Code Section Group

Health and Safety Code - HSC

DIVISION 31. HOUSING AND HOME FINANCE [50000 - 54034]

  ( Division 31 repealed and added by Stats. 1977, Ch. 610. )

PART 2. DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT [50400 - 50899.7]

  ( Heading of Part 2 amended by Stats. 1981, Ch. 996. )

CHAPTER 6.5. Deferred-Payment Rehabilitation Loans [50660 - 50671.6]
  ( Chapter 6.5 added by Stats. 1978, Ch. 884. )

50660.
  

The Legislature finds and declares that the rehabilitation of existing housing is necessary to the continued viability of neighborhoods, the elimination of health and safety hazards, the prevention of the overcrowding and the continued availability of a dwindling stock of low-cost housing. Economic conditions have not provided sufficient incentive to home improvement and elimination of substandard conditions, and financial assistance in the form of deferred-payment rehabilitation loans is necessary for those owners of residential real property who would otherwise be unable to obtain sufficient public or private financing to bring their properties into compliance with rehabilitation standards. Deferred-payment loans provide a means of financing rehabilitation which the owner could not otherwise afford. Such assistance is particularly necessary where local agencies are undertaking concentrated or systematic enforcement programs to require compliance with rehabilitation standards, and where persons or families of low or moderate income are affected.

(Amended by Stats. 1979, Ch. 1043.)

50660.5.
  

(a) It is the intent of the Legislature to encourage local governments to assist residents to repair and rebuild housing in a cost-efficient and expeditious manner following a disaster. To this end, the Legislature recognizes that local governments may enact ordinances following disasters to expedite the permit process. These ordinances may include, but not be limited to, ordinances waiving fees and streamlining requirements affecting disaster-related repairs.

(b) The Legislature finds and declares that homeowners and owners of rental housing who apply for assistance pursuant to Sections 50662.7, 50671.5, and 50671.6 may be unable to utilize expedited procedures or liberalized standards because loan approval and repair may occur after the expiration of the local ordinance. It is, therefore, the intent of the Legislature to encourage local governments to extend the application of these local ordinances to homeowners and owners of rental housing who are utilizing disaster assistance programs, including the respective loan programs authorized by Sections 50662.7, 50671.5, and 50671.6, so that housing can be repaired or rebuilt in a cost-efficient and expeditious manner.

(Amended by Stats. 2006, Ch. 538, Sec. 408. Effective January 1, 2007.)

50661.
  

(a) There is hereby created in the State Treasury the Housing Rehabilitation Loan Fund. All interest or other increments resulting from the investment of moneys in the Housing Rehabilitation Loan Fund shall be deposited in the fund, notwithstanding Section 16305.7 of the Government Code. Notwithstanding Section 13340 of the Government Code, all money in the fund is continuously appropriated to the department for the following purposes:

(1) For making deferred-payment rehabilitation loans for financing all or a portion of the cost of rehabilitating existing housing to meet rehabilitation standards as provided in this chapter.

(2) For making deferred payment loans as provided in Sections 50668.5, 50669, and 50670.

(3) For making deferred payment loans pursuant to Sections 50662.5 and 50671.

(4) Subject to the restrictions of Section 53131, if applicable, for administrative expenses of the department made pursuant to this chapter, Article 3 (commencing with Section 50693) of Chapter 7.5, and Chapter 10 (commencing with Section 50775).

(5) For related administrative costs of nonprofit corporations and local public entities contracting with the department pursuant to Section 50663 in an amount, if any, as determined by the department, to enable the entities and corporations to implement a program pursuant to this chapter. The department shall ensure that not less than 20 percent of the funds loaned pursuant to this chapter shall be allocated to rural areas. For purposes of this chapter, “rural area” shall have the same meaning as in Section 50199.21.

(6) To the extent no other funding sources are available, ten million dollars ($10,000,000), as provided in Section 4 of Chapter 3 of the Statutes of 2014, may be used for the purposes of Section 34085.

(7) To the extent that funds are made available by the Legislature, moneys in the fund may be used for the purposes described in Chapter 4 (commencing with Section 34090) of Part 1.6 of Division 24. Any funds made available for these purposes that are not encumbered on or before June 30, 2017, shall revert to the General Fund.

(b) There shall be paid into the fund the following:

(1) Any moneys appropriated and made available by the Legislature for purposes of the fund.

(2) Any moneys that the department receives in repayment of loans made from the fund, including any interest thereon.

(3) Any other moneys that may be made available to the department for the purposes of this chapter from any other source or sources.

(4) Moneys transferred or deposited to the fund pursuant to Sections 50661.5 and 50778.

(5) Transfers from the Infrastructure Stabilization Fund, pursuant to Section 13106 of the Government Code. Any moneys transferred from the Infrastructure Stabilization Fund shall be used only for infrastructure, as defined in Section 13101 of the Government Code, within the Multifamily Housing Program established by Chapter 6.7 (commencing with Section 50675).

(c) Notwithstanding any other law, any interest or other increment earned by the investment or deposit of moneys appropriated by subdivision (b) of Section 3 of Chapter 2 of the Statutes of the 1987–88 First Extraordinary Session, or Section 7 of Chapter 4 of the Statutes of the 1987–88 First Extraordinary Session, shall be deposited in a special account in the Housing Rehabilitation Loan Fund and shall be used exclusively for purposes of Sections 50662.5 and 50671.

(d) Notwithstanding any other law, effective with the date of the act adding this subdivision, appropriations authorized by the Budget Act of 1996 for support of the Department of Housing and Community Development from the California Disaster Housing Repair Fund and the California Homeownership Assistance Fund shall instead be authorized for expenditure from the Housing Rehabilitation Loan Fund.

(e) Effective July 1, 2014, the California Housing Trust Fund in the State Treasury is abolished and any remaining balance, assets, liabilities, and encumbrances shall be transferred to, and become part of, the Housing Rehabilitation Loan Fund. Notwithstanding Section 13340 of the Government Code, all transferred amounts are continuously appropriated to the department for the purpose of satisfying any liabilities and encumbrances and the purposes specified in this section.

(Amended by Stats. 2018, Ch. 43, Sec. 4. (AB 1831) Effective June 27, 2018.)

50661.5.
  

(a) There is hereby created in the State Treasury the California Disaster Housing Repair Fund, into which shall be paid all moneys appropriated by the Legislature pursuant to subdivision (b) or transferred pursuant to subdivision (c) for housing repair loans pursuant to Sections 50662.7, 50671.5, and 50671.6. All interest or other increments resulting from the investment of moneys in the California Disaster Housing Repair Fund shall be deposited in the fund, notwithstanding Section 16305.7 of the Government Code. Notwithstanding Section 13340 of the Government Code, all money in that fund is continuously appropriated to the department for the following purposes:

(1) For making deferred payment loans and predevelopment loans pursuant to Sections 50662.7, 50671.5, and 50671.6.

(2) For related administrative expenses of the department.

(3) For related administrative expenses of any entity contracting with the department, pursuant to Sections 50662.7, 50671.5, and 50671.6 in an amount, if any, as determined by the department, to enable the entities to implement a program pursuant to those sections.

(4) For providing loan guarantees for disaster-related loans made by private institutional lending sources.

(b) There shall be paid into the fund the following:

(1) Any moneys appropriated and made available by the Legislature for purposes of the fund.

(2) Any moneys transferred from the Special Fund for Economic Uncertainties prior to July 1, 1996, pursuant to subdivision (c).

(3) Any other moneys which may be made available to the department prior to July 1, 1996, for the purposes of this section from any other source or sources.

(4) The director may authorize the sale of the beneficiary interest of loans made pursuant to Section 50662.7. The proceeds from that sale prior to July 1, 1996, shall be deposited into the California Disaster Housing Repair Fund. Proceeds from that sale after July 1, 1996, shall be deposited in the General Fund.

(c) (1) To the extent that funds are not available, the Department of Housing and Community Development shall submit to the Department of Finance, within 90 days after a disaster, a deficiency request based on a minimum funding level based on a damage survey completed by the Office of Emergency Services and the Federal Emergency Management Agency. The request shall distinguish between owner-occupied housing of one to four units and rental housing of five or more units.

(2) Upon receipt of the deficiency request from the Department of Housing and Community Development pursuant to paragraph (1), the Department of Finance shall make a funding determination and notify the Legislature of the approval or disapproval of the deficiency amount. Any deficiency amount approved shall distinguish between owner-occupied housing of one to four units and rental housing of five or more units.

(3) Any payments made pursuant to this subdivision from funds made available under Section 50671.5 shall be matched by a corresponding and equal payment from funds made available under Section 50671.6, except that, upon the determination of the Director of Finance that one of the two rental repair programs has excess funds, moneys from that fund may be used for either of the other two disaster repair programs.

(d) In the event of a natural disaster, as defined in Section 8680.3 of the Government Code, the Director of Finance may transfer moneys from the Special Fund for Economic Uncertainties established by Section 16418 of the Government Code to the California Disaster Housing Repair Fund, provided the transfer is not made sooner than 30 days after notification in writing of the necessity therefor is provided to the Joint Legislative Budget Committee.

(e) Notwithstanding any other provision of law, on or after July 1, 1996, the unencumbered fund balance and reserves shall be transferred to the Housing Rehabilitation Loan Fund and subsequent income and other resources payable pursuant to Sections 50662.7, 50671.5, and 50671.6, shall be deposited to the Housing Rehabilitation Loan Fund, except that payments of principal and interest on loans issued pursuant to Sections 50662.7, 50671.5, and 50671.6 shall be deposited in the General Fund.

(f) In making funds available to disaster victims pursuant to Sections 50662.7, 50671.5, and 50671.6, the department shall impose a one-year deadline for submission of applications.

(g) Any changes made on or after January 1, 1994, to any program funded by the California Disaster Housing Repair Fund shall not apply to applications submitted on or before December 31, 1993. The department may administer the program in accordance with guidelines until regulations are adopted.

(Amended by Stats. 2013, Ch. 352, Sec. 378. (AB 1317) Effective September 26, 2013. Operative July 1, 2013, by Sec. 543 of Ch. 352.)

50661.7.
  

The Director of the Department of Housing and Community Development may transfer moneys appropriated or otherwise made available for the purposes of the programs established under Sections 50662.7 and 50671.5 between those programs when there is insufficient funding to meet the loan demand in either of those programs and an uncommitted funding balance in the other program.

(Added by Stats. 1989, 1st Ex. Sess., Ch. 6, Sec. 5. Effective November 7, 1989.)

50662.
  

The department shall adopt regulations establishing terms upon which deferred-payment rehabilitation loans may be made. The amount of a deferred-payment rehabilitation loan shall in no case exceed the costs of meeting rehabilitation standards. The amount, when combined with other financing provided, shall in no case exceed the combined costs of meeting rehabilitation standards and refinancing existing indebtedness. Except for loans made to local agencies pursuant to Section 50664, deferred-payment rehabilitation loans shall bear interest at the rate of 3 percent per annum on the unpaid principal balance. In the discretion of the department, which may differentiate among the types of programs specified in Section 50663, such interest shall either be payable periodically as it accrues during the term of the loan or payment of interest shall be deferred until payment of the principal is due. However, regulations of the department may provide for waiver of interest payments when a local public entity or nonprofit corporation contracting pursuant to Section 50663 remits to the department in advance on behalf of the borrower a sum equal to not less than 15 percent of the original principal balance, which may be in lieu of interest. The regulations of the department may also provide for payment of interest as accrued, in circumstances determined appropriate by the department to serve the purposes of this chapter. In the case of a deferred-payment rehabilitation loan to an elderly person who is the owner of an owner-occupied one-to-four family residence, the note and deed of trust securing the loan shall require payment of the obligation upon transfer of the property. Notwithstanding any other provisions of this chapter, the department may permit the making of a deferred-payment rehabilitation loan to an elderly person of low income who is the owner of an owner-occupied dwelling without requiring that other financing be provided to the extent of the owner’s ability to afford the cost of such other financing. In the case of a deferred-payment rehabilitation loan to a nonelderly person who is the owner of an owner-occupied one-to-four family residence, payment shall be required after five years or upon transfer of the property, whichever first occurs. However, the loan may be renewed for additional five-year terms so long as the property is not transferred and the owner is unable to refinance the obligation when the debt comes due. In the case of a deferred-payment rehabilitation loan to an owner of a residence other than an owner-occupied one-to-four family residence, payment shall be required after five years unless it is determined by the department that a longer term is required to ensure the economic feasibility of obtaining other rehabilitation financing or accepting subsidies. The loan may be renewed for up to five additional five-year terms so long as persons of low income residing in the residence will benefit. The department shall establish standards and determine eligibility for renewal. Regulations of the department shall permit the assumption of a deferred-payment rehabilitation loan authorized by this section when the property which has been rehabilitated by such loan is transferred to a person who meets the eligibility requirements of this section, as determined by the department.

(Amended by Stats. 1982, Ch. 1020, Sec. 4.)

50662.2.
  

Deferred-payment loans may be made to finance actual costs incurred to meet rehabilitation standards for rehabilitation of mobilehome parks, as defined in Section 18214, for occupancy by lower income households.

(Added by Stats. 1988, Ch. 1174, Sec. 3.)

50662.5.
  

For the purpose of providing disaster relief to those owners of owner-occupied single-family dwellings that were damaged or destroyed as a result of the Los Angeles-Whittier Narrows Earthquake on October 1, 1987, or subsequent aftershocks, resulting in a state of emergency proclaimed by the Governor pursuant to Section 8625 of the Government Code, financial assistance may be provided to disaster victims as prescribed in this chapter under the following special conditions, which shall prevail over conflicting provisions of this chapter and administrative regulations:

(a)  The loans shall be provided in the counties proclaimed by the Governor to be in a state of disaster (1) to persons who do not qualify for loan assistance from an agency of the United States for rehabilitation of the damage caused by the earthquakes of October 1987, (2) to the extent that federally provided or assisted financing may be insufficient to accomplish the necessary rehabilitation, and (3) to the extent required to enable the recipient to obtain and afford loan assistance from an agency of the United States to finance the necessary rehabilitation. The loans shall be made only to households that are victims of the earthquakes specified in this section and only to the extent that other federal, state, local, or private resources are not available or do not provide the assistance or coverage needed to rehabilitate or reconstruct their homes.

(b)  The loans shall be for the purpose of rehabilitating, including reconstruction, of single-family dwellings that are owner-occupied or would be owner-occupied but for the damage caused by the earthquake or earthquakes.

(c)  The maximum loan amount shall not exceed twenty thousand dollars ($20,000), except that the department may waive this limitation in individual cases to permit compliance with health and safety standards or to restore the dwelling to a condition substantially similar to its condition prior to the earthquakes.

(d)  The loan, together with any existing indebtedness encumbering the security property, shall not exceed 100 percent of the after-rehabilitation value of the property, except that the department may waive this limitation in individual cases to permit compliance with health and safety standards or to restore the dwelling to a condition substantially similar to its condition prior to the earthquakes.

(e)  The department shall impose no income criteria or other means test as a prerequisite to obtaining a loan under this section.

(f)  Repayment of the principal amount of a loan under this section and interest thereon shall not be required until the borrower transfers ownership of the rehabilitated property. Payments of principal and interest on the loans shall, notwithstanding Section 50661, be deposited in the General Fund.

(g)  The adoption by the department of rules for implementation of this chapter shall not be subject to Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.

(h)  No commitments of loan funds under this section may be made after December 31, 1990.

(i)  Section 50668 does not apply to loans made pursuant to this section.

(Added by Stats. 1987, 1st Ex. Sess., Ch. 2, Sec. 2. Effective November 16, 1987.)

50662.7.
  

For the purpose of providing disaster relief to those owners of owner-occupied dwellings that were damaged or destroyed as a result of a natural disaster defined by Section 8680.3 of the Government Code, resulting in a state of emergency proclaimed by the Governor pursuant to Section 8625 of the Government Code, financial assistance may be provided to disaster victims as prescribed in this chapter under the following special conditions, which shall prevail over conflicting provisions of this chapter and administrative regulations:

(a)  (1)  The loans shall be provided in any city, county, or city and county proclaimed by the Governor to be in a state of disaster: (A) to persons who do not qualify for loan assistance from an agency of the United States for repair of the damage caused by a natural disaster, (B) to the extent that federally provided or assisted financing may be insufficient to accomplish the necessary repair, and (C) to the extent required to enable the recipient to obtain and afford loan assistance from an agency of the United States to finance the necessary repair.

(2)  The loans shall be made only to households that are victims of a natural disaster and only to the extent that other federal and state resources, private insurance proceeds, or private institutional lending sources, are not available or do not provide the assistance or coverage needed to rehabilitate or reconstruct their homes.

(3)  This subdivision shall not be construed to prevent the processing of a loan application once a person or household has received loan approval from a federal, state, or private institutional lending source, nor shall this subdivision be construed to prevent the funding of short-term loans until other federal, state, or private loan proceeds become available.

(4)  In allocating grants and loans, the department shall in no event provide a loan to a family with an annual income in excess of 150 percent of statewide median income, adjusted for family size. This paragraph shall apply to any disaster that occurs on or after January 18, 1994.

(b)  (1)  The loans shall be for the purpose of repairing, including reconstructing, dwellings that are owner-occupied or would be owner-occupied but for the damage caused by the natural disaster and for rental dwelling units of one to four units. Loan funds shall be used to fund work necessary to repair damaged dwellings and to correct serious, life-threatening violations of the state or local building code or housing standards that are required to be corrected prior to occupancy, including ensuring compliance with applicable seismic safety standards and related property improvements or to finance the reconstruction of dwellings destroyed as a result of the natural disaster up to a maximum of fifty thousand dollars ($50,000) per unit. The department shall limit the square footage of units repaired or reconstructed using funds provided pursuant to this section to the predisaster size of the unit.

(2)  In the case of manufactured housing or mobilehomes, loan funds shall be used to bring the manufactured home or mobilehome into compliance with the standards set forth in Chapter 4 (commencing with Section 18025) of Part 2 of Division 13.

(3)  For the purposes of this section:

(A)  “Owner-occupied dwellings” include single-family units, attached owner-occupied units, condominiums, townhouses, cooperatives, and manufactured homes, including mobilehomes.

(B)  “Rental dwelling of one to four units” includes single-family units, condominiums, townhouses, cooperatives, duplexes, and manufactured homes, including mobilehomes.

(c)  The loan, together with any existing indebtedness encumbering the secured property, shall not exceed the after-repair value of the property, except that the department may waive this limitation in individual cases to ensure, when necessary, correction of serious, life-threatening violations of the state or local building code or housing standards, seismic safety standards, and general property improvements relating to these standards pursuant to subdivision (b).

(d)  (1)  The outstanding balance of a loan provided under this section, including principal and accrued interest thereon, shall be due and payable, after 30 years or when either of the following occurs: (A) the borrower transfers ownership of the rehabilitated property, or (B) fails to occupy the rehabilitated property as his or her principal place of residence, whichever comes first. For rental dwellings, the term of the loan shall be 20 years.

(2)  After the initial recordation of the deed of trust securing the department’s loan, the department shall not subordinate its deed of trust to additional or other financing except in cases of extreme hardship necessary to protect the health or safety of the occupants or to the extent that the total principal of loans senior to the department’s loan is unchanged or decreased and the department’s security interest is not jeopardized, as determined by the department.

(e)  The department may make loans directly to borrowers, or contract for the administration under this section of loans with one or more entities that it determines to have the necessary experience to successfully administer the loan program, including, but not limited to, local public agencies and private organizations. The department may authorize, under that contract, the payment of expenses incurred by the entities in administering the loan program and may prescribe the conditions pursuant to which the entities shall administer the loans.

(f)  Sections 50663 and 50668 do not apply to loans made pursuant to this section.

(g)  The department may set aside or use funds that are made available for the purposes of this section for the purpose of curing or averting an owner’s default on the terms of any loan or other obligation where that default would jeopardize the department’s security in the owner-occupied housing assisted pursuant to this section. The payment or advance of funds by the department pursuant to this subdivision shall be exclusively within the department’s discretion, and no person shall be deemed to have any entitlement to the payment or advance of those funds. The amount of any funds expended by the department pursuant to this subdivision shall be added to the loan amount secured by the deed of trust and shall be payable to the department upon demand.

(h)  Any rule, policy, or standard of general application employed by the Department of Housing and Community Development in implementing this section shall not be subject to the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.

(i)  Fund allocations made pursuant to this section shall not be subject to review or approval by the Loan Committee of the Department of Housing and Community Development operating pursuant to Subchapter 1 (commencing with Section 6900) of Chapter 6.5 of Title 25 of the California Code of Regulations.

(j)  (1)  In order to be eligible for one or more loans pursuant to this section, the borrower shall agree to all of the following conditions:

(A)  All buildings shall be connected to their foundation systems as necessary to meet the seismic requirements of the 1973 Edition of the Uniform Building Code of the International Conference of Building Officials in a manner approved by the department, which may include seismic strengthening of foundation cripple walls and affixing or bolting sill plates to the foundation.

(B)  All water heaters shall be braced, anchored, or strapped to resist falling or horizontal displacement due to earthquake motion.

(C)  Hazard insurance shall be obtained and maintained as required by the department.

(2)  As a condition of receipt of assistance under this section, owners of rental dwellings shall agree, in writing, to all of the restrictions set forth in this subdivision.

(3)  The loan shall include an amount sufficient to meet the requirements of subparagraphs (A) and (B) of paragraph (1).

(k)  Initial rents for rental housing rehabilitated under this section shall not exceed the rent charged immediately prior to the natural disaster. The department may allow for adjustments to the predisaster rents due to cost-of-living increases or increases necessary for debt service.

( l)  The department shall adopt regulations establishing terms and conditions upon which repair loans may be made. These regulations shall be made available to the public by the department. The department may set interest rates for individual loans for each disaster at a rate that shall not exceed the rate for veterans’ home loans established pursuant to Section 987.87 of the Military and Veterans Code on the date the Governor declares a state of emergency for that disaster, plus up to one-half percent for administrative costs not included in the interest rate. The Department of Housing and Community Development shall prepare an annual audit of administrative costs for the Department of Finance. All loans for each disaster shall bear the same interest rate. The department may also require periodic payments of interest, or principal and interest, or provide incentives for earlier repayment of principal and interest on owner-occupied dwellings. Incentives may include reduction of interest rates to a minimum of 3 percent for repayment that occurs within three years of the closing of the loan.

(m)  Prior to full loan approval, the department may make loans not exceeding five thousand dollars ($5,000) per loan to pay for the costs of predevelopment activity which must be undertaken prior to making eligible repairs if, in the opinion of the department, the borrower is unable to pay for these costs in advance of full loan approval. These loans shall bear interest at the rate of 6 percent simple interest per annum and shall be evidenced by a promissory note secured by a deed of trust. At the time of full loan approval, the predevelopment loan shall be canceled, and the principal amount of the loan and all accrued interest shall be included in the amount of the full loan and shall be subject to the same interest rate and terms and conditions as the full loan. For purposes of computing the maximum loan amount, the amount of any predevelopment loan shall be included.

(Amended by Stats. 1994, Ch. 96, Sec. 1. Effective January 1, 1995.)

50662.8.
  

(a) Notwithstanding paragraph (1) of subdivision (d) of Section 50662.7, the department may allow the assumption of any loan made pursuant to subdivision (b) of that section for owner-occupied dwellings subject to all of the following conditions:

(1) The original borrower dies.

(2) The assumption is by a member of the original borrower’s household and is a spouse, domestic partner, or child of the original borrower.

(3) The person assuming the loan has legal ownership of the home.

(4) The person assuming the loan will continuously reside in the home as his or her principal place of residence and will not transfer the home to any other person or entity. If the person assuming the loan moves to another residence or transfers the home to any other person or entity, the loan shall become immediately due and payable.

(5) The total income of the household assuming the loan is at or below 120 percent of the area median income, adjusted for household size.

(6) The department determines that requiring immediate repayment of the loan upon the borrower’s death would be an economic hardship for the person assuming the loan.

(7) The assumption is for a period of time necessary to permit the person assuming the loan to repay the loan without economic hardship.

(b) The department may not permit subordination of a loan made pursuant to subdivision (b) of Section 50662.7 for owner-occupied dwellings except under the following circumstances:

(1) The total household income of the borrower’s household is at or below 80 percent of the area median income, or, in the case of extreme hardship, where borrowing becomes necessary to either protect the health and safety of the occupants, or pay health care costs for the borrower’s immediate family.

(2) The total principal of the loans senior to the department’s loan is unchanged or decreased and the department’s security interest is not jeopardized, as determined by the department.

(c) With respect to any loans made pursuant to subdivision (b) of Section 50662.7 for owner-occupied dwellings, the department shall do all of the following:

(1) Annually mail, by the end of January, to any borrower who has an outstanding balance a statement that provides all of the following information:

(A) The principal loan balance.

(B) The interest accrued to the date of the statement.

(C) The interest percentage rate.

(D) Payment instructions with a disclaimer that a payment may not be required until the outstanding loan balance is due and payable.

(E) Contact information, including a telephone number and mailing address for borrower inquiries.

(2) By July 1, 2005, adopt a written application process and evaluation guidelines to authorize the transfer of the borrower’s loan obligations described in subdivision (a) or the subordination of the deed of trust. The department shall provide a summary of this process and the guidelines with all statements mailed on or before February 1, 2006.

(3) Mail to the party that applies to the department to subordinate or assume the loan, the department’s decision to approve or deny the application within 60 days of receipt, along with a statement of reasons for any denial.

(d) With respect to any loans made pursuant to subdivision (b) of Section 50662.7 for owner-occupied dwellings, the department may delay the foreclosure of the loan if the department determines that its security interest is not jeopardized.

(e) The department may adopt guidelines for implementation of this section. These guidelines shall not be considered to be regulations as defined in Section 11342.600 of the Government Code and therefore shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Division 3 of Title 2 of the Government Code).

(Added by Stats. 2004, Ch. 569, Sec. 1. Effective January 1, 2005.)

50663.
  

The department may contract with a local public entity or nonprofit corporation to provide any portion of uncommitted funds in the Housing Rehabilitation Loan Fund for making deferred-payment rehabilitation loans through such local public entity or nonprofit corporation in aid of a (a) rehabilitation loan program conducted in a concentrated rehabilitation area designated pursuant to Section 51302; (b) residential rehabilitation financing program conducted pursuant to Part 13 (commencing with Section 37910) of Division 24; (c) systematic enforcement program for which the California Housing Finance Agency has allocated funds for mortgage loans pursuant to Section 51311; (d) code enforcement agency repairing substandard dwellings following the owner’s failure to commence work following a final notice or order from the enforcement agency; (e) program conducted by the agency in a mortgage assistance area, provided such area is located in a rural area; or (f) rehabilitation or code enforcement program being undertaken by a local public entity or nonprofit corporation in an area in which federal funds are being used or will be used in conjunction with the program established pursuant to this chapter. Eligibility for such loans shall be governed by the provisions of Sections 50664, 50665, 50666, 50667, 50667.5, or 50668.

(Amended by Stats. 1979, Ch. 1045. Note: Conditional amendment by Stats. 1994, Ch. 94, was repealed by Stats. 1997, Ch. 580.)

50664.
  

Deferred-payment loans may be made to local agencies for repair of substandard dwellings through a master agreement and fund commitment. Such agreements shall limit the amount of deferred-payment rehabilitation loans to actual rehabilitation costs to the local agency, shall require that the full amount of rehabilitation costs be made a special assessment against the property involved, and shall require that the full amount collected, including any interest attributable to delinquency, be promptly repaid to the Housing Rehabilitation Loan Fund. However, loans made pursuant to this section shall not otherwise bear any interest.

(Added by Stats. 1978, Ch. 884.)

50665.
  

In residential rehabilitation areas designated pursuant to Section 37921, or in conjunction with financing of residential rehabilitation outside such areas as provided in Section 37922.1 or 37924.5, a person or family of low or moderate income that is the owner of an owner-occupied one-to-four dwelling unit property may receive a deferred-payment rehabilitation loan for the excess of the cost of meeting rehabilitation standards over the amount of financing the local agency is able to provide without exceeding the owner’s ability to afford the monthly payments required. Owners of rental residences may receive deferred-payment rehabilitation loans if they have agreed to limit rent increases as provided in Section 37922.5, and if such loans are necessary in addition to financing otherwise provided in order to avoid increases in monthly debt service which would result in rent increases causing permanent displacement of persons of low income residing in the residence prior to rehabilitation. Such owners may also receive deferred-payment rehabilitation loans in the amount, if any, necessary to avoid such increases in monthly debt service as would make it economically infeasible to accept subsidies available to provide affordable rents to persons of low income, if the owner agrees to accept such subsidies.

(Added by Stats. 1978, Ch. 884.)

50666.
  

In concentrated rehabilitation areas designated pursuant to Section 51302, a person or family of low or moderate income who is the owner of an owner-occupied residential structure of one to four units may receive a deferred-payment rehabilitation loan for the excess of the cost of meeting rehabilitation standards over the amount of the neighborhood improvement loan the administering agency, local public entity, or qualified mortgage lender is able to provide without exceeding the owner’s ability to afford the monthly payments required. Owners of rental housing may receive deferred-payment rehabilitation loans if necessary to avoid increases in monthly debt service which would result in rent increases causing permanent displacement of persons of low income residing in the residential structure prior to rehabilitation and if the owner contracts during the term of the loan not to raise residential rentals except as permitted by regulations of the agency pursuant to subdivision (g) of Section 51307. Owners of rental housing may also receive deferred-payment rehabilitation loans in the amount, if any, necessary to avoid such increases in monthly debt service as would make it economically infeasible to accept subsidies available to provide affordable rents to persons of low income, if the owner agrees to accept such subsidies.

(Added by Stats. 1978, Ch. 884.)

50667.
  

In those counties and cities in which the California Housing Finance Agency has allocated funds for mortgage loans for rehabilitation of housing developments pursuant to Section 51311, a person or family of low or moderate income who is the owner of an owner-occupied housing development may receive a deferred-payment rehabilitation loan for the excess of the cost of meeting rehabilitation standards over the amount of mortgage-loan financing the agency is able to provide without exceeding the owner’s ability to afford the monthly payments required. Owners of rental housing developments in such counties and cities may receive deferred payment loans if necessary to avoid increases in monthly debt service which would result in rent increases causing permanent displacement of persons of low income residing in the housing development prior to rehabilitation, and if the owner accepts a mortgage loan from the agency with its limitation of rents and profits. Owners of rental housing developments in such counties and cities may also receive deferred-payment rehabilitation loans in the amount, if any, necessary to avoid such increases in monthly debt service as would make it economically infeasible to accept subsidies available to provide affordable rents to persons of low income if the owner agrees to accept such subsidies.

(Added by Stats. 1978, Ch. 884. Note: Conditional amendment by Stats. 1994, Ch. 94, was repealed by Stats. 1997, Ch. 580.)

50667.5.
  

In areas in which a local public entity or nonprofit corporation is undertaking a rehabilitation or code enforcement program for which federal funds are being used or will be used in conjunction with the program established pursuant to this chapter, a person or family of low income who is the owner of an owner-occupied one-unit to four-unit dwelling may receive a deferred-payment rehabilitation loan for the excess of the cost of meeting rehabilitation standards over the amount of financing or assistance the local public entity or nonprofit corporation is able to provide without exceeding the owner’s ability to afford the monthly payments required. Owners of rental housing in such areas may receive deferred-payment loans if necessary to avoid increases in monthly debt service which would result in rent increases causing permanent displacement of persons of low income residing in such housing and if the owner enters into an agreement with the local public entity or nonprofit corporation which provides for the regulation of rents, consistent with a fair rate of return for the owner, if such owner is not a nonprofit corporation, and consistent with the provision of affordable rents, to assure that the purposes of this chapter are carried out. Such agreement shall be binding on any successor in interest of the sponsor. The department may adopt regulations which govern the terms of such agreements. Owners of rental housing in such areas may also receive deferred-payment rehabilitation loans in the amount necessary to avoid such increases in monthly debt service as would make it economically infeasible to accept subsidies available to provide affordable rents to persons of low income if the owner agrees to accept such subsidies.

(Amended by Stats. 1979, Ch. 1045.)

50668.
  

(a)  Except as provided in subdivision (b) or in Section 50664, deferred-payment loans may be made only through agreements between the local public entity which has received a fund commitment and the owner of the dwelling unit or rental housing development or through agreements approved by the local public entity between a nonprofit corporation which has received a fund commitment and the owner of the dwelling unit or rental housing development. The agreements shall regulate contractor selection, work to be done, and the schedule of contractor payments, and shall require that the loan be secured by a deed of trust or other adequate security. Agreements regarding housing other than owner-occupied one- to four-family dwellings shall have the prior approval of the department.

(b)  The department may provide deferred payment loans directly to the owner-occupant of a dwelling unit or owner of a rental housing development if it has been determined by the department that the dwelling unit to be assisted is located in an eligible geographical area pursuant to the provisions of this chapter and no eligible local public entity exists in that area.

(c)  All moneys received by the department in repayment of loans made pursuant to this chapter, including interest and payments in advance in lieu of future interest, shall be deposited in the Housing Rehabilitation Loan Fund.

(Amended by Stats. 1981, Ch. 1165.)

50668.5.
  

For the purpose of providing financial assistance pursuant to this chapter utilizing bond proceeds transferred to the Housing Rehabilitation Loan Fund pursuant to paragraph (2) of subdivision (a) of Section 53130, paragraph (2) of subdivision (b) of Section 53130, and Sections 8878.20 and 8878.21 of the Government Code, deferred payment loans made with these funds shall be subject to all of the following special provisions, which shall prevail over conflicting provisions of this chapter:

(a)  (1) Applications for fund commitments shall be accepted by the department at any time. Fund commitments shall be based on a ranking of applications, which shall occur at least once every three months until there are insufficient funds available to commit according to this ranking. In making this ranking for rental housing developments, priority shall be given to those projects which (A) serve the greater number of eligible households as defined in Section 50105 with the lowest incomes, (B) provide the greater number of units with three or more bedrooms, (C) are located in areas where the housing need is great as determined by the department, taking into consideration, among other factors, low vacancy rates, high market rents, long waiting lists for subsidized housing, the stock of substandard housing, and the potential loss of subsidized rental housing to market-rate housing through demolition, foreclosure, or subsidy termination, (D) complement the implementation of an existing housing program, (E) maximize private, local, and other funding sources, and (F) maximize long-term benefits for eligible households, as defined in Sections 50079.5 and 50105. Subparagraph (B) above shall not apply to applications for fund commitments submitted pursuant to Section 50670 or to any application for residential hotels and motels. In making this ranking for owner-occupied housing, priority shall be given to those applications which (A) serve the greater number of eligible households, as defined in Section 50105, with the lowest income, (B) provide the greater number of units with three or more bedrooms, (C) are located in areas where the need for rehabilitation is great as determined by the department, taking into consideration, among other factors, the amount of substandard owner-occupied housing, low vacancy rates, and limited availability of affordable housing, (D) complement the implementation of an existing housing program, and (E) maximize available and appropriate private, local, and other funding sources. The department shall also evaluate the capability of the sponsor to rehabilitate, own, and manage the rental housing development or the capability of the applicant for funding for owner-occupied housing to implement the proposed program.

(2) Loans for rental housing developments may be reviewed, approved, and funded by the department directly to the sponsor. In these cases, the department shall ensure that the sponsor notifies the local legislative body of the sponsor’s loan application prior to a funding award. Loans to owner-occupants may be made by local public entities or nonprofit corporations which have received fund commitments from the department. The department shall ensure that the local public entity or nonprofit corporation applying for fund commitments for loans to owner-occupants notifies the local legislative body of the application prior to a funding award. When the department certifies a local public entity or nonprofit corporation as being capable of making these loans, the department shall delegate responsibility for reviewing and approving these loans to the local public entity or nonprofit corporation. If it is determined by the department that the local public entity or nonprofit corporation is no longer capable of making or managing these loans, the department may, at its sole discretion, revoke that delegation of responsibility or cancel the funding commitment to the local public entity or nonprofit corporation, or both. The department’s regulations shall include procedures and standards for certification and decertification.

(3) A sponsor may apply for loans for one or more rental housing developments.

(b) (1) A housing development may utilize any combination of federal, state, local, and private financial resources necessary to make the development affordable, for the term of the state’s regulatory agreement, to the eligible households. Notwithstanding the requirements of Section 50663, rental housing developments and owner-occupied units assisted by the program may be located anywhere in the state.

(2) In the case of loans for rental housing developments awarded to nonprofit sponsors, the total secured debt in a superior position to the department’s loan, plus the department’s loan, shall not exceed 100 percent of the after rehabilitation value of the property, as determined by an appraisal of the property conducted pursuant to guidelines established in regulations of the department.

(3) The maximum loan amounts per unit established in regulations pursuant to Section 50670 shall also apply to rental housing developments rehabilitated or acquired and rehabilitated pursuant to paragraph (1) of subdivision (a) of Section 50661, except that there shall not be a maximum loan amount established per project. These dollar limitations may be increased by the department, as necessary, in high-cost areas of the state or where the correction of severe health and safety defects or the provisions of handicapped accessibility standards necessitate greater assistance. The department, by regulation, may specify unit loan limits for loans made for owner-occupied housing and the circumstances under which it may grant exceptions to, or variances from, these limits.

(4) (A) Loans made to sponsors of rental housing developments for acquisition and rehabilitation shall be for terms of not less than 30 years. Loans made to sponsors of rental housing developments for rehabilitation only shall be for terms of not less than 20 years. However, the term shall not exceed the useful life of the rental housing development for which the loan is made. The sponsor may elect to begin to repay the loan at any time in accordance with the prepayment plan established in accordance with paragraph (6), if it is determined by the department, that the sponsors can continue to maintain the rents at levels affordable to eligible households.

(B) The term of the loan and the time for repayment may be extended by the department for additional terms as long as the rental housing development is operated in a manner consistent with the regulatory agreement and the sponsor requires an extension in order to continue to operate in a manner consistent with this chapter. Each extension shall be for a period of not less than 10 years and the total term of the revised loan shall not exceed 55 years.

(5) (A) In the case of loans made for rental housing developments, eligible costs shall include those costs relating to (i) real property acquisition, including refinancing of existing debt to the extent necessary to reduce debt service to a level consistent with the provision of affordable rents and the fiscal integrity of the project; (ii) rehabilitation or reconstruction, including the conversion of nonresidential structures to residential use; (iii) general property improvements which are necessary to correct unsafe, unhealthy, or unsanitary conditions, including renovations and remodeling, including, but not limited to, remodeling of kitchens and bathrooms, installation of new appliances, landscaping, and purchase or installation of central air conditioning; (iv) necessary and related onsite improvements; (v) reasonable administrative expenses in connection with the planning and execution of the project, as determined by the department; (vi) reasonable consulting costs; (vii) rent-up costs; (viii) seismic rehabilitation improvements; and (ix) any other costs of rehabilitation authorized by the department. “Rent-up costs,” as used in this section, means costs incurred while a unit is on the housing market but not rented to its first tenant. “Seismic rehabilitation improvements,” as used in this section, means improvements which are designed to increase seismic structural safety in accordance with a plan developed by a civil engineer, a structural engineer, or an architect for a particular building that has been identified as hazardous by the city or county in which the building is located in accordance with the criteria established by the Seismic Safety Commission pursuant to Section 8875.1 of the Government Code or in accordance with a previously adopted city or county seismic safety ordinance adopted pursuant to Section 19163.

(B) In the case of loans made for owner-occupied housing, eligible costs shall include those costs relating to (i) rehabilitation work expenses; (ii) cost of room additions necessary to alleviate overcrowding; (iii) costs of general property improvements including renovations and remodeling, including, but not limited to, remodeling of kitchens and bathrooms, installation of new appliances, landscaping and purchase or installation of central air conditioning, to the extent that they are necessary to correct unsafe, unhealthy, or unsanitary conditions; (iv) costs related to necessary architectural, engineering, and other technical consultants; (v) costs of preliminary reports, title policies, credit reports, appraisal reports, and fees for recording documents related to the department’s loans; (vi) costs of building permits and other governmental fees; and (vii) if in conjunction with other rehabilitation work, costs for improvements related to making the housing accessible to the handicapped.

(C) Notwithstanding the provisions of Section 53130 which limit the use of allocated proceeds with respect to project operating costs, and Sections 53131 and 53133, the department may set aside or use any amounts available in the fund to establish a rental housing development default reserve for the purpose of curing or avoiding a sponsor’s defaults on the terms of any loan or other obligation which jeopardizes the financial integrity of a rental housing development or the department’s security in the rental housing development. The payment or advance of funds by the department pursuant to this subparagraph shall be solely within the discretion of the department and no sponsor shall be entitled to or have any right to payment of these funds. Funds advanced pursuant to this subparagraph shall be added to the loan amount secured by the deed of trust and shall be payable to the department upon demand.

(D) Notwithstanding the provisions of Section 53130 which limit the use of allocated proceeds with respect to project operating costs, or Sections 53131 and 53133, the department may set aside or use proceeds in the fund in an amount not to exceed 3 percent of the amount of encumbrances for loans for owner-occupied housing to establish an owner-occupied housing default reserve for the purpose of curing or avoiding an owner’s default on the terms of any loan or other obligation which jeopardizes the department’s security in the owner-occupied housing. The payment or advance of funds by the department pursuant to this subparagraph shall be solely within the discretion of the department, and no homeowner shall be entitled to, or have any right to payment of, these funds. Funds advanced pursuant to this subparagraph shall be added to the loan amount secured by the deed of trust and shall be payable to the department upon demand. Interest payments from loans for owner-occupied housing shall be allocated by the department into this reserve to replace the allocated proceeds until the percent established by the department is achieved solely with interest payments.

(6) Upon request of the sponsor, the department may permit repayment of a sponsor’s loan on the basis of net cashflow. The department shall develop a prepayment plan in conjunction with the sponsor which will ensure the maintenance of affordable rents and the fiscal integrity of the rental housing development. As an incentive to encourage the prepayment of loans, the department may permit the sponsor to retain one-half of the net cashflow. The department shall determine the method for calculating net cashflow, which may include a factor for excess debt service coverage or a return on cash investment to the sponsor.

(7) If a loan is made pursuant to this chapter for both seismic rehabilitation improvements and other eligible rehabilitation costs, only those costs related to the seismic rehabilitation improvements shall be counted and included for purposes of the fund reservation made by Section 8878.20 of the Government Code.

(c) Principal and accumulated interest is due and payable upon completion of the term of the loan. The loan shall bear interest at the rate of 3 percent per annum on the unpaid principal balance. However, the department shall reduce or eliminate interest payments on a loan for any year or, alternatively, defer interest until the deferred payment loan is repaid, if necessary to provide affordable rents to households of very low and low income. The ability to pay all or part of the 3 percent simple annual interest shall not be considered in determining the fiscal integrity of the rental housing development at the time of the rating and ranking of an application.

(1) “Maintain affordable rent levels,” as used in this section, means rents may be automatically increased by the sponsor on an annual basis pursuant to an inflation index to be determined by the department. The inflation index shall reflect anticipated annual changes in rental housing development operating costs from a base year when the rents are initially established. Any sponsor may appeal to the department for a greater adjustment in rents necessary to ensure the fiscal integrity of the rental housing development. If the department does not respond within 60 days, the request shall be deemed approved. A 30-day written notice shall be given to each eligible household prior to an adjustment in the amount of rent.

(2) (A) Upon prior written approval by the department, a sponsor may set income limits for incoming tenants at a level below the limit specified in Section 50079.5. If a tenant’s income exceeds this income limit established by the sponsor, but does not exceed the limit specified in Section 50079.5, that fact alone shall neither constitute cause for the tenant’s eviction, nor be a violation of the sponsor’s loan agreement. If a tenant’s income exceeds the income limit for a household specified in Section 50079.5, the tenant shall be required to vacate the assisted unit within six months from the date of income recertification or notice to the sponsor of an increase in income over the permissible income level. That period may be extended by the sponsor for an additional six-month period in high cost rental areas with low vacancy rates, as determined by the department. Any vacant units shall be rented to eligible households until the required residency by eligible households is attained.

(B) In the case of limited equity housing cooperatives, the provisions of this paragraph shall apply, except that tenants whose incomes, upon recertification, exceed the limit specified in Section 50079.5 shall not be required to vacate their units. Instead, and upon six months’ notice, these tenants shall be required to pay rent in an amount equal to the market rate rent for comparable units, as determined by the department. When a tenant’s income exceeds the limit specified in Section 50079.5, the next available membership share for occupancy in a comparable unit shall be sold to a household with an income at or below this limit.

(3) When operating income as defined by the department is greater than operating expenses, debt service, deposits required for reserve accounts, payments pursuant to paragraph (6) of subdivision (b) if elected by the sponsor, approved annual distributions, and any other disbursements approved by the department, these excess funds shall be paid into an account established in the fund. Funds in this account shall be appropriated to the department for use to assist rental housing developments funded pursuant to this section with proceeds of bonds issued pursuant to Chapter 27 of the Statutes of 1988, Chapter 30 of the Statutes of 1988, or Chapter 48 of the Statutes of 1988, subject to the following requirements:

(i) Excess funds in the account shall be allocated first into the rental housing development default reserve established pursuant to subparagraph (C) of paragraph (5) of subdivision (b). The balance of this default reserve shall not exceed the maximum level of funding established by regulations adopted by the department.

(ii) After the rental housing development default reserve is fully funded with these excess funds, the department shall use all additional excess funds in the account for payment of either unforeseen capital improvements, the cost of which would jeopardize the fiscal integrity and affordability of a rental housing development, or to further reduce rents in a rental housing development. The department may adopt regulations which specify the procedures and standards for application for, and use of, these funds. Those payments used for capital improvements shall be added to the loan amount secured by the deed of trust and shall be payable to the department upon demand.

(d) Prior to disbursement of any funds for loans to rental housing developments made pursuant to this section, the department shall enter into a regulatory agreement with the sponsor in accordance with subdivision (d) of Section 50670, except that (1) the term of the regulatory agreement shall be for the original term of the loan and the agreement shall be binding upon the sponsor and successors in interest upon sale or transfer of the rental housing development or prepayment of the loan and (2) a nonprofit sponsor, other than a governmental agency, may maintain a debt service coverage ratio of 115 percent and distribute earnings in an amount no greater than 8 percent of the nonprofit sponsor’s actual investment. The regulatory agreement also shall contain provisions requiring annual inspections and review of year-end fiscal audits and related reports by the department and provisions to maintain affordable rent levels to serve eligible households.

(e) Where loans will be used in conjunction with federal or other housing assistance or tax credits and a conflict exists between the other state or federal program requirements and those of this chapter with respect to the calculation of rents, the requirements of the Deferred Payment Rehabilitation Loan Program and the Special User Housing Rehabilitation Program may be waived only to the extent necessary to permit federal or other state financial participation or eligibility for tax credits.

(f) “Sponsor,” for purposes of this section, has the same meaning as defined in subdivision (c) of Section 50669.

(g) (1) The department shall adopt emergency regulations to implement this chapter and to amend the maximum loan amounts per unit established in regulations adopted pursuant to Section 50670, with respect to loans made with funding subject to this section. The regulations shall be conclusively presumed to be necessary for the immediate preservation of the public peace, health, safety, or general welfare within the meaning or purposes of Section 11346.1 of the Government Code.

(2) Notwithstanding conflicting provisions of this chapter, the department may elect to make the regulations referred to in paragraph (1) additionally applicable until December 31, 1993, to all other deferred payment loan programs authorized by this chapter, except the programs specified in Sections 50662.5 and 50671, if the department determines that the uniformity achieved thereby will avoid significant additional administrative costs.

(h) For purposes of this section, “rental housing development” means a single family house or a multifamily structure or structures containing two or more dwelling units, including efficiency units. One or more of the dwelling units in a rental housing development shall be rented or leased or otherwise occupied as a primary residence by a person or household who is not the owner of the structure or structures. For the purposes of this section, motels operated pursuant to subdivision (b) of Section 50669, residential hotels, group or congregate homes, and limited equity housing cooperatives are rental housing developments. Except for motels, the limitations concerning types of residents and minimum number of units set forth in subdivision (b) of Section 50669 shall not apply.

(i) “Affordable rent” for the purposes of this section shall be established by the department in the regulations authorized by subdivision (g). However, the initial rents shall be established by the department based on a designated family size for each unit size, and those initial rents shall not exceed 30 percent of 50 percent of the area median income adjusted by that designated family size for units restricted to occupancy by very low income households; or 30 percent of 60 percent of area median income adjusted by that designated family size for units restricted to occupancy by low-income households. In establishing affordable rent levels, the department shall make provision in its regulations for projects serving the physically and mentally handicapped persons.

(Amended by Stats. 2011, Ch. 239, Sec. 11. (SB 562) Effective January 1, 2012.)

50669.
  

As used in Section 50670:

(a)  “Deferred-payment loan” means a loan for acquisition and rehabilitation of a rental housing development which (1)  has a term of not more than 30 years, but which shall not in any event exceed the useful life of the rental housing development for which such loan is made, as determined by the department, whichever is less, and (2)  is repaid in a single payment upon refinancing of such development at the end of the term of the loan. Those loans shall bear interest at the rate of 3 percent per annum on the unpaid principal balance, provided, however, that the department shall reduce or eliminate interest payments on a loan for any year or, alternatively, defer interest payments until the deferred-payment loan is repaid, if necessary to provide affordable rents to households of very low and low income. The ability to pay all or part of the 3 percent simple annual interest shall not be considered in determining the fiscal integrity of the rental housing development at the time of the rating and ranking of an application.

(b)  “Rental housing development” means a residential structure or structures containing five or more rental dwelling units for the elderly or handicapped, provided that each unit is equipped with a kitchen and bathroom, or a structure or structures intended for use as a group home by five or more handicapped individuals or a residential hotel for any low or very low income household. “Residential hotel” shall have the same meaning as used in paragraph (1) of subdivision (b) of Section 50519 but, for purposes of this subdivision, there shall be an additional requirement that a majority of the guestrooms in the hotel be residential hotel units. A “residential hotel unit” means a room used or intended to be used as a primary residential unit by a person or persons, which is subject to Chapter 2 (commencing with Section 1940) of Title 5 of Part 4 of Division 3 of the Civil Code, but which does not have either a self-containing kitchen or bathroom, or both. A “residential hotel unit” also includes an efficiency unit as defined in Section 17958.1. “Rental housing development” also means a residential structure or structures in operation or previously operated as a motel and subject to subdivision (b) of Section 1940 of the Civil Code, which will contain five or more dwelling units for any low or very low income households. Eligible rehabilitation costs relative to motels may include costs associated with adding self-containing kitchens and bathrooms in each unit.

(c)  “Sponsor” means any individual, joint venture, partnership, limited partnership, trust, corporation, cooperative, local public entity, duly constituted governing body of an Indian reservation or rancheria, or other legal entity, or any combination thereof, certified by the department as qualified to own, manage, and rehabilitate a rental housing development. A sponsor may be organized for profit or limited profit or be nonprofit.

(Amended by Stats. 1990, Ch. 229, Sec. 2. Effective July 12, 1990.)

50670.
  

(a)  The department shall establish a Special User Housing Rehabilitation Program under which it may make deferred-payment loans to sponsors for the rehabilitation or the acquisition and rehabilitation of rental housing developments to be occupied by eligible households of very low and low income. The department may make such loans in an amount necessary to acquire and rehabilitate a rental housing development and to provide affordable rents, when considered in conjunction with other financing on or assistance to such development, for eligible households of very low and low income for the term of the regulatory agreement pursuant to subdivision (d). In no event, may the amount of the loan exceed 90 percent of the combined amount of the fair market value of the rental housing development and the cost of rehabilitation work to be undertaken. However, with respect to a nonprofit sponsor or local public entity, the department may loan up to 100 percent of such combined amount.

(b)  In making a loan pursuant to this section, the department may disburse funds in a manner and in accordance with a schedule which ensures the economic feasibility of the rental housing development and the completion of the rehabilitation work and which protects the interests of the state.

(c)  Prior to making a loan commitment pursuant to this section, the department shall do all of the following:

(1)  Inspect the rental housing development to be assisted pursuant to this section to determine the economic feasibility of rehabilitating such development.

(2)  Approve a plan submitted by the sponsor which includes a plan for occupancy of the development, a description of the nature and costs of rehabilitation to be undertaken, and projections as to rental levels in such development.

(d)  Prior to disbursement of any funds pursuant to this section, the department shall enter into a regulatory agreement with the sponsor which provides for the limitation on profits in the operation of the rental housing development. When the sponsor is not a nonprofit sponsor or a local public entity, the regulatory agreement with the sponsor shall limit the distribution of the sponsor’s earnings to an annual amount no greater than 8 percent of the sponsor’s actual investment (excluding unaccrued liabilities of the sponsor) in the rental housing development. The regulatory agreement shall also set standards for tenant selection to ensure occupancy by eligible households of very low and low income for the term of such agreement, govern the terms of occupancy agreements, and contain other provisions necessary to carry out the purposes of this section. Upon recordation of the agreement in the office of the county recorder in the county in which the real property subject to such agreement is located, the agreement shall be binding upon the sponsor and successors in interest for the original term of the loan, as determined by the department, but for a period of not more than 30 years.

(e)  The department shall fix and alter, from time to time, a schedule of rents on each development as may be necessary to provide residents of the rental housing development with affordable rents, to the extent consistent with the financial integrity of such development. No sponsor shall increase the rent on any unit without the prior permission of the department which shall be given only if the sponsor affirmatively demonstrates that such increase is required to defray necessary operating costs or to avoid jeopardizing the fiscal integrity of the housing development. However, in the event that the department does not act upon a request for a rent increase within 60 days from documented receipt of the request, such increase shall be deemed approved.

(f)  The department may annually inspect rental housing developments assisted pursuant to this section to ensure compliance with the terms of the regulatory agreement and may require such audits, financial statements, and other documents as are necessary to ensure compliance with the terms of the regulatory agreement and to ensure occupancy by eligible households of very low and low income.

(g)  With respect to rental housing developments rehabilitated pursuant to this section:

(1)  The department shall make payments and shall provide advisory assistance to persons and families permanently displaced as a result of such rehabilitation in accordance with the requirements of subdivisions (b) and (e) of Section 7265.3 of the Government Code.

(2)  The department shall provide affordable temporary housing to eligible households of very low and low income who reside in a rental housing development prior to rehabilitation or acquisition and rehabilitation of such housing development, who are required to move during the period of rehabilitation, and who occupy a unit in such development upon completion of rehabilitation. Such temporary housing shall be provided until units in the rental housing development are available for occupancy by such households.

(3)  For the purposes of subdivision (f) of Section 7265.3 of the Government Code, moneys appropriated for purposes of this chapter on and after the effective date of the amendments to this section enacted by the Statutes of the 1983 Regular Session of the Legislature, and by Chapter 1043 of the Statutes of 1979, whether or not reappropriated for transfer to the Housing Rehabilitation Loan Fund, shall constitute available state funds.

(4)  Eligible households of very low and low income displaced as a result of rehabilitation pursuant to this section shall be accorded first priority in occupying units in the rental housing development, from which they were displaced, subsequent to rehabilitation.

(Amended by Stats. 1983, Ch. 682, Sec. 2. Effective September 11, 1983.)

50671.
  

For the purpose of providing disaster relief to owners of rental housing and the tenants residing in rental housing that was damaged or destroyed as a result of the Los Angeles-Whittier Narrows Earthquake on October 1, 1987, or subsequent aftershocks, resulting in a state of emergency proclaimed by the Governor pursuant to Section 8625 of the Government Code, financial assistance may be provided to disaster victims as prescribed in this chapter under the following special conditions, which shall prevail over conflicting provisions of this chapter and administrative regulations:

(a)  Funds may be used for the purpose of rehabilitating, including reconstruction of, rental housing developments, including residential hotels, which were damaged or destroyed as a result of the earthquake.

(b)  Rental housing developments, as otherwise defined in subdivision (b) of Section 50669, need not contain a minimum of five rental dwelling units. One rental dwelling unit shall be sufficient.

(c)  The loans need not be made in support of the programs specified in Section 50663.

(d)  As a condition of assistance to sponsors of rental housing developments, the department may establish those rent levels for units assisted pursuant to this section as it may determine (1) are necessary to alleviate hardship in the disaster area, (2) provide for affordable rents or rents not exceeding those charged prior to the earthquakes, and (3) are consistent with the economic feasibility of the assisted rental housing development. In addition to the other requirements of this chapter, the department may require terms and conditions as it determines necessary to meet the needs of the disaster area and its victims, to ensure the fiscal integrity of the rental housing development and to protect the interests of the state. The department shall require that priority in occupancy in any unit assisted pursuant to this section shall be given first to occupants of rental units assisted pursuant to this section who were displaced by the earthquakes or resulting rehabilitation of the assisted rental units. After no additional displaced persons qualify for, or remain in, any assisted units, these units shall be available to on a priority basis, or occupied by, very low income households and lower income households.

(e)  In allocating funds to local public entities and nonprofit corporations, the department shall consider the availability of other resources to assist rental housing and the occupants of that rental housing and shall give priority to those applicants in jurisdictions with the greatest housing need resulting from the disaster and the fewest resources to address those needs.

(f)  The department may waive the maximum loan amounts and per-unit loan amounts established by regulation as it determines necessary to serve the disaster victims.

(g)  A loan to a nonprofit corporation or a limited partnership in which a nonprofit corporation is a general partner which owns or will acquire a rental housing development shall not exceed 100 percent of the combined costs of rehabilitation and refinancing existing indebtedness or rehabilitation and acquisition costs.

(h)  A loan may be made to a local housing authority or community development commission to rehabilitate vacant rental housing that it owns and operates.

(i)  When a loan will be used in conjunction with federal or other state housing assistance or tax credits and a conflict exists between the other state or federal program requirements and this chapter with regard to determining maximum allowable rents, the requirements of this chapter may be waived only to the extent necessary to permit the federal or other state financial participation or eligibility for tax credits.

(j)  Eligible rehabilitation or reconstruction costs may include the costs of temporary relocation where damage caused by the earthquake or rehabilitation or reconstruction of the rental housing development necessitates temporarily displacement of the tenants. The amount of monthly relocation assistance provided to eligible households temporarily displaced shall not exceed the difference between monthly rent paid by the tenant prior to the earthquake and rent in the replacement housing located by the local public entity or nonprofit corporation until rehabilitation is completed, but in no case shall, the total amount exceed one thousand dollars ($1,000). Prior to providing relocation assistance payments, the local public entity or nonprofit corporation shall ensure that displaced tenants have applied for any and all other financial assistance for which the tenants are eligible that is provided by any other federal, state, or local programs.

(k)  The department may provide funds to local public entities and nonprofit corporations for related administrative expenses in an amount not to exceed 5 percent of the total loan commitments subject to this section from the Housing Rehabilitation Loan Fund.

( l)  No funds shall be committed pursuant to this section on or after January 1, 1990.

(Amended by Stats. 1988, Ch. 1291, Sec. 2. Effective September 26, 1988.)

50671.5.
  

For the purpose of providing disaster relief to owners of rental housing and the tenants residing in rental housing that was damaged or destroyed as a result of a natural disaster as defined by Section 8680.3 of the Government Code, resulting in a state of emergency proclaimed by the Governor pursuant to Section 8625 of the Government Code, financial assistance may be provided to disaster victims as prescribed in this chapter under the following special conditions, which shall prevail over conflicting provisions of this chapter and administrative regulations:

(a)  (1)  Funds may be used to make loans for (A) repair or (B) refinancing in conjunction with repair, of rental housing developments that were damaged or destroyed as a result of the natural disaster. For purposes of this section, “repair” includes reconstruction.

(2)  The loans shall only be made in a city, county, or city and county proclaimed by the Governor to be in a state of disaster to assist rental housing developments that are damaged or destroyed by a natural disaster and only to the extent that other federal and state resources, private insurance proceeds, or private institutional lending sources, are not available or do not provide the assistance or coverage needed to rehabilitate or reconstruct that housing.

(3)  The loans may be provided (A) to persons who do not qualify for loan assistance from an agency of the United States for repair of the damage caused by a natural disaster, or, (B) to the extent that federally provided or assisted financing may be insufficient to accomplish the necessary repair or would require rent increases above the rent charged for the units prior to the disaster.

(4)  As to damaged rental housing, the loan funds shall be used to correct serious, life-threatening violations of the state or local building code or housing standards which are required to be corrected prior to occupancy, and to bring the property into compliance with seismic safety standards. If reconstruction is precluded on the original project site due to documented soil, geological, or other conditions which cannot be mitigated at a reasonable cost or the cost of the repair or reconstruction would exceed 110 percent of the value after reconstruction, the department may approve reconstruction on a comparable site in the immediate neighborhood. However, loan funds shall not be used for acquisition of real property.

(b)  (1)  Rental housing developments, for this purpose, shall include, but not be limited to, multifamily rental dwellings, apartments, residential hotels, rental mobilehomes, mobilehome parks, group homes for senior citizens or the disabled, buildings of mixed residential rental and commercial use, and buildings of mixed owner-occupant and rental use, that are made available for permanent residency of tenants. Rental housing developments shall contain five or more units. For buildings of mixed residential rental and commercial use, funds may be used for the repair of commercial as well as residential space.

(2)  To be eligible for funds under this section, the owner of any rental housing development set forth above, shall have been the owner of record at the time of the natural disaster.

(c)  In addition to the other requirements of this chapter, the department may require terms and conditions as it determines necessary to meet the needs of the disaster area and its victims, to ensure the fiscal integrity of the rental housing development, and to protect the interests of the state. The department shall require that priority in occupancy in any unit assisted pursuant to this section shall be given first to occupants of rental units assisted pursuant to this section who were displaced by the natural disaster or the resulting repair of the assisted rental units. Second priority shall be given to other persons who were displaced from housing as a result of the natural disaster.

(d)  In allocating funds, the department shall consider the availability of other resources to assist rental housing and the occupants of that rental housing and shall give priority to those applicants in jurisdictions with the greatest housing need resulting from the disaster and the fewest resources to address those needs. In allocating funds, the department shall also consider the availability of program funds and may give first priority to a loan request for repair only, and second priority to a loan request for refinancing and repair.

(e)  (1)  The department may waive the maximum loan amounts and per-unit loan amounts established by regulation as it determines necessary to serve the disaster victims. Loans made pursuant to this section for repair shall have a term of up to 20 years. Upon the request of the borrower, the department may permit repayment of the principal amount of any loan provided under this section, or of any interest on that loan, before the end of the loan term. This section shall not be construed to authorize any deferrals on the payment of principal or interest, unless the department determines that temporary deferral is necessary for fiscal integrity or to prevent foreclosure. The deferral period may be extended for an additional 12 months if the extension is authorized by the director.

(2)  The department may set interest rates as specified in subdivision (m) of Section 50662.7.

(f)  A loan shall not exceed the combined costs of refinancing existing indebtedness and repair. However, the total secured debt in a superior position to the department’s loan, plus the department’s loan, shall not exceed 100 percent of the after-repair value of the property, except that the department may waive this limitation in individual cases when necessary to ensure correction of serious, life-threatening violations of the state or local building code or housing standards which are required to be corrected prior to occupancy, seismic safety standards, and general property improvements relating to these standards, pursuant to subdivision (a).

(g)  Prior to full loan approval, the department may make loans not exceeding five thousand dollars ($5,000) per loan to pay for the costs of predevelopment activity which must be undertaken prior to making eligible repairs if, in the opinion of the department, the borrower is unable to pay for these costs in advance of full loan approval. These loans shall bear interest at the rate of 6 percent simple interest per annum and shall be evidenced by a promissory note secured by a deed of trust. At the time of full loan approval, the predevelopment loan shall be canceled, and the principal amount of the loan and all accrued interest shall be included in the amount of the full loan and shall be subject to the same interest rate and terms and conditions as the full loan. For purposes of computing the maximum loan amount, the amount of the predevelopment loan shall be included.

(h)  Tenants of rental housing developments repaired with assistance provided under this section who are displaced as a result of either the natural disaster or the repair work, or both the natural disaster and the subsequent repair work, shall be entitled to relocation benefits pursuant to, and subject to, the requirements of Section 7265.3 of the Government Code. Sponsors of assisted rental housing developments shall be responsible for providing the benefits and assistance. The costs of the benefits and the assistance provided to tenants shall be eligible for funding by a loan provided pursuant to this section. Benefits and assistance provided hereunder shall not duplicate benefits or assistance for temporary housing received by tenants from any other public source or from insurance proceeds.

(i)  The department may make loans directly to owners of rental housing, or contract for the administration of loans under this section with entities that it determines to have the necessary experience to successfully administer the loan program, including, but not limited to, local public agencies and private organizations. The department may authorize, under that contract, the payment of expenses incurred by the entities in administering the loan program and may prescribe the conditions pursuant to which the entities shall administer the loans.

(j)  To the extent that any housing unit or other structure that was damaged or destroyed is reconstructed pursuant to this section with substantially the same number of units, it shall be deemed to be “existing housing” for purposes of subdivision (d) of Section 37001.5.

(k)  The department may set aside or use funds that are made available for the purposes of this section for the purpose of curing or averting a housing sponsor’s default on the terms of any loan or other obligation where that default would jeopardize the financial integrity of a rental housing development or the department’s security in the rental housing development assisted pursuant to this section. The payment or advance of funds by the department pursuant to this subdivision shall be exclusively within the department’s discretion, and no person shall be deemed to have any entitlement to the payment or advance of those funds. The amount of any funds expended by the department pursuant to this subdivision shall be added to the loan amount secured by the deed of trust and shall be payable to the department upon demand.

( l)  Any rule, policy, or standard of general application employed by the Department of Housing and Community Development in implementing the provisions of this section shall not be subject to the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.

(m)  The department shall adopt regulations establishing terms and conditions upon which repair loans may be made. These regulations shall be made available to the public by the department.

(n)  Fund allocations made pursuant to this section shall not be subject to review or approval by the Local Assistance Loan and Grant Committee of the Department of Housing and Community Development operating pursuant to Subchapter 1 (commencing with Section 6900) of Chapter 6.5 of Title 25 of the California Code of Regulations.

(o)  (1)  In order to be eligible for one or more loans pursuant to this section, the borrower shall agree to all of the following:

(A)  All buildings shall be connected to the foundation systems except those of unreinforced masonry wall construction as necessary to meet the seismic requirements of the 1973 Edition of the Uniform Building Code of the International Conference of Building Officials in a manner approved by the department, which may include seismic strengthening of foundation cripple walls, and affixing or bolting sill plates to the foundation.

(B)  For all buildings of unreinforced masonry wall construction, all repairs and seismic retrofits shall comply with earthquake hazard mitigation programs established pursuant to Chapter 12.2 (commencing with Section 8875) of Division 1 of Title 2 of the Government Code.

(C)  All water heaters shall be braced, anchored, or strapped to resist falling or horizontal displacement due to earthquake motion.

(2)  The loans shall include an amount sufficient to meet the requirements of paragraph (1).

(Amended by Stats. 1993, Ch. 1105, Sec. 4. Effective January 1, 1994.)

50671.6.
  

For the purpose of preserving or expanding the supply of rental housing affordable to low- and very low-income tenants in cities or counties affected by a natural disaster as defined by Section 8680.3 of the Government Code, resulting in a state of emergency proclaimed by the Governor pursuant to Section 8625 of the Government Code, financial assistance may be provided as prescribed in this chapter under the following special conditions, which shall prevail over conflicting provisions of this chapter and administrative regulations:

(a)  Funds may be used for the purpose of repair or refinancing in conjunction with rehabilitation of rental housing developments. For purposes of this section, rehabilitation may include reconstruction. The loans shall only be made in a city, county, or city and county proclaimed by the Governor to be in a state of disaster and only when the Director of the Department of Housing and Community Development has determined that the disaster has decreased the supply of low-income rental housing. The loan funds may be used to repair disaster related damage, bring the housing into compliance with applicable health and safety and seismic safety standards, and to make property improvements that are related to that compliance. If reconstruction is precluded on the original project site due to documented soil, geological, or other conditions that cannot be mitigated at a reasonable cost, or the cost of the rehabilitation or reconstruction would exceed 110 percent of the value after reconstruction, the department may approve reconstruction on a comparable site in the immediate neighborhood.

(b)  (1)  Rental housing developments, for this purpose, shall include, but not be limited to, multifamily rental dwellings, apartments, residential hotels, mobilehome parks, group homes for senior citizens or the disabled, buildings of mixed residential rental and commercial use, and buildings of mixed owner-occupant and rental use that are made available for permanent residency of tenants. Rental housing developments must contain five or more units. For buildings of mixed residential rental and commercial use, funds may be used for costs directly attributable to the residential space or the conversion of commercial space to residential space or a pro-rata share, based on gross floor area mix at the time of the disaster, if costs cannot be directly attributable to either commercial or residential space.

(2)  Eligible cost shall include those costs relating to all of the following:

(A)  Refinancing of existing debt to the extent necessary to reduce debt service to a level consistent with the provision of affordable rents and the fiscal integrity of the project.

(B)  Rehabilitation or reconstruction.

(C)  General property improvements that are necessary to correct unsafe, unhealthy, or unsanitary conditions, including renovations and remodeling, including, but not limited to, remodeling of kitchens and bathrooms, installation of new appliances, landscaping, and purchase or installation of central air conditioning.

(D)  Necessary and related onsite improvements.

(E)  Reasonable administrative expenses in connection with the planning and execution of the project, as determined by the department.

(F)  Reasonable consulting costs.

(G)  Rent-up costs.

(H)  Seismic rehabilitation improvements.

(I)  Any other costs of rehabilitation authorized by the department.

(3)  (A)  “Rent-up costs,” as used in this section, means costs incurred while a unit is on the housing market but not rented to its first tenant.

(B)  “Seismic rehabilitation improvements,” as used in this section, means improvements that are designed to increase seismic structural safety in accordance with a plan developed by a civil engineer, a structural engineer, or an architect for a particular building that has been identified as hazardous by the city or county in which the building is located in accordance with the criteria established by the Seismic Safety Commission pursuant to Section 8875.1 of the Government Code or in accordance with a previously adopted city or county seismic safety ordinance adopted pursuant to Section 19163.

(4)  Eligible activities, not fundable under the program, shall include those costs relating to both of the following:

(A)  Acquisition of property.

(B)  Conversion of nonresidential structures to residential use.

(c)  The loans need not be made in support of the programs specified in Section 50663.

(d)  As a condition of assistance under this section, sponsors of rental housing developments shall agree to the restrictions set forth in this subdivision with respect to assisted units. The proportion of assisted units shall at least be equal to the proportion of project costs financed pursuant to this section to the total after-rehabilitation value of the rental housing development.

(1)  For any loan under this section for the rehabilitation of units, the borrower must maintain affordable rent levels for low-income households, as defined by Section 50079.5, for assisted units for the term of the loan.

(2)  “Maintain affordable rent levels,” as used in this section, means rents may be automatically increased by the sponsor on an annual basis pursuant to increases in the median income of the county in which the rental housing development is located. Any sponsor may appeal to the department for a greater adjustment in rents necessary to ensure the fiscal integrity of the rental housing development. If the department does not respond within 60 days, the request shall be deemed approved. A 30-day written notice shall be given to each eligible household prior to an adjustment in the amount of rent.

(3)  (A)  Upon prior written approval by the department, a sponsor may set income limits for incoming tenants at a level below the limit specified in Section 50079.5. If a tenant’s income exceeds this income limit established by the sponsor, but does not exceed the limit specified in Section 50079.5, that fact alone shall neither constitute cause for the tenant’s eviction, nor be a violation of the sponsor’s loan agreement. If a tenant’s income exceeds the income limit for a household specified in Section 50079.5, the tenant shall be required to vacate the assisted unit within six months from the date of income recertification or notice to the sponsor of an increase in income over the permissible income level. That period may be extended by the sponsor for an additional six-month period in high cost rental areas with low vacancy rates as determined by the department. Any vacant units shall be rented to eligible households until the required residency by eligible households is attained.

(B)  In the case of limited equity housing cooperatives, the provisions of this paragraph shall apply, except that tenants whose incomes, upon recertification, exceed the limit specified in Section 50079.5 shall not be required to vacate their units. Instead, and upon six months’ notice, these tenants shall be required to pay rent in an amount equal to the market rate rent for comparable units, as determined by the department. When a tenant’s income exceeds the limit specified in Section 50079.5, the next available membership share for occupancy in a comparable unit shall be sold to a household with an income at or below this limit.

(4)  Any rental housing development assisted pursuant to this section shall be governed by a regulatory agreement between the sponsor and the department. The agreement shall, at a minimum, contain all of the restrictions set forth in this subdivision. The regulatory agreement shall be recorded, or referenced in a document recorded, in the office of the county recorder for the county in which the rental housing development is located. The regulatory agreement shall be deemed a covenant running with the land and shall be binding upon the sponsor and any and all successors-in-interest in case of sale or transfer of the rental housing development for the original term of the loan, and any extensions thereof, regardless of any prepayment of the loan.

(5)  If any unit undergoing rehabilitation or reconstruction pursuant to funding under this section is subject to a currently applicable regulatory agreement between the department and a housing sponsor, that agreement shall prevail over this subdivision.

(6)  In addition to the other requirements of this chapter, the department may require terms and conditions as it determines necessary to meet the needs of the disaster area and its victims, to ensure the fiscal integrity of the rental housing development, and to protect the interests of the state. The department shall require that priority in occupancy in any unit assisted pursuant to this section shall be given first to those occupants who were displaced by the natural disaster or the resulting rehabilitation of the assisted rental units. Second priority shall be given to other persons who were displaced from housing as a result of the natural disaster.

(e)  (1)  When the requirements of subdivision (a) have been met, the department shall announce the availability of funds and accept applications for fund commitments until any deadline established pursuant to subdivision (e) of 50661.5 has expired. Fund commitments shall be based on a ranking of applications, which shall occur at least once for each new disaster. In making this ranking for rental housing developments, priority shall be given to those projects that: (A) serve the greater number of eligible households, as defined in Section 50105, with the lowest incomes; (B) suffered substantial damage as a result of the natural disaster; (C) are located in areas where the housing need is great as determined by the department, taking into consideration, among other factors, low vacancy rates, high market rents, long waiting lists for subsidized housing, the stock of substandard housing, and the potential loss of subsidized rental housing to market-rate housing through demolition, foreclosure, or subsidy termination; (D) complement the implementation of an existing housing program; (E) maximize private local and other funding sources; and (F) maximize long-term benefits for eligible households, as defined in Sections 50079.5 and 50105.

(2)  The department shall also evaluate the capability of the sponsor to rehabilitate, own, and manage the rental housing development.

(f)  (1)  The department may waive the maximum loan amounts and per-unit loan amounts established by regulation as it determines necessary to serve the disaster victims. Loans made pursuant to this section for rehabilitation, shall have a term of up to 20 years. Loans made pursuant to this section for rehabilitation, or refinancing and rehabilitation shall have a term of up to 30 years.

(2)  Upon request of the sponsor, the department may permit repayment of a sponsor’s loan on the basis of net cash-flow. The department shall develop a prepayment plan in conjunction with the sponsor that shall ensure the maintenance of affordable rents and the fiscal integrity of the rental housing development. As an incentive to encourage the prepayment of loans, the department may permit the sponsor to retain one-half of the net cash-flow. The department shall determine the method for calculating net cash-flow, which may include a factor for excess debt service coverage or a return on cash investment to the sponsor.

(3)  Principal and accumulated interest is due and payable upon completion of the term of the loan. The loan shall bear interest at the rate of three percent per annum on the unpaid principal balance. However, the department shall reduce or eliminate interest payments on a loan for any year or, alternatively, defer interest until the deferred payment loan is repaid, if necessary to provide affordable rents to households of very low-income and low-income. The ability to pay all or part of the three percent simple annual interest shall not be considered in determining the fiscal integrity of the rental housing development at the time of the rating and ranking of an application.

(g)  When a loan will be used in conjunction with federal or other state housing assistance or tax credits, and a conflict exists between the other state or federal program requirements and this chapter with regard to determining maximum allowable rents, the requirements of this chapter may be waived only to the extent necessary to permit the federal or other state financial participation or eligibility for tax credits.

(h)  Tenants of rental housing developments rehabilitated with assistance provided under this section who are displaced as a result of either the rehabilitation work, or both the natural disaster and the subsequent rehabilitation work, shall be entitled to relocation benefits pursuant to, and subject to, the requirements of Section 7265.3 of the Government Code. The costs of the benefits and the assistance provided to tenants shall be eligible for funding by a loan provided pursuant to this section. Benefits and assistance provided hereunder shall not duplicate benefits or assistance for temporary housing received by tenants from any other public source or from insurance proceeds.

(i)  The department may make loans directly to owners of rental housing, or contract for the administration of loans under this section with entities that it determines to have the necessary experience to successfully administer the loan program, including, but not limited to, local public agencies and private organizations. The department may authorize, under that contract, the payment of expenses incurred by the entities in administering the loan program and may prescribe the conditions pursuant to which the entities shall administer the loans.

(j)  To the extent that any housing unit or other structure that was damaged or destroyed is reconstructed pursuant to this section with substantially the same number of units, it shall be deemed to be ”existing housing” for purposes of subdivision (d) of Section 37001.5.

(k)  Any rule, policy, or standard of general application employed by the Department of Housing and Community Development in implementing this section shall not be subject to the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code.

( l)  The department shall adopt regulations establishing terms and conditions upon which repair loans may be made. These regulations shall be made available to the public by the department.

(m)  Fund allocations made pursuant to this section shall not be subject to review or approval by the Local Assistance Loan and Grant Committee of the Department of Housing and Community Development operating pursuant to Subchapter 1 (commencing with Section 6900) of Chapter 6.5 of Title 25 of the California Code of Regulations.

(n)  (1)  In order to be eligible for one or more loans pursuant to this section, the borrower shall agree to all of the following:

(A)  All buildings shall be connected to the foundation systems, except those of unreinforced masonry wall construction, as necessary to meet the seismic requirements of the 1973 Edition of the Uniform Building Code of the International Conference of Building Officials in a manner approved by the department, that may include seismic strengthening of foundation cripple walls, and affixing or bolting sill plates to the foundation.

(B)  For all buildings of unreinforced masonry wall construction, all repairs and seismic retrofits shall comply with earthquake hazard mitigation programs established pursuant to Chapter 12.2 (commencing with Section 8875) of Division 1 of Title 2 of the Government Code.

(C)  All water heaters shall be braced, anchored, or strapped to resist falling or horizontal displacement due to an earthquake motion.

(2)  The loans shall include an amount sufficient to meet the requirements of paragraph (1).

(Added by Stats. 1993, Ch. 1105, Sec. 5. Effective January 1, 1994.)

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