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 5 - Deferred-Payment Rehabilitation Loans › Section 7432 - Defaults, Transfers and Assumptions

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) In the event a borrower should default on
				  any of its debts to a lender or creditor whose loan is secured in any manner by
				  the subject property and the lender or secured creditor should proceed to force
				  a sale of the subject property after a foreclosure procedure, or in the event a
				  judgment has been taken against the property owner and the judgment creditor
				  should proceed to force a sale of the subject property in satisfaction of its
				  claim, the Department by this fact approves the sale. In the case of an
				  assisted owner-occupied unit, the deferred payment loan shall be repaid
				  according to law or the loan may be assumed for the remaining term of the loan
				  by an eligible purchaser, with the approval of the Department; at the end of
				  the loan term, such loan shall be repaid in full including all accrued
				  interest. In the case of elderly owner-occupants, deferred payment loans shall
				  be repaid in full, including all accrued interest, upon sale or transfer of the
				  property. If the property includes assisted rental units, the purchaser may
				  take it subject to the restrictions of the loan agreement between the local
				  entity and borrower, subject to the approval of the Department.
(b) If an assisted owner-occupied unit is
				  transferred, the deferred payment loan shall either be repaid or may be assumed
				  for the remaining term of the loan by a person who meets eligibility
				  requirements of the program, with the approval of the Department; at the end of
				  the loan term, such loan shall be repaid in full, including all accrued
				  interest. In the case of elderly owner-occupants, deferred payment loans shall
				  be repaid in full including all accrued interest, upon sale or transfer of the
				  property. If a property with assisted rental units is transferred, the
				  transferee may assume the loan. In all cases, the transferee of a property with
				  assisted rental units shall take the property subject to the restrictions of
				  the loan agreement between the local entity and the original borrower, subject
				  to the approval of the Department.
(c) Local entities shall process requests or
				  applications for loan assumptions in accordance with these regulations, using
				  documents provided by the Department, during the term of the Standard Agreement
				  between the local entity and the Department. This obligation shall continue
				  until all loans under this program have been paid in full.
(d) When a loan is repaid by an
				  owner-occupant borrower, the loan agreement with the borrower shall be
				  terminated and the Deed of Trust shall be reconveyed.
(e) A reserve fund in the amount of 3 percent
				  of the maximum amount of total program assets, including the total outstanding
				  loan balance plus the balance of the Housing Rehabilitation Loan Fund, shall be
				  maintained by the Department. The reserve fund balance shall be calculated
				  annually. The purpose of this fund is to permit the Department to utilize such
				  funds, when required in the case of a defaulted loan to protect the security
				  interests of the Department. In addition, such funds may be applied to the
				  State's administrative and legal expenses incurred in connection with such
				  defaults. The Loan Committee may change the size of and establish the terms or
				  use of the reserve fund by a majority vote.
(f) In the event a borrower or
				  successor-in-interest defaults on any material provision of the loan agreement
				  or these regulations, the local entity shall promptly demand rectification of
				  the default. If substantial progress is not made in rectification within 30
				  days from such notice, at the discretion of the Department the local entity
				  shall declare the note evidencing the loan to be due and payable.
(g) In the event a local entity defaults on
				  any material provision of the Standard Agreement with the Department or these
				  regulations, the Department may demand rectification of the default. If
				  substantial progress is not made in rectification within 60 days from such
				  notice, the Department may seek such remedies as are available to it under the
				  terms of the Standard Agreement.
1. Amendment
					 filed 10-2-81; effective thirtieth day thereafter (Register 81, No.
					 40).
2. Amendment filed 6-3-85; effective thirtieth day thereafter
					 (Register 85, No. 23).
3. Amendment of subsection (e) filed 3-17-86;
					 effective thirtieth day thereafter (Register 87, No.
					 12).
Note: Authority cited: Section 50662, Health and Safety
						Code. Reference: Sections 50660-50668, Health and Safety
						Code.