California Code of Regulations › Title 25 - Housing and Community Development › Division 1 - Housing and Community Development › Chapter 7 - Department of Housing and Community Development Programs › Subchapter 18 - Child Care Facilities Financing Program › Article 3 - Guaranty Program › Section 8260 - General Terms and Conditions of Guaranties

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
In addition to the terms and conditions set forth in
						Article 2 of this subchapter, loan guaranties shall also be subject to all of
						the following terms and conditions:
(a) A single guaranty shall not exceed eighty
					 percent (80%) of the principal and interest due and owing on a loan for
					 eligible project costs, and the total amount of all outstanding loan guaranties
					 for any one borrower shall not exceed two million dollars
					 ($2,000,000).
(b) The term of the
					 guaranty shall be the lesser of twenty (20) years or the term of the loan, and
					 shall be subject to termination conditions described in subsection
					 8263.
(c) The guaranty shall
					 contain a requirement that the maximum amount of interest to be paid is one
					 hundred twenty (120) days at the guarantied percentage, after the lender
					 receives the notice defined in section 8263(d).
(d) The guaranty shall contain a statement
					 that the lender send to the department, or its contractor executing the
					 guaranty, a copy of all delinquency notices tendered to the borrower.
(e) The guaranty shall contain a description
					 of the procedures and the responsibilities of the lender and the department or
					 its contractor subsequent to default, including information on whether the
					 guaranty is a loan guaranty or a collection guaranty.
(f) The guaranty shall contain section 8261
					 demand procedures.
(g) The guaranty
					 shall contain an acknowledgment by the lender that in the event of a demand,
					 the lender will allow a representative of the Department of Financial
					 Institutions, or other auditor selected by the department or its contractor, to
					 examine the lender's loan files.
(h) The guaranty shall contain an agreement
					 to abide by binding arbitration by the American Arbitration Association in the
					 event that the department or its contractor denies the requested demand
					 pursuant to section 8261 or 8262, or the amount paid to the lender is less than
					 the amount contained in the demand letter.
(i) The guaranty shall acknowledge that the
					 full faith and credit of the State of California is not, and shall not be,
					 pledged to the Loan Guaranty Fund; and the State of California is not, and
					 shall not be, liable for loan defaults that exceed the balance of funds on
					 deposit in the Loan Guaranty Fund.
(j) If the department utilizes a contractor
					 to administer the guaranty, the guaranty authorizes the contractor to charge a
					 guaranty applicant an application fee not to exceed two hundred fifty dollars
					 ($250.00) and a guaranty fee not to exceed two percent (2%) of the principal
					 amount guarantied.
(k) The
					 department or its contractor shall approve a guaranty application and issue a
					 guaranty if it finds that all of the following conditions have been met:
(1) The aggregate amount of all outstanding
					 guaranties, plus the amount of the requested guaranty, will not exceed four (4)
					 times the current balance in the Loan Guaranty Fund;
(2) The applicant is eligible pursuant to
					 this subchapter;
(3) The use of the
					 proceeds of the loan being guarantied is eligible pursuant to this
					 subchapter;
(4) The project is in
					 accordance with the threshold and priority criteria set forth in section
					 8254;
(5) Not more than fifty
					 percent (50%) of the loan proceeds shall be used to refinance existing
					 loans;
(6) Repayment of the loan is
					 secured by reasonably available collateral which may include, but shall not be
					 limited to, a deed of trust on the property assisted with the guarantied loan
					 and the personal guaranties of any shareholders or partners;
(7) There is no probability that the loan
					 being guarantied would be made by the lender under reasonable terms or
					 conditions without the guaranty, and the applicant has demonstrated a
					 reasonable prospect of repayment of the guarantied loan;
(8) The application includes a lender
					 certification;
(9) The lender's
					 loan documents contain an agreement by the borrower to maintain a current,
					 valid child care license for the facility during the term of the guarantied
					 loan;
(10) The lender's loan
					 documents contain an agreement by the borrower to provide child care and
					 development services at the facility for which the loan was made, for the
					 lesser of twenty (20) years or the term of the guarantied loan, unless the
					 borrower is a family child care provider temporarily ceasing providing child
					 care and development services and complying with section 8260(k)(11);
(11) The lender's loan documents require that
					 the borrower shall notify the lender and the department or its contractor
					 within fourteen (14) calendar days of the cessation of child care and
					 development services in the facility for which the guarantied loan was made
					 ("cessation notice");
(12) In the
					 case of a family child care provider borrower that ceases to provide services
					 but retains its license and intends to resume services, the cessation notice
					 shall also include:
(i) the reasons for the
					 interruption in services; and
(ii) a
					 date for resuming services. The borrower may amend the resumption of services
					 date declared in the cessation notice by submitting an amended cessation notice
					 to the lender and the department or its contractor. The lender's loan documents
					 shall also contain a requirement that any cessation of services exceeding three
					 years from the date of the initial cessation notice shall constitute a default
					 of the loan;
(13) The
					 lender's loan documents contain a provision that, with the exception of a
					 family child care provider temporarily ceasing to provide services in
					 compliance with section 8260(k)(11), failure by the borrower to continue
					 operation of the licensed facility assisted with the guaranty for child care
					 and development shall constitute a default or breach under the lender's loan
					 documents;
(14) The lender has
					 complied with all material conditions contained in the guaranty, including
					 perfecting its security interest in all collateral, and the lender has not
					 engaged, and will not engage, in fraudulent or grossly negligent practices in
					 connection with the borrower, guaranty, the loan or the loan agreement;
					 and
(15) The department's
					 contractor, if any, is also not the lender.