Amended  IN  Assembly  April 26, 2018
Amended  IN  Assembly  March 14, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2562

Introduced by Assembly Member Mullin
(Coauthor: Assembly Member Arambula)
(Coauthors: Senators Atkins and Wiener)

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 amended, 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, whichever is greater, if the development meets specified requirements regarding, among other things, debt and household income.
This bill would authorize the department to reduce the interest rate on any loan issued by the department to a rental housing development to only a rate determined by the department that is sufficient to cover the costs of project monitoring and would revise the requirements for the reduction to instead require that the rate change increase the feasibility of the proposed project and 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 project closing.
Existing law requires the department to charge a fee in an amount sufficient to cover administrative costs associated with a loan modification requested by a borrower pursuant to these provisions.
This bill would instead authorize the department to charge the fee.
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 may reduce the interest rate on any loan issued by the department to a rental housing development to a rate determined by the department that is sufficient to cover the costs of project monitoring described in subdivision (c) of Section 50675.6 if the development meets all of the following requirements:
(1) The development will utilize low-income housing tax credits.
(2) The 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 department may require a third-party tax professional to verify this determination, the cost of which shall be borne by the sponsor.
(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.
(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 published by the United States Internal Revenue Service and in effect at the time of the 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 may charge a fee in an amount sufficient to cover administrative costs associated with a loan modification requested by a borrower pursuant to this section.
(d) The amendments made to this section by Assembly Bill 2562 of the 2017–2018 Regular Session shall not be construed to affect any interest rate reduction authorized by the department pursuant to this section as it read prior to the effective date of these amendments.