers and homebuyers alike.
The new U.S. national average purchase price is $510,100, used in calculating the high housing cost adjustment to income limits. Issuers can choose to use either the current FHA loan limits divided by 0.878 or the newer FHA loan limits divided by 0.878 for safe harbor numbers.
The IRS is also reviewing its methodology for calculating safe harbor numbers. It is considering using HUD data or alternative data and has invited public comments on the proposed changes. The Revenue Procedure sets forth average area purchase prices for most statistical areas, with a safe harbor for areas not listed. To calculate the purchase price limit, issuers must multiply the average area purchase price by 0.9 (or 1.1 for targeted area loans).
Transition rules allow issuers to use last year's safe harbor numbers for mortgage loans with commitments made before June 15, 2024, if bonds are sold or MCC programs are established before May 16, 2024.
The new average area purchase prices and U.S. average purchase price are effective for mortgage loans committed or made on or after April 16, 2024. Issuers should familiarize themselves with the new rules and consider the potential changes in safe harbor number calculation methodology. These updates aim to ensure accurate and fair determination of average prices for real estate purchases related to mortgages.
