33700.

 The Legislature finds and hereby declares all of the following:

(a) The end of the housing boom in 2005 has led to declining housing prices and the reduced availability of mortgage credit.

(b) As housing prices fall, delinquencies and foreclosures on subprime and nontraditional mortgages have increased to historically high levels. Lenders with exposure to subprime and nontraditional mortgage losses have tightened their lending standards. Consequently, homeowners with subprime and nontraditional mortgages are having difficulty refinancing into more affordable loans.

(c) With many subprime and nontraditional mortgages facing their first interest reset during 2008 and 2009, mortgage foreclosures will increase significantly and, along with falling housing prices, may overwhelm the ability of mortgage markets to restructure or refinance loans for creditworthy borrowers.

(d) Home foreclosures impose significant costs not only on borrowers and lenders, but also on local governments, neighboring homeowners, and others with a financial stake in nearby properties. This is particularly true of subprime and nontraditional mortgage foreclosures because they tend to be concentrated geographically. The effect of multiple foreclosures in limited geographic areas can cause declines in property values, accelerating the decline of entire neighborhoods. Increased crime and vandalism, lack of proper maintenance, and the spread of blight are other consequences of concentrated foreclosures in limited geographic areas.

(e) Decent housing for all of the people of this state is vital to the state’s future peace and prosperity.

(f) A fundamental purpose of redevelopment is to expand the supply of low-income and moderate-income housing.

(g) In order to more effectively respond to the current crisis in subprime and nontraditional mortgage foreclosures, redevelopment agencies should be given greater flexibility on a temporary basis to do all of the following:

(1) Acquire, assume, or refinance existing subprime and nontraditional mortgages in default or at risk of default, or make loans to eligible homeowners faced with foreclosure.

(2) Acquire and then maintain, resell, or rent foreclosed homes.

33701.

 For the purposes of this chapter, the following terms have the following meanings, unless the context clearly requires otherwise:

(a) “Eligible homeowner” means the trustor of a subprime or nontraditional mortgage who occupies a home encumbered by the subprime or nontraditional mortgage as his or her principal place of residence, if either of the following applies:

(1) The obligation secured by the subprime or nontraditional mortgage has a payment that is 30 days or more past due or has a scheduled interest rate increase that will create a financial hardship likely to produce a default.

(2) A notice of default has been recorded against the obligation secured by the subprime or nontraditional mortgage pursuant to Section 2924 of the Civil Code.

(b) The “fund” is the Low and Moderate Income Housing Fund established pursuant to Section 33334.3.

(c) “Nontraditional mortgage” means a consumer loan that allows the borrower to defer payment of principal and, under certain circumstances, interest, as set forth in the “Interagency Guidance on Nontraditional Mortgage Product Risks” (71 Fed. Reg. 58609 (Oct. 4, 2006)).

(d) (1) “Subprime mortgage” means a deed of trust securing a loan that was originated on or after January 1, 2002, was issued for the purchase of a single-family home, residential condominium, or townhome, but not a mobilehome, and meets one of the following conditions:

(A) Has an annual percentage rate that is more than one of the following:

(i) For a senior loan, 3 percent, plus the yield on United States Treasury notes with comparable maturities.

(ii) For a subordinate loan, 5 percent, plus the yield on United States Treasury notes with comparable maturities.

(B) Has interest-only payments, or an adjustable rate that may lead to negative amortization.

(2) “Subprime mortgage” does not include a subordinate home equity line of credit or a reverse mortgage.

33702.

 (a) The agency may expend any money that is not held in the fund to purchase, assume, or refinance, or assist lenders or nonprofit or for-profit developers in purchasing, assuming, or refinancing, subprime or nontraditional mortgages on homes owned by eligible homeowners who reside within its jurisdiction, or make loans to those eligible homeowners, if the combined annual income of the members of the eligible homeowner’s household does not exceed 150 percent of area median income, adjusted for family size by the department in accordance with adjustment factors adopted and amended from time to time.

(b) The amount of assistance provided under subdivision (a) for any single eligible homeowner shall not exceed an amount equal to the loan to value ratio applied by the Federal Housing Administration for an insured loan for the applicable geographic area, multiplied by the current value of the home.

(c) The agency may also expend money that is not held in the fund to provide mortgage or credit counseling services to existing or prospective homeowners who qualify for assistance under subdivision (a).

33703.

 (a) The agency may expend any money that is not held in the fund to purchase, or assist lenders or nonprofit or for-profit developers in purchasing, homes within its jurisdiction that have been foreclosed and are vacant, for sale to any purchaser, regardless of income.

(b) Homes purchased under this section may be managed, maintained, and rented prior to resale.

33704.

 Funds shall be expended pursuant to this chapter in a manner that preserves the exemption from federal and state income taxes of interest on the bonds or notes issued by the agency under this division, if applicable.

33705.

 This chapter shall apply notwithstanding any other provision of this division.

33706.

 Consistent with this chapter, the agency may adopt local criteria governing the use of funds and provision of other assistance authorized under this chapter, including, but not limited to, limiting assistance to defined neighborhoods or a geographic area, or targeting specific income categories.

33707.

 This chapter shall remain in effect only until January 1, 2013, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2013, deletes or extends that date.