Qualified Mortgage Bond Interest Exclusion

§ 143. Mortgage revenue bonds: qualified mortgage bond and qualified veterans’ mortgage bond(a) Qualified mortgage bond(1) Qualified mortgage bond definedFor purposes of this title, the term “qualified mortgage bond” means a bond which is issued as part of a qualified mortgage issue. (2) Qualified mortgage issue defined(A) DefinitionFor purposes of this title, the term “qualified mortgage issue” means an issue by a State or political subdivision thereof of 1 or more bonds, but only if—(i) all proceeds of such issue (exclusive of issuance costs and a reasonably required reserve) are to be used to finance owner-occupied residences, (ii) such issue meets the requirements of subsections (c), (d), (e), (f), (g), (h), (i), and (m)(7), (iii) such issue does not meet the private business tests of paragraphs (1) and (2) of section 141(b), and (iv) except as provided in subparagraph (D)(ii), repayments of principal on financing provided by the issue are used not later than the close of the 1st semiannual period beginning after the date the prepayment (or complete repayment) is received to redeem bonds which are part of such issue. Clause (iv) shall not apply to amounts received within 10 years after the date of issuance of the issue (or, in the case of refunding bond, the date of issuance of the original bond). (B) Good faith effort to comply with mortgage eligibility requirementsAn issue which fails to meet 1 or more of the requirements of subsections (c), (d), (e), (f), and (i) shall be treated as meeting such requirements if—(i) the issuer in good faith attempted to meet all such requirements before the mortgages were executed, (ii) 95 percent or more of the proceeds devoted to owner-financing was devoted to residences with respect to which (at the time the mortgages were executed) all such requirements were met, and (iii) any failure to meet the requirements of such subsections is corrected within a reasonable period after such failure is first discovered. (C) Good faith effort to comply with other requirementsAn issue which fails to meet 1 or more of the requirements of subsections (g), (h), and (m)(7) shall be treated as meeting such requirements if—(i) the issuer in good faith attempted to meet all such requirements, and (ii) any failure to meet such requirements is due to inadvertent error after taking reasonable steps to comply with such requirements.