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, and 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 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 require 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 50406.7 is added to the Health and Safety
2Code, to read:
(a) Notwithstanding any other law, the department
4is authorized to reduce the interest rate on any loan issued by the
5department to a rental housing development to as low as forty-two
6hundredths of 1 percent per annum, or a rate determined by the
7department that is sufficient to cover the costs of project monitoring
8described in subdivision (c) of Section 50675.6, whichever is
9greater, if the development meets all of the following requirements:
10(1) The development has no other debt with regularly scheduled
11or amortizing debt service payments. The department reserves the
12right to impose a default interest rate of 3 percent should amortizing
13debt be placed on the
project.
14(2) The development will utilize low-income housing tax credits.
15(3) The sponsor determines that the loan issued by the
16department is not eligible to be treated as debt for federal or state
17low-income housing tax credit purposes without a reduction in the
18interest rate of the loan. The determination must be acceptable to
19the
department. The department may contract with a third-party
20tax professional for verification, the cost of which shall be borne
21by the sponsor.
22(4) The development has no debt in a senior lien position to the
23department’s debt.
P3 1(5) The development has 35 percent or more of the total units
2in the project serving households with income not exceeding 30
3percent of the area median income.
4(6) The new department loan shall not be used tobegin delete supplementend delete
5begin insert supplantend insert or replace an existing department loan.
6(b) The department is authorized to change the current interest
7rate for any loan for which it receives a loan extension request
8associated with an award of federal or state low-income housing
9tax credits made on or after January 1, 2014, to the applicable
10federal rate most recently published by the United States Internal
11Revenue Service. The additional tax credit equity generated by
12the change in interest rate shall be used for rehabilitation of the
13development. If the total amount of debt and accrued interest at
14the end of the loan term would be greater after making this change
15than it would have been under the original interest rate, the
16department may forgive an amount of accrued interest equal to the
17lesser of either the amount necessary to make the expected principal
18and accrued interest the same as it would have been using the
19original interest rate, or the total amount of interest accrued
at the
20time of the sponsor’s request.
21(c) The department shall charge a fee in an amount sufficient
22to cover administrative costs associated with a loan modification
23requested by a borrower pursuant to this section.
O
94