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  ( Division 31 repealed and added by Stats. 1977, Ch. 610.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 8.6. Foreclosure Intervention Housing Preservation Program [50720 - 50720.12]
  ( Chapter 8.6 added by Stats. 2021, Ch. 111, Sec. 23. )

50720.
  

The Foreclosure Intervention Housing Preservation Program is hereby created for the purpose of preserving affordable housing and promoting resident ownership or nonprofit organization ownership of residential real property. The program shall be administered by the department and shall provide loans and grants as described in this chapter.

(Added by Stats. 2021, Ch. 111, Sec. 23. (AB 140) Effective July 19, 2021.)

50720.2.
  

(a) The Foreclosure Intervention Housing Preservation Program is hereby established. The department shall administer the program for the purpose of preserving affordable housing and promoting resident ownership or nonprofit organization ownership of residential real property.

(b) (1) Upon appropriation by the Legislature, the program shall be administered by the department to provide loans to eligible borrowers to support the acquisition of 1 to 25 unit properties meeting any of the following criteria:

(A) Real property subject to a trustee’s sale pursuant to Section 2924m of the Civil Code wherein an eligible bidder has made a bid or represents an intention to bid using funds from the program.

(B) Real property subject to a preforeclosure intervention sale.

(C) Real property subject to a foreclosure risk intervention sale.

(D) Real property subject to a recorded notice of default.

(2) Eligible borrowers shall be any one of the following:

(A) Eligible bidders in Section 2924m of the Civil Code other than “prospective owner-occupants” as defined in paragraph (1) of subdivision (a) of Section 2924m of the Civil Code.

(B) An organization whose primary activity is the development and preservation of affordable housing that is at least one of the following:

(i) An incorporated nonprofit organization as described in Section 501(c)(3) of the Internal Revenue Code (26 U.S.C. Sec. 501(c)(3)) that is exempt from taxation under Section 501(a) of that code (26 U.S.C. Sec. 501(a)).

(ii) A nonprofit corporation as that term is defined in Section 50091 of the Health and Safety Code.

(C) A limited liability company that satisfies both of the following criteria:

(i) A community land trust, as defined in clause (ii) of subparagraph (C) of paragraph (11) of subdivision (a) of Section 402.1 of the Revenue and Taxation Code, holds a controlling interest in the company.

(ii) A community land trust, as defined in clause (ii) of subparagraph (C) of paragraph (11) of subdivision (a) of Section 402.1 of the Revenue and Taxation Code, is the managing member of the company.

(3) Up to 5 percent of the funds appropriated for this program may be expended for the costs to administer the program. Costs to administer the program include, but are not limited to, all of the following:

(A) Costs to develop the guidelines required by this chapter, which may include, but is not limited to, the following:

(i) Department staffing expenses incurred in developing the guidelines.

(ii) Contracting with one or more program fund managers to develop the guidelines.

(iii) Contracting with third-party consultants to develop guidelines.

(B) Costs to develop lending criteria.

(C) Costs to advertise the program.

(D) Costs to develop technical assistance tools to support qualified entities in navigating the requirements and processes to apply for funding including, but not limited to, the following:

(i) Training modules.

(ii) Acquisition-rehabilitation specific financing templates and guidance, such as pro formas and worksheets.

(iii) Best practice guides for engaging tenants before and after property acquisition, managing safe and accessible rehabilitation of occupied buildings, facilitating resident ownership, and any other topic deemed appropriate by the department.

(iv) Technical assistance with resident engagement and education, property assessment and due diligence, affordable housing operations management, acquisition-rehabilitation project financial assistance, construction, and property management.

(4) Funds not committed to fund managers pursuant to Section 50720.6 as of December 31, 2025, or any funds returned from fund managers after December 31, 2025, shall be made available for loans authorized by Chapter 5.5 (commencing with Section 50606). Notwithstanding the requirements of Chapter 5.5, uncommitted or returned funds made available for purposes of Chapter 5.5 may be used to assist projects funded by the department or other public entities.

(5) Not later than May 15, 2023, the department shall report to the chairs of the Assembly Committee on Budget and the Senate Committee on Budget and Fiscal Review on the implementation of this program, including amount of funding disbursed and number, location, and cost of acquired properties, as well as the number of units acquired.

(c) All repayments of program funds, including loan principal and any interest collected, and any interest earned on the funds shall be deposited into the Housing Rehabilitation Loan Fund for purposes of the program, including, but not limited to, loans and grants to pay for repairs, maintenance, or improvements on properties acquired pursuant to the program. The funds may also be used to provide technical assistance pursuant to this chapter.

(Added by Stats. 2021, Ch. 111, Sec. 23. (AB 140) Effective July 19, 2021.)

50720.4.
  

As used in this chapter:

(a) “Department” means the Department of Housing and Community Development.

(b) “Foreclosure risk intervention sale” means a sale of a 1 to 25 unit residential real property that is not owner occupied and that exhibits indicators of foreclosure risk at the time of sale including, but not limited to, the following:

(1) There is a mortgage delinquency of at least 90 days.

(2) There is a delinquency on two or more property tax payments.

(3) The owner of the property is a debtor in a bankruptcy proceeding.

(4) There is tenant-initiated litigation against the owner of the property on the basis of lack of habitability.

(5) A local government body responsible for enforcing building codes has deemed the property partially or fully uninhabitable.

(6) There are other indicators that the department may prescribe in the guidelines adopted pursuant to this chapter.

(c) “Preforeclosure intervention sale” means a sale of a 1 to 25 unit residential real property that is subject to a recorded notice of default by a trustee representing a beneficiary at the time of the sale.

(d) “Program” means the Foreclosure Intervention Housing Preservation Program.

(e) “Property acquisition costs” means direct real property acquisition costs such as payment of the purchase price and any liens on eligible properties in addition to repairs required to ensure a property and its structures are in compliance with all applicable habitability, health, and safety laws.

(f) “Transaction costs” means costs related to acquiring a property, which may include property appraisal, transfer taxes, financing costs, underwriting, project management, broker fees, and legal fees.

(Added by Stats. 2021, Ch. 111, Sec. 23. (AB 140) Effective July 19, 2021.)

50720.6.
  

(a) The department shall contract with one or more fund managers to manage the program until June 30, 2026. The contract with the fund manager or the contracts with the fund managers may be renewed past June 30, 2026, if funds are available and if deemed appropriate by the department.

(b) The fund manager or managers shall be responsible for all of the following:

(1) Reviewing and approving loan or grant applications.

(2) Originating and servicing loans or grants.

(3) Establishing terms and conditions for loan or grant applications pursuant to the guidelines adopted pursuant to this chapter.

(c) The fund manager or managers shall meet all of the following criteria:

(1) Be a nonprofit lender with experience making real estate loans in this state, or be a housing trust fund operated by a city, a county, a city and county, or a joint powers authority as described in Article I (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code operated for the purpose of funding the development, acquisition, rehabilitation, or preservation of affordable housing for low- or moderate-income residents.

(2) Have originated and serviced loans to develop, maintain, improve, or acquire affordable housing, including at least five million dollars ($5,000,000) in acquisition loans.

(3) Demonstrate an ability to process loans for property acquisitions in an expedient manner sufficient to deploy loans necessary to purchase real property in trustee’s sales pursuant to the time constraints described in Section 2924m of the Civil Code.

(d) The department may, but is not required to, contract with one or more third-party consultants to assist with administering the program.

(1) Any third-party consultant contracted with by the department pursuant to this subdivision must demonstrate expertise in a variety of property ownership and stewardship models, such as rental housing, home ownership, community land trusts, limited-equity housing cooperatives, workforce housing cooperative trusts, or nonprofit affordable housing cooperatives.

(2) In contracting with a third-party consultant pursuant to this subdivision the department shall prioritize to third-party consultants that demonstrate a commitment to and experience in advancing racial equity.

(Added by Stats. 2021, Ch. 111, Sec. 23. (AB 140) Effective July 19, 2021.)

50720.8.
  

(a) A borrower or grantee that receives funds from a loan made pursuant to the program shall only use the funds as follows:

(1) To pay for property acquisition, rehabilitation, and repair costs and associated transaction costs for real property purchased through one of the following:

(A) A trustee’s sale pursuant to Section 2924m of the Civil Code.

(B) A preforeclosure intervention sale.

(C) A foreclosure risk intervention sale.

(2) To pay for transaction costs, so long as no more than 10 percent of a single loan funded by the program is used toward transaction costs.

(b) A borrower or grantee that receives funds from a loan or grant made pursuant to this program shall ensure that all vacant units are restricted in one of the following ways:

(1) By those conditions of a contract described in paragraph (10) of subdivision (a) of Section 402.1 of the Revenue and Taxation Code.

(2) By those conditions of a contract described in paragraph (11) of subdivision (a) of Section 402.1 of the Revenue and Taxation Code.

(3) (A) To persons and families of extremely low, very low, low, or moderate income, with an affordable sales price or an affordable rent, as defined in Sections 50052.5 and 50053 of the Health and Safety Code, for a minimum of 55 years, or a longer duration as the department may require.

(B) A property may be restricted pursuant to this paragraph by recording a lease agreement, ground lease agreement, or other recorded contractual agreement between a borrower between a borrower or grantee and the residents of the property or between a borrower or grantee and a resident-controlled corporation or association.

(C) Any agreement made between a borrower or grantee and a resident-controlled corporation or association pursuant to subparagraph (B) shall ensure that the housing units are affordable to lower income households, as defined in Section 50079.5 of the Health and Safety Code.

(c) Occupied properties having a mix of incomes among tenants or owners may seek exemption from restrictions under subdivision (b) for units with over-income occupants, only until the unit is vacated due to natural turnover and available to be rerented or resold.

(Added by Stats. 2021, Ch. 111, Sec. 23. (AB 140) Effective July 19, 2021.)

50720.10.
  

A loan made pursuant to the program may be partially or fully converted to a grant.

(Added by Stats. 2021, Ch. 111, Sec. 23. (AB 140) Effective July 19, 2021.)

50720.12.
  

(a) The department shall adopt guidelines for the administration of the program. The guidelines shall comply with all of the following:

(1) The guidelines 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.

(2) The guidelines shall not be subject to the requirements of Chapter 8.3 (commencing with Section 50705) of Part 2 of Division 31.

(3) The guidelines shall ensure that loan interest rates on loans made pursuant to the program are no higher than those of other loan programs for affordable housing overseen by the department.

(4) The guidelines shall ensure that a loan made pursuant to the program can be obtained within the timeline necessary for an eligible bidder in a trustee’s sale pursuant to Section 2924m of the Civil Code to successfully acquire real property using a loan from the program.

(5) The guidelines shall ensure, to the extent possible, geographic equity in allocating funding across the state.

(b) The department may include in the guidelines reasonable procedures for a borrower to apply for all or a portion of its loan to be converted to a grant and to verify eligibility for such a conversion pursuant to this section.

(Added by Stats. 2021, Ch. 111, Sec. 23. (AB 140) Effective July 19, 2021.)

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