SERVICE MODIFIES REV. PROC. REGARDING MORTGAGE REVENUE BONDS.

Rev. Proc. 90-24

SECTION 1. PURPOSE

Section 3.05 of Rev. Proc. 89-59, 1989-45 I.R.B. 27, states which average area purchase price safe harbor limitations apply if a residence is in a metropolitan statistical area (MSA) or primary metropolitan statistical area (PMSA) that contains more than one state and that is listed in section 4 of that revenue procedure under a state that is different from the state in which the residence is located. That section does not make clear, however, which safe harbor limitation applies if one category of residence (new or existing) is omitted because of insufficient data.

Section 4 of Rev. proc. 89-59 includes a footnote that also does not indicate which state safe harbor limitation is to be used if one category of residence (new or existing) is omitted and the residence at issue is in an MSA or PMSA that contains more than one state and that is listed under a state that is different from the state in which the residence is actually located.

Rev. Proc. 89-59, Section 6.01 and 6.03, contains an error in the effective dates for the use of the new national average purchase prices and the average area purchase price safe harbor limitations.

SEC. 2. MODIFICATIONS OF REV. PROC. 89-59

01 Section 3.05 of Rev. proc. 89-59 is modified to read as follows:

05 If a residence is in an MSA or PMSA, the safe harbor limitation applicable to it is the limitation of that MSA or PMSA. In particular, if the residence is in an MSA or PMSA that contains more than one state and that is listed in section 4 under a state that is different from the state in which the residence is located, then the safe harbor limitation applicable to that residence is the limitation provided for the MSA or PMSA and not the limitation provided for all other areas in the state in which the residence is located. If sufficient data are not available for the applicable category of residence (new or existing) in the MSA or PMSA, however, then the safe harbor limitation for "all areas" or "all other areas" of the state in which the residence is actually located is used for the omitted category.

02 All of the footnotes in section 4 of Rev. Proc. 89-59 are modified to read as follows:

"*Not available. The safe harbor limitation for all areas or all other areas of the state in which the residence is actually located may be used."

03 Section 6.01 of Rev. proc. 89-59 is modified to read as follows:

01 Issuers of qualified mortgage bonds and mortgage credit certificates must use the national and average area purchase price limitations contained in this revenue procedure when computing the housing cost/income ratio under section 143(f)(5) of the Code for commitments to provide financing that are made, or (if the purchase precedes the financing commitment) for residences that are purchased, in the period beginning on November 6, 1989, the date of publication of this revenue procedure in the Internal Revenue Bulletin, and ending on the date as of which such national and average area purchase prices are rendered obsolete by a new revenue procedure. If an issuer computes different average area purchase price limitations based on more accurate and comprehensive data, the issuer must use data from a 12-month period that does not begin earlier than December 1, 1987, or end later than November 30, 1989, for purposes of computing the housing cost/income ratio.

04 Section 6.03 of Rev. Proc. 89-59 is modified to read as follows:

03 Issuers of qualified mortgage bonds and mortgage credit certificates may rely on the average area purchase price safe harbor limitations contained in this revenue procedure for the purpose of satisfying the purchase price requirement for commitments to provide financing that are made, or (if the purchase precedes the financing commitment) for residences that are purchased, in the period beginning on November 6, 1989, and ending on the date as of which such safe harbor limitations are rendered obsolete by a new revenue procedure.

05 Section 6 is modified by adding subsection .07 that reads as follows:

07 Issuers of qualified mortgage bonds and mortgage credit certificates may continue to rely on an average area purchase price safe harbor limitation for an omitted category of residence (new or existing) based on a figure for "all areas" or "all other areas" of the state under which the MSA or PMSA is listed (even though the residence is not actually located in that state) for commitments to provide financing that are made, or (if the purchase precedes the financing commitment) for residences that are purchased before May 1, 1990.

SEC. 3. EFFECT ON OTHER DOCUMENTS

Rev. Proc. 89-59 is modified. Section 3.03 of Rev. proc. 89-32, 1989-1 C.B. 904, is obsolete.

PERSON TO CONTACT

For further information regarding this revenue procedure contact Gene Overton on (202) 566-4310 (not a toll-free call).