51600.

 The Legislature finds and declares as follows:

(a)  For reasons of prudent investment policy, California’s public and private lending institutions are not making mortgage financing available for certain single- and multifamily residential housing occupied or intended to be occupied by substantial numbers of persons and families of low and moderate income because of the perceived risks these loans entail. The absence of this financing has also caused and contributed to the deterioration of residential neighborhoods, has inhibited government in its attempts to arrest and reverse deterioration through local code enforcement programs, and has generally reduced or limited the supply of safe, decent, and sanitary housing available to persons and families of low and moderate income.

(b)  The absence of financing has resulted in persons and families who are not able to realize financial security through equity accumulation and psychological security through a sense of permanence and control over the direction of their lives, as well as a lack of job creation linked to housing construction or the sale of existing housing.

(c)  The percentage of California residents who own their own homes is considerably lower than the national average.

(d)  All of the factors set forth in subdivisions (a) to (c), inclusive, have hindered the state’s economy and the general well-being of the state’s populace.

(e)  The state has authorized state agencies, local agencies, redevelopment agencies, and housing authorities to provide financing for preservation and construction of residential structures, including single-family and multifamily residential housing, to enhance housing opportunities for persons and families of low or moderate income. However, some of these local public entities will be unable to sell bonds pursuant to that authorization on terms sufficiently favorable to enable them to make loans at less than the market-rate interest because of a lack of adequate bond security.

(f)  Although the agencies are empowered to sell bonds in order to raise funds for housing assistance, they may be unable to market these bonds on terms and at interest rates adequate to enable these agencies to accomplish their purposes.

(g)  For reasons of prudent investment policy, private lending institutions and public agencies are not making mortgage financing available for the rehabilitation of buildings identified by local jurisdictions as being potentially hazardous.

(h)  For reasons of prudent investment policy, private lending institutions and public agencies are not making mortgage financing available for residential housing for low- and moderate-income households in California due to an inadequate supply of reliable, consistent, and affordable mortgage guaranty insurance.

(i)  To provide credit enhancements for the development of new, or the purchase or refinancing of existing, low-income and moderate-income multifamily housing.

51601.

 It is the intent of the Legislature in enacting this part to establish programs of bond and loan insurance for the following purposes:

(a)  To encourage homeownership opportunities for low- and moderate-income rental households and to encourage multifamily residential construction and rehabilitation, all of which will revitalize the state’s economy and provide security for these households.

(b)  To encourage and facilitate the preservation of existing housing and improve housing opportunities by reducing the risk factor for all of the following:

(1)  Loans to persons and families of low and moderate income for housing in older deteriorating areas and neighborhood preservation areas.

(2)  Bonds issued by governmental agencies for the purpose of providing housing for persons and families of low or moderate income.

(3)  Loans to provide housing for persons and families of low or moderate income.

(4)  Privately financed loans for multifamily residential housing that benefits low- and moderate-income households.

(5)  Construction loan loss guarantee assistance for rehabilitation of buildings in need of rehabilitation improvements, where the building has been identified by local jurisdictions as being potentially hazardous.

(c)  To encourage and facilitate housing opportunities for low-income and moderate-income households which might not readily be available in the private market due to, in part, location, type of housing, and income group serviced, provided, however, that the actuarial soundness of the insurance fund not be jeopardized.

(d)  To provide single-family and multifamily residential housing mortgage guaranty insurance.

(e)  To provide single-family and multifamily residential guaranty insurance for construction loans.

(f)  To provide credit enhancements for the development of new, or the purchase or refinancing of existing, low-income and moderate-income housing.

51601.5.

 The Legislature finds and declares the following:

The California Housing Finance Agency, in administering the mortgage guaranty insurance program, as it is currently constituted in law, will adopt a new five-year business plan pursuant to board resolution at the June 9, 1993, meeting of the agency’s board of directors. The business plan will contain all of the financial resources of the agency necessary for this insurance fund to create a mortgage guaranty insurance underwriting capacity for single-family loans at one billion two hundred million dollars ($1,200,000,000) of gross insurance. In order to initiate this program, the agency will provide its 1993 commitment of eighteen million dollars ($18,000,000) as soon as reasonably practicable following the adoption of the June 9, 1993, board resolution. The agency will also commit that it will provide its 1994 pledge of eleven million dollars ($11,000,000) at its January 1994 board of directors meeting. During the five-year time period, the program will result in a significant beneficial economic impact on the state’s economy, particularly on the homebuilding and real estate resale markets. As such, the agency will remain fully committed to implementing the plan, unless the economic and fiscal expectations of the agency fail to materialize so that implementation of the plan, in whole or in part, is no longer possible without jeopardizing the fiscal integrity or the bond rating of the agency.

51602.

 (a)  The agency shall require that occupancy of housing for which a loan is insured pursuant to this part shall be open to all regardless of race, color, sex, marital status, religion, national origin, ancestry, familial status, or disability and that contractors and subcontractors engaged in the construction or rehabilitation of housing funded by a loan insured pursuant to this part shall provide an equal opportunity for employment without discrimination as to race, color, sex, marital status, religion, national origin, ancestry, familial status, or disability.

(b)  A qualified developer shall certify compliance with this section and Section 50955 according to requirements specified by the pertinent criteria of the agency.

51603.

 (a)  Unless the context otherwise requires, the definitions contained in this chapter shall govern the construction of this part. These definitions shall be in addition to definitions set forth in Part 1 (commencing with Section 50000) of this division, except that, where the same term is defined in this chapter and in that part, the definition of the term contained in this chapter shall prevail.

(b)  As used in this part:

(1)  “Approved lending institution” means a qualified mortgage lender approved by the agency for participation in a program of loan insurance, including those successors and assigns of any such institution as are permitted by the agency. “Approved lending institution” shall also include the agency.

(1.5)  “Board” or “board of directors” means the Board of Directors of the California Housing Finance Agency.

(2)  “Bond reserve requirement” means an amount specified by the agency which shall, as of any particular date of computation, be at least equal to the total of both of the following:

(A)  Insurance benefits due and payable as of the date under contracts of bond insurance.

(B)  The percentage, required by the rating agencies or required to adequately provide security for the bonds insured pursuant to this part, of the sum of the aggregate insurance outstanding under contracts of bond insurance and the aggregate amounts to be insured under the agency’s commitments to insure bonds.

(2.5)  “Credit enhancement” means a method of reducing risk for a lender through letters of credit and bond and loan insurance.

(3)  “Executive director” means the Executive Director of the California Housing Finance Agency.

(4)  “Fund” or “insurance fund” means the California Housing Loan Insurance Fund, which is hereby created.

(5)  “Insurance reserve requirement” means an amount established by the agency, which shall, as of any particular date of computation, be at least equal to the total of both of the following:

(A)  Insurance benefits due and payable as of that date pursuant to contracts of loan insurance.

(B)  An amount calculated to equal any required policyholder’s surplus which would be required of a mortgage guaranty insurer under Section 12640.05 of the Insurance Code.

(6)  “Insured loan” means a loan insured pursuant to Chapter 4 (commencing with Section 51650).

(7)  “Loan-to-value limitation” means a limitation on the ratio of the original principal balance of a loan to the appraised value at the time of execution of the contract of insurance, including the estimated costs of repair and rehabilitation and sale, if any, of the property securing it.

(8)  “Mortgage guaranty insurance” means either of the following:

(A)  Insurance against financial loss by reason of nonpayment of principal, interest, and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a first lien or charge on real estate, provided the improvement on the real estate is a residential building or a condominium unit or buildings designed for occupancy by not more than four families.

(B)  Insurance against financial loss by reason of nonpayment of principal, interest, and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a junior lien or charge on real estate, provided the improvement on the real estate is a residential building or a condominium unit or buildings designed for occupancy by not more than four families.

(C)  Insurance against financial loss by reason of nonpayment of principal, interest, and other sums agreed to be paid under the terms of any note or bond or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument constituting a lien or charge on real estate, provided the improvement on the real estate is a building or buildings designed for occupancy by five or more families or designed to be occupied for industrial or commercial purposes.

(9)  “Multifamily residential housing” means an improvement on real estate which is a building or buildings containing five or more residential units.

(10)  “Persons and families of low or moderate income” means “persons and families of low or moderate income” as defined in Section 50093.

(11)  “Qualified developer” means a housing sponsor which is certified by the agency to be qualified according to experience, financial capability, and any other pertinent criteria as the fund may establish to carry out rehabilitation and new construction with loans insured pursuant to this part.

(12)  “Rehabilitated structure” means a residential structure which becomes eligible for an insured acquisition loan by rehabilitation conducted pursuant to rules of the agency, whether or not loan insurance is provided by the agency for that rehabilitation.

(13)  “Single-family residential housing” means an improvement on real estate which is a building or a condominium unit or buildings containing one to four units.

51610.

 (a)  The agency shall, with respect to the implementation of this part, and notwithstanding any other provision of law, have the general powers set forth in Sections 51050 and 51058 and in this part and, in addition, may do any and all things necessary to carry out its purposes and exercise the powers expressly granted by this part.

(b)  The fund shall develop and maintain complete and current statistics and other information with respect to the loan insurance program, including, but not limited to, each of the following:

(1)  Mortgage arrearages, defaults, and foreclosures on insured loans.

(2)  Expenses incurred as a result of those arrearages, defaults, and foreclosures.

(3)  The extent of displacement caused by availability of insured loans.

(c)  The information required by subdivision (b) shall be provided in the agency’s annual report as required by Section 51622.

51611.

 (a)  The California Housing Loan Insurance Fund is hereby created in the State Treasury.

(b)  The California Housing Insurance Fund is hereby renamed the California Housing Loan Insurance Fund. All references in any provision of law to the California Housing Insurance Fund shall be deemed to refer to the California Housing Loan Insurance Fund. Notwithstanding Section 13340 of the Government Code, all money in the insurance fund is hereby continuously appropriated to the agency without regard to fiscal year for the purpose of insuring loans and bonds pursuant to this part and for the purpose of defraying administrative expenses incurred by the agency in operating these programs of loan and bond insurance. All insurance premiums shall be deposited in the insurance fund. Mortgage insurance in force under certificates of insurance by the California Housing Insurance Fund shall continue in force without interruption after the effective date of this act.

(c)  Notwithstanding Chapter 2 (commencing with Section 12850) of Part 2.5 of Division 3 of Title 2 of the Government Code, Article 2 (commencing with Section 13320) of Chapter 3 of Part 3 of Division 3 of Title 2 of the Government Code, or any other provision of law, expenditures of the insurance fund shall not be subject to the supervision or approval of any other officer or division of state government. However, the agency’s budget respecting the insurance fund shall be prepared and reviewed in accordance with Section 50913.

(d)  The agency shall, from time to time, direct the Treasurer to invest moneys in the insurance fund which are not required for its current needs in eligible securities designated by the agency from among those specified in Section 16430 of the Government Code or as otherwise permitted by law. The agency may direct the Treasurer to deposit moneys in the insurance fund in interest-bearing accounts in state or national banks or other financial institutions having principal offices in this state. To the extent permitted by law, the agency may invest moneys in the fund in obligations of financial institutions, as permitted by board resolution. The agency may also require the transfer of moneys in the insurance fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code.

51614.

 (a)  The agency is hereby vested with full power, authority, and jurisdiction over the insurance fund. The agency may perform all acts necessary or convenient in the exercise of any power, authority, or jurisdiction over the insurance fund, either in the administration thereof or in connection with the business administered under this part, as fully and completely as the governing body of a private insurance carrier.

(b)  The agency may create task forces and advisory committees, when appropriate and as the members deem necessary, for the purpose of obtaining advice on issues arising as a result of the agency’s activities under this part. Ex officio members of those task forces and advisory committees may include, but are not limited to, the Insurance Commissioner or his or her designee, the Director of Housing and Community Development or his or her designee, the Director of the Seismic Safety Commission or his or her designee, and the Director of the Office of Emergency Services or his or her designee.

51615.

 Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of; and Article 9 (commencing with Section 11120) of Chapter 1 of, Chapter 3.5 (commencing with Section 11340) of, Chapter 4 (commencing with Section 11370) of, and Chapter 5 (commencing with Section 11500) of, Part 1 of Division 3 of Title 2 of; the Government Code shall not apply to any of the following: the agency’s activities and records relating to establishing rates and premiums; the development of bids for insurance, coinsurance, and reinsurance; or to other matters necessary to maintain the competitiveness of the agency in the mortgage insurance industry.

51616.

 The state shall not be liable beyond the assets of the insurance fund for any obligations in connection therewith.

51618.

 There shall be within the agency a Director of Insurance of the fund, appointed by the Governor and serving at the pleasure of the executive director. The Director of Insurance of the fund shall demonstrate knowledge of, and expertise in, mortgage insurance. The Director of Insurance of the fund shall manage and conduct the business and affairs of the insurance fund under the direction and supervision of the agency, and shall perform any other duties as the executive director prescribes.

51619.

 The agency may delegate to the Director of Insurance of the fund, under the resolutions of the board and subject to the conditions as it from time to time prescribes, any power, function, or duty conferred by law on the agency in connection with the administration, management, and conduct of the business and affairs of the insurance fund. The Director of Insurance may exercise the powers and functions and perform the duties with the same force and effect as the executive director, but subject to his or her approval.

51620.

 In conducting the business and affairs of the insurance fund, the executive director may do any of the following:

(a)  Enter into contracts of insurance.

(b)  Decline to insure any risk in which the minimum requirements of the insurance fund are not complied with, or which is beyond the safe carrying of the insurance fund.

(c)  Reinsure any risk or any part thereof.

(d)  Make rules for the settlement of claims against the insurance fund and determine to whom and through whom the payments are to be made.

(e)  Enter into any contracts or obligations relating to the fund.

(f)  Invest and reinvest the moneys belonging to the fund as provided by this part or Part 3 (commencing with Section 50900).

(g)  Conduct all business and affairs and perform all acts relating to the fund whether or not specifically designated in this part.

51622.

 (a)  The agency may contract with any private person or public agency for review of the administration of this part and for assistance in implementing this part.

(b)  The agency shall prepare an annual report on the condition of the program of loan and bond insurance authorized by this part. The report of the evaluation shall include an evaluation of program effectiveness in relation to cost and shall include recommendations and suggested legislation for the improvement of the program, if any. The report shall also include an audit of the insurance fund’s books and accounts with respect to its activities under this part to be made at least once for each calendar year by an independent certified public accountant. A copy of the annual report shall be transmitted to the Governor and to each Member of the Legislature and made available for review by interested parties no later than March 31 of each year.

51623.

 (a)  The California Housing Loan Insurance Fund, as provided for pursuant to Section 51653 as it read prior to the effective date of the act that adds this part, is continued in existence, and, pursuant to Section 51603, is referred to as the insurance fund. Notwithstanding Section 13340 of the Government Code, all money in the insurance fund is hereby continuously appropriated to the agency without regard to fiscal year for the purpose of insuring loans and bonds pursuant to this part and for the purpose of defraying administrative expenses incurred by the fund in operating those programs of loan and bond insurance. All insurance premiums shall be deposited in the insurance fund.

(b)  The insurance fund shall be administered by the agency for the purpose of insuring loans and bonds as provided in this part. Any appropriation made therefrom or thereto before the effective date of this section shall continue to be available for the purposes for which it was made.

51624.

 The agency shall prepare a preliminary budget for the agency’s activities under this part on or before December 1 of each year for the ensuing fiscal year, to be reviewed by the Secretary of the Business, Transportation and Housing Agency, the Director of Finance, and the Joint Legislative Budget Committee.

51625.

 (a)  The agency shall cause all moneys in the insurance fund which are in excess of current requirements to be invested and reinvested, from time to time, in the same manner as provided for private insurance carriers pursuant to Article 3 (commencing with Section 1170) of Chapter 2 of Part 2 of Division 1 of the Insurance Code.

(b)  All interest or other increment resulting from the investment shall be deposited in the insurance fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the insurance fund shall not be subject to transfer to any other fund pursuant to Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, except the Surplus Money Investment Fund.

51626.

 The insurance fund shall be organized as a public enterprise fund.

51627.

 The assets of the insurance fund shall be applicable to the payment of losses sustained on account of insurance and to the payment of the salaries and other expenses charged against it in accordance with this part.

51628.

 The agency shall, after a reasonable time during which it may establish a business, be fairly competitive with other insurers, and it is the intent of the Legislature that the insurance fund shall ultimately become neither more nor less than self-supporting. However, this section shall not be construed to preclude the insurance fund from operating in a manner that will permit the agency to create additional reserves from operations in order that the agency can maximize its insurance capacity.

51632.

 Claims arising out of activities of the agency on behalf of the insurance fund pursuant to this part are exempted from the provisions of Part 3 (commencing with Section 900) of Division 3.6 of Title 1 of the Government Code.

51636.

 Except as provided in this part, the agency, on behalf of the insurance fund pursuant to this part, shall not be subject to the provisions of the Government Code made applicable to state agencies generally or collectively, unless the section specifically names the fund as an agency to which the provision applies.

51637.

 With respect to the administration of the insurance fund, the agency shall be subject to the provisions of Chapter 10.3 (commencing with Section 3512) of Division 4 of Title 1 of, and Division 5 (commencing with Section 18000) of Title 2 of, the Government Code, and any other personnel management provisions in law that are generally applicable to state employees. Notwithstanding subdivision (e) of Section 3513 of the Government Code, up to five positions of the insurance fund of the agency may be designated as managerial under Section 18801.1 of the Government Code. All other position designations in the insurance fund of the agency are subject to Sections 3513 and 18801.1 of the Government Code. In making these designations, consideration shall be given to the agency’s need and continued ability to attract and maintain qualified individuals within the insurance fund.

51639.

 The agency shall establish reserve accounts for unearned premiums, losses, and potential catastrophic losses caused by economic cycles. The agency shall not cause sums to be withdrawn from the loan insurance reserve account in amounts which would reduce the moneys therein to less than the insurance reserve requirement, except as necessary to satisfy liabilities arising under contracts of loan insurance. In the event that the loan insurance reserve account is reduced to less than the insurance reserve requirement, the agency shall cease making commitments for, and contracts of, insurance until the loan insurance reserve account has been restored to satisfy that requirement.

51640.

 There is hereby continued in existence a bond insurance reserve account in the insurance fund to secure commitments under contracts to insure bonds. The agency shall take all reasonable steps to ensure that the bond reserve account is continuously maintained at not less than the bond reserve requirement. The agency shall not cause sums to be withdrawn from the bond insurance reserve account in amounts which would reduce the moneys therein to less than the bond reserve requirement, except as necessary to satisfy liabilities arising under contracts of bond insurance. In the event that the bond insurance reserve account is reduced to less than the bond reserve requirement, the agency shall cease making contracts of bond insurance until the account has been restored to satisfy that requirement.

51641.

 The agency may create other accounts within the insurance fund as it deems are necessary or convenient to carry out the purposes of this part.

51642.

 (a)  The obligation of the agency and of the state to pay any insurance benefit pursuant to contracts of insurance insuring loans or bonds shall not exceed amounts deposited in the insurance fund which are made available therefor under the respective contracts of insurance. Nothing in this part shall require the Legislature to appropriate moneys from the General Fund in the State Treasury to the insurance fund on account of these obligations. The insurance of loans or bonds under this part shall not directly, indirectly, or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment.

(b)  All contracts of insurance insuring loans or bonds pursuant to this part shall contain on the face thereof a statement to the following effect: “Neither the faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of or interest on this contract of insurance.”

(c)  Moneys in the insurance fund received from the proceeds of bonds issued pursuant to the California Housing and Jobs Investment Bond Act may not be transferred to any other fund of the agency except as necessary to pay the expenses of operating the program of loan and bond insurance for single-family residential housing authorized by this part, nor shall the agency utilize any of these moneys under the direction and control of the agency, other than moneys in the insurance fund, to satisfy liabilities arising from contracts of insurance authorized by this part.

(d)  Moneys in the insurance fund may not be transferred to any other fund of the agency except as necessary to pay the expenses of operating the program of loan and bond insurance authorized by this part, nor shall the agency utilize any moneys under the direction and control of the agency to satisfy liabilities arising from contracts of insurance authorized by this part.

(e)  The agency, on behalf of the California Housing Loan Insurance Fund, may borrow or receive moneys from the agency or from any federal, state, or local agency or private entity, in order to create reserves in the insurance fund for loan or bond insurance as provided in this part and as authorized by resolution of the board of directors.

(f)  The agency shall create a separate reserve account for insuring mortgages of multifamily housing developments which shall consist of all of the following:

(1)  Funds transferred by redevelopment agencies pursuant to Section 33334.2. The use of these funds shall be consistent with Section 33334.4.

(2)  Any other funds available for insuring mortgages of multifamily housing developments as may be made available for that purpose by law and as provided in this part.

(g)  Reserve funds for the single-family mortgage guarantee insurance program and the multifamily residential mortgage guaranty insurance program shall not be commingled.

51643.

 The agency shall not be required to pay any tax or assessment on any property owned by the fund or upon the income therefrom.

51643.5.

 The agency shall be subject to, and comply with, the same reserve certification requirements as mortgage guaranty insurers who are licensed pursuant to Chapter 2A (commencing with Section 12640.01) of Part 6 of Division 2 of the Insurance Code.

51645.

 The agency shall establish priorities for the allocation of loan-insurance assistance in accordance with the purposes and general provisions of Chapter 2 (commencing with Section 50950) of Part 3 of this division and Article 6 (commencing with Section 51225) of Chapter 5 of Part 3 of this division, in compliance with the needs identified in the California Statewide Housing Plan, and as provided in this part.

51646.

 Insured loans shall not be made available pursuant to this part in areas where there exists widespread damage of a substantial nature to residential structures resulting from any natural or other disaster, including fire, flood, wind, and earthquake.

51647.

 The agency shall establish and maintain separate accounts in the insurance fund for a single-family mortgage guaranty insurance program and a multifamily residential mortgage guaranty insurance program. Each program shall be actuarially sound and shall be capitalized through separate insurance funds.

51648.

 The agency shall make efforts to equitably distribute insurance based on a regionalized basis, weighted in accordance with the geographic distribution of the state’s population. While maintaining the actuarial soundness of the fund, the agency shall focus on housing opportunities that benefit households with incomes at or below area median income, households that require mortgages at or above 95 percent of the price of the home, or households that are participating in locally administered housing programs.

51650.

 (a)  To be qualified for loan insurance, a borrower shall be, or by reason of a loan insured pursuant to this part shall become, the owner of a multifamily rental housing development or a single-family residential structure for which an insured loan is authorized, and shall be able to bear the usual expenses of maintaining the housing development, development, or structure and repay the loan. To be qualified for loan insurance on a single-family residential housing unit, the borrower shall also qualify as a person or family of low or moderate income, as that term is defined in Section 51603. The agency may, by resolution, establish additional requirements that it deems necessary to accomplish the purposes of this part.

(b)  For the purpose of increasing the efficiency and minimizing the cost of the loan insurance program, the agency may insure or issue commitments to insure loans upon the certification of an officer of an approved lending institution that the borrower is qualified for loan insurance according to eligibility requirements specified by the agency.

51651.

 The agency shall specify the percentage of the outstanding principal indebtedness which may be insured under this part with respect to each category of loan authorized to be insured under this part. Loans not secured by a mortgage of first priority may be insured for an amount equal to 100 percent of the outstanding principal indebtedness. All other categories of loans may be insured only for the percentage of the amount of risk that the agency determines is necessary to induce approved lending institutions to make the loans for the purposes specified in this part.

51652.

 Loans insured under this part shall meet all of the following requirements:

(a)  The loans shall be made for a period acceptable to the agency not to exceed 40 years or four-fifths of the remaining life of the structure, as determined by the agency, whichever is less.

(b)  The loans shall be subject to maximum loan amounts for each category of loan authorized to be insured under this part.

(c)  The loans shall be secured by mortgages, or the loan shall be wholly or partially insured or guaranteed by an agency or instrumentality of the United States, except for property improvement loans under limits established by the agency.

(d)  The agency may establish loan-to-value limitations for each category of loan and may set forth limitations on the further encumbrance of structures and other real property securing loans, but only to the extent necessary to prevent unreasonable impairment of the agency’s security. In no case involving refinancing shall the loan have a principal obligation in an amount exceeding the sum of the estimated cost of rehabilitation, if any, and the amount required to refinance existing indebtedness secured by the property and settlement and closing costs incurred in connection therewith.

(e)  Loans involving the rehabilitation of residential structures shall have a principal obligation not exceeding an amount which, when added to any outstanding indebtedness constituting a lien upon the property securing the loan, creates a total outstanding indebtedness which would be reasonably secured by a mortgage of first priority on the property pursuant to subdivision (d), and as set forth by the agency.

(f)  Loans involving refinancing may be insured only if refinancing is necessary to permit a borrower to afford the cost of rehabilitation, to lower his or her monthly debt-to-income payments, minimize rent increases for occupants of the residential structure, where the rents would otherwise exceed affordable rents due to the expense of rehabilitation, or to achieve another purpose specified in this division.

(g)  With respect to loans involving the rehabilitation of a residential structure, the agency shall determine that the rehabilitation is economically feasible. For purposes of this subdivision, the economic feasibility of rehabilitation projects involving commercial space in a mixed residential and commercial structure shall be determined independently for any structure to be rehabilitated for mixed residential and commercial uses.

(h)  For the purpose of increasing the efficiency and minimizing the cost of the loan insurance program, the agency may insure, or issue commitments to insure, loans, upon the certification of an officer of an approved lending institution that the proposed rehabilitation conforms to requirements specified by the agency regarding economic feasibility.

(i)  The agency shall contract with the insured or the borrower, or both, during the term of the insurance if the agency determines that either or both of those contracts is necessary to maintain residential rentals available to lower income households at affordable rents.

(j)  Relocation payments shall be made to persons and families displaced in making a site or residential structure available for rehabilitation or construction financed by loans insured under this part, and relocation advisory assistance provided to those persons, as specified by Section 51063. Relocation payments for rehabilitation or construction financed by loans insured by this part, shall also be made to owners involuntarily displaced because of inability to afford costs of compliance required pursuant to this part, but any payment pursuant to Section 4623 of Title 42 of the United States Code or Section 7263 of the Government Code shall be limited to the reasonable costs of a replacement dwelling adequate to accommodate the displaced person or family without regard to whether the dwelling is otherwise comparable to the dwelling formerly occupied, less the amount received from sale of the dwelling. Relocation payments may be made from the proceeds of insured loans as authorized by the agency.

(k)  The residential structure for which a loan is insured pursuant to this part shall be insured against loss due to fire and other causes, as provided by the agency.

( l)  Any other terms and conditions as the agency determines are necessary to further the purposes of this part.

51653.

 Notwithstanding any other provision of law, any rental housing development which is financed from mortgages insured pursuant to this part is exempt from both of the following:

(a)  Any local government prohibitions against condominium conversion any time after 10 years from the date a certificate of occupancy is issued. Any condominium conversion shall be made in accordance with the requirements of Article 2.5 (commencing with Section 66452.50) of Chapter 3 of Division 2 of Title 7 of the Government Code.

(b)  Any rent control, except for units made available to lower income households as provided pursuant to subdivision (b) of Section 51226.

51654.

 The agency may provide insurance pursuant to this part for loans for residential structures which will be occupied primarily by persons and families of low or moderate income and for loans for privately or publicly financed rental housing developments which will benefit lower income households. “Privately financed rental housing development,” as used in this section, includes rental housing developments financed by local public entities, as defined in Section 50079.

51655.

 Subject to this part, the agency may insure or guarantee loans made by qualified mortgage lenders for the purposes described in Section 51320.

51656.

 Notwithstanding any other provision of this part, the agency may establish a program of insuring reverse mortgages as authorized by resolution of the board.

51657.

 (a)  The agency shall establish, and may from time to time revise, after public hearings, a schedule of insurance premium rates. The premiums may vary according to the category of the loan and the degree of risk related to the loan. Premiums shall be calculated in an amount which, when added to the other revenues of the insurance program, will be adequate to defray losses occasioned by defaults and the operating expenses of the program, to repay amounts advanced to the agency for purposes of this part, and gradually to expand the insurance availability of the program. Approved lending institutions shall remit premiums to the fund at intervals specified by the agency.

(b)  The agency may prescribe other charges that it finds necessary, including service charges and appraisal, inspection, and other fees.

51658.

 (a)  The agency shall establish procedures to be followed by approved lending institutions in the event of default on a loan insured under this part. The agency may require that, prior to submitting a claim, an approved lending institution shall foreclose or exercise a power of sale and take possession of the property or otherwise acquire title and possession of the property within the time specified by the agency. The agency may, upon submission of the claim, pursue one of the following alternatives:

(1)  Pay the approved lending institution the benefit of the insurance.

(2)  Upon conveyance to the agency of all the right, title, and interest of the approved lending institution in the foreclosed property and the assignment of all claims of the approved lending institution against the defaulting borrower to the agency, pay to the qualified mortgage lender the sum of the unpaid principal balance of the loan, foreclosure costs, accrued interest, and other costs defined by contract.

(3)  Pay a partial claim prior to foreclosure by agreement with the insured.

(b)  In any case in which the agency has insured only a portion of the outstanding principal indebtedness of a loan, it may further provide that not more than an equivalent percentage of the total accrued interest and costs shall be payable by the agency pursuant to this section in the event of a default.

51659.

 In the event of a default on an insured loan not secured by a first mortgage, the agency may, in lieu of proceeding under Section 51658, acquire the insured loan and any security therefor upon payment to the approved lending institution of an amount equal to the unpaid principal balance of the loan, accrued interest, and other costs that the agency finds are fair, reasonable, and authorized.

51660.

 The agency may initiate programs of coinsurance or reinsurance with, and may procure reinsurance from, any state agency, local agency, agency of the United States, or private mortgage insurer in order to accomplish more effectively the purposes of this part. The agency may coinsure or reinsure loans made or originated by approved lending institutions which are otherwise insurable under this part.

51661.

 The agency may provide for, and require attendance at, homeownership counseling and training courses as a condition to the insurance of loans for the purchase or refinancing of residential structures under this part.

51662.

 The agency may commence any action to protect or enforce any right conferred upon it by any law, mortgage, contract of insurance, or any other agreement. The agency may bid for and purchase property sold in satisfaction thereof at any foreclosure or other sale or may otherwise acquire and take possession of that property.

51670.

 (a)  The agency may insure bonds issued by state or local agencies to finance or refinance the construction, rehabilitation, acquisition, or preservation of single-family and multifamily residential housing for persons and families of low and moderate income. The agency may charge and collect insurance premiums for the insurance and fees for services performed in conjunction with the processing and approval of insurance applications as determined by the agency. The agency shall take all reasonable steps to ensure that bonds insured pursuant to this chapter are in a form satisfactory to the agency and contain provisions relating to the underlying security for the bonds as may be required by the agency.

(b)  The agency shall take reasonable steps to ensure that both of the following occur:

(1)  The bonds contain, or are subject to, terms respecting repayment, dates of maturity, and other provisions satisfactory to the agency.

(2)  The bonds contain, or are subject to, provisions that the agency deems necessary with respect to security interests of the agency, including provisions relating to subrogation, liens and releases of liens, payment of taxes, escrow or trusteeship requirements, or other matters.

51671.

 The agency may insure bonds pursuant to this chapter only if it determines that the proceeds of the bonds will be utilized, to the maximum extent feasible, for one of the following purposes:

(a)  Construction or rehabilitation of multifamily rental housing for persons and families of low or moderate income.

(b)  Construction or rehabilitation of housing that utilizes federal rental or other subsidies.

(c)  Construction or rehabilitation of other dwelling units for persons and families of low or moderate income.

51680.

 The agency may administer a loan loss guarantee program in order to induce private lenders to make construction loans for seismic rehabilitation improvements which are designed to increase seismic structural safety in accordance with a plan developed by a civil engineer, structural engineer, or an architect for a property which has been identified by a local jurisdiction as being potentially hazardous, as defined in Chapter 12.2 (commencing with Section 8875) of Division 1 of Title 2 of the Government Code, or as being hazardous in the event of an earthquake, as defined in Article 4 (commencing with Section 19160) of Chapter 2 of Part 3 of Division 13.

51681.

 (a)  Except as provided in subdivision (b), the agency shall only issue rehabilitation loan loss guarantees on single-family homes or on buildings with five or more residential units and where any commercial use in those buildings is limited to the basement and ground floors or where the commercial use occupies less than 15 percent of the total square footage of the building.

(b)  For the purpose of using the program enacted by this chapter in conjunction with the multifamily seismic retrofit program authorized by Section 50668.5, the 15-percent limitation on commercial space required by subdivision (a) may be waived in order to facilitate the seismic retrofit of lower income housing.

51683.

 The agency may issue a loan loss guarantee in the amount of 25 percent of the actual loss of a loan guaranteed under this section. The fund may not guarantee any loan loss in excess of the amount of permanent loan financing for the property. No guarantee shall be made for a property which does not have a binding, unconditional, permanent financing commitment from a lender acceptable to the agency, nor for a property in which the owner has less than a 20-percent equity interest.

51684.

 (a)  The agency shall collect a premium for a loan loss guarantee as provided in Section 51657. All premiums shall be deposited in the Seismic Rehabilitation Loan Loss Guarantee Account within the insurance fund, which is hereby created.

(b)  Premiums shall be calculated in an amount which, when added to the other revenues of the account, will be adequate to, in the following order of priority: pay losses on claims made under loan loss guarantees issued hereunder, pay actual operating costs of the program, and repay moneys transferred to the account pursuant to Section 51685. The agency is authorized to transfer from the account actual operating expenses necessary for its administration of this program. Any excess premiums shall be retained in the account and used to expand the loan loss guarantee program hereunder.

(c)  Moneys in the account shall be segregated from other moneys of the insurance fund and shall not be transferred from the account for any purpose, except as provided in this chapter. Loan loss guarantees issued by the agency for the benefit of either construction lenders or borrowers shall specify that only the moneys in the account are available to pay claims under loan loss guarantees and that the other assets of the insurance fund, the assets of the agency, and the assets of the State of California are not available to pay claims or damages resulting from loan loss guarantees.

51685.

 Moneys transferred to the insurance fund under this section may be used to create reserves for loan loss guarantees authorized by this chapter and for the initial administrative expenses of the program which are not offset by premium income.

51685.5.

 (a)  Notwithstanding any other provision of law, the California Housing Insurance Fund may borrow one million eight hundred thousand dollars ($1,800,000) from the Local Agency Indebtedness Fund, established pursuant to Article 6.5 (commencing with Section 16496) of Chapter 3 of Division 4 of Title 2 of the Government Code, for the purpose of establishing the Seismic Rehabilitation Loan Loss Guarantee Account within the fund as authorized by subdivision (d) of Section 51642.

(b)  Upon request of the agency, the Pooled Money Investment Board shall transfer from the Local Agency Indebtedness Fund amounts authorized hereunder and upon terms and conditions to which the agency and the board shall agree. Moneys borrowed hereunder shall constitute a loan, which shall be repaid with simple interest accrued at the pooled money investment rate exclusively from premium income collected by the agency for seismic rehabilitation loan loss guarantees issued under this chapter. No other moneys of the agency shall be liable for repayment of the loan from the Local Agency Indebtedness Fund. The loan authorized, along with accrued interest, shall be due and payable not later than one year from the date of expiration of the last outstanding loan loss guarantee issued, or not later than January 1, 2010, whichever comes first, or unless the Legislature extends the sunset provision of this program because of the success and continuing need for the program.

(c)  Moneys transferred to the agency under this section may be used to create reserves for loan loss guarantees authorized by this chapter and for the initial administrative expenses of the program which are not offset by premium income.

51686.

 In addition to the powers expressly granted by this chapter, the agency shall have all the powers granted under this part in administering this program which are not inconsistent with this chapter.

51687.

 This chapter shall be inoperative if moneys are not transferred to the fund pursuant to Section 51685.5 for the purposes defined in Section 51680.