CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2562

Introduced by Assembly Member Mullin
(Coauthor: Assembly Member Arambula)

February 15, 2018

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


LEGISLATIVE COUNSEL'S DIGEST


AB 2562, as introduced, Mullin. Department of Housing and Community Development loans.
Existing law authorizes the Department of Housing and Community Development to make loans under a multifamily housing program, and 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, if the development meets specified requirements regarding, among other things, debt and household income.
This bill would revise these requirements to instead require that the rate change increase the feasibility of the proposed project and will further the goals and purpose of the department and the appropriate loan program.
Existing law also authorizes 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 applicable federal rate most recently published by the Internal Revenue Service.
This bill instead would provide that the department is authorized to change the current interest rate for any loan issued by the department 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 published by the Internal Revenue Service and in effect at the time of the loan extension and project closing.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 50406.7 of the Health and Safety Code is amended to read:

50406.7.
 (a) Notwithstanding any other law, the department is authorized to may 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 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. The department reserves the right to impose a default interest rate of 3 percent should amortizing debt be placed on the project.

(2)

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

(3)

(2) The sponsor department determines 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. The determination must be acceptable to the department. The department may contract with require a third-party tax professional for verification, to verify this determination, the cost of which shall be borne by the sponsor.

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

(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.

(3) The change in the interest rate will increase the feasibility of the proposed project and will further the goals and purpose of the department and the appropriate loan program.

(6)

(4) The new department loan shall not be used to supplant or replace an existing department loan.
(b) The department is authorized to change the current interest rate for any loan issued by the department 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. Service and in effect at the time of the loan extension and project closing. The additional tax credit equity generated by the change in interest rate shall be used for rehabilitation of the development. 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 shall charge a fee in an amount sufficient to cover administrative costs associated with a loan modification requested by a borrower pursuant to this section.