Amended in Senate June 23, 2014

Amended in Senate September 3, 2013

Amended in Senate June 24, 2013

Amended in Assembly May 24, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 523

Introduced by Assembly Members Ammiano and Brown

(Principal coauthor: Senator Leno)

February 20, 2013

An act to add Section 50406.7 to the Health and Safety Code, relating to housing.

LEGISLATIVE COUNSEL’S DIGEST

AB 523, as amended, Ammiano. Department of Housing and Community Development: loans.

Existing law authorizes the Department of Housing and Community Development to make advance payments to eligible borrowers and grantees under certain loan or grant programs for housing, if the department makes specified determinations.

This bill would additionally authorize the department to reduce the interest rate on any loan issued by the department to a rental housing development to as low as 0.42% per annum, or a rate determined by the department that is sufficient to cover the costs of project monitoring, as specified, if the development meets specified requirements. The bill would also authorize the department to change the current interest rate for any loan for which it receives a loan extension request associated with an award of federal or state low-income housing tax credits made on or after January 1, 2014, to the most recently published applicable federal rate, begin delete as specified, end delete and begin insert require the additional tax credit equity generated by the change to be used for rehabilitation of the project. The bill would also authorize the department end insert to forgive an amount of accrued interest if the total amount of debt and accrued interest at the end of the loan term would be greater after making this change than it would have been under the original interest rate. The bill would also begin delete authorize end delete begin insert require end insert the department to charge a fee sufficient to cover administrative costs associated with a loan modification requested by a borrower.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 50406.7 is added to the Health and Safety
Code, to read:

50406.7.  

(a) Notwithstanding any other law, the department
is authorized to reduce the interest rate on any loan issued by the
department to a rental housing development to as low as forty-two
hundredths of 1 percent begin delete (0.42%) end delete per annum, or a rate determined
by the department that is sufficient to cover the costs of project
monitoring described in subdivision (c) of Section 50675.6,
whichever is greater, if the development meets all of the following
requirements:

(1) The development has no other debt with regularly scheduled
or amortizing debt service payments. begin insert The department reserves the
right to impose a default interest rate of 3 percent should
amortizing debt be placed on the project. end insert

(2) The development will utilize low-income housing tax credits.

(3) The sponsor begin delete provides evidence acceptable to the department
that demonstrates end delete begin insert determines end insert that the loan issued by the department
is not eligible to be treated as debt for federal or state low-income
housing tax credit purposes without a reduction in the interest rate
of the loan. begin insert The determination must be acceptable to the
department. The department may contract with a third- end insert begin insert party tax
professional for verification, the cost of which shall be borne by
the sponsor. end insert

begin insert

(4) The development has no debt in a senior lien position to the
department’s debt.

end insert begin insert

(5) The development has 35 percent or more of the total units
in the project serving households with income not exceeding 30
percent of the area median income.

end insert begin insert

(6) The new department loan shall not be used to supplement
or replace an existing department loan.

end insert

(b) The department is authorized to change the current interest
rate for any loan for which it receives a loan extension request
associated with an award of federal or state low-income housing
tax credits made on or after January 1, 2014, to the applicable
federal rate most recently published by the United States Internal
Revenue Service. begin insert The additional tax credit equity generated by
the change in interest rate shall be used for rehabilitation of the
development. end insert If the total amount of debt and accrued interest at
the end of the loan term would be greater after making this change
than it would have been under the original interest rate, the
department may forgive an amount of accrued interest equal to the
lesser of either the amount necessary to make the expected principal
and accrued interest the same as it would have been using the
original interest rate, or the total amount of interest accrued at the
time of the sponsor’s request.

(c) The department begin delete may end delete begin insert shall end insert charge a fee in an amount
sufficient to cover administrative costs associated with a loan
modification requested by a borrower pursuant to this section.