Amended  IN  Senate  June 11, 2018
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 Sections 50406.7 and 50675.6 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 law, the Multifamily Housing Program, is administered by the Department of Housing and Community Development to address renter housing needs through an omnibus multifamily housing program. Under the program, assistance provided to a project is required to be provided in the form of a deferred payment loan to pay for the eligible costs of development. Existing law, subject to specified terms, authorizes the department to approve an extension of an existing loan, the subordination of an existing loan to new debt, or an investment of tax credit equity if the rental housing development is being operated in a manner consistent with the regulatory agreement and the development requires an extension in order to continue to operate in that manner. Existing law also authorizes 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, 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 each extension of an existing loan, subordination of an existing loan to new debt, or investment of tax credit equity to be made in connection with the combining of multiple sites or collateral as if the existing loan is a new loan, as specified, and would authorize the department to revise the requirements for the interest rate 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 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 50675.6, whichever is greater, 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 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.

SEC. 2.

 Section 50675.6 of the Health and Safety Code is amended to read:

50675.6.
 (a)  A sponsor may apply for loans for one or more rental or transitional housing developments. A housing development may utilize any combination of federal, state, local, and private financial resources necessary to make the development affordable, for the term of the state’s regulatory agreement, to the eligible households.
(b)  (1)  Loans made pursuant to subdivision (f) of Section 50675.7 to sponsors by a local public entity as part of its code enforcement efforts for rental housing developments involving rehabilitation shall only be for terms of not less than 20 years. All other loans shall be for a term of not less than 55 years.
(2) For loans made pursuant to this chapter, the department may approve an extension of an existing loan, the subordination of an existing loan to new debt, or an investment of tax credit equity, as long as the rental housing development is being operated in a manner consistent with the regulatory agreement and the development requires an extension in order to continue to operate in a manner consistent with this chapter. Each
(A) Each extension of an existing loan, subordination of an existing loan, or investment of tax credit equity may be made in connection with the combining of multiple sites or collateral as if the existing loan were a new loan, and shall otherwise be consistent with the department’s uniform multifamily regulations (Subchapter 19 (commencing with Section 8300) of Chapter 7 of Division 1 of Title 25 of the California Code of Regulations).
(B) Each extension shall be for a period of not less than 10 years and each extension shall not exceed 55 years or, if needed to match the term of tax credit restrictions, exceed 58 years. The interest rate for the extension shall be 3 percent simple interest, or such interest rate as authorized by the department pursuant to Section 50406.7. All
(C) All loan payments shall be deferred for the full term of the loan, except for residual receipts payments. These residual receipts payments shall be structured to avoid reducing the amount of payments on local public agency loans resulting solely from changes in the payment terms on the department’s loan, and not resulting from fees or other payments to the borrower, and shall otherwise be consistent with the department’s uniform multifamily regulations (Subchapter 19 (commencing with Section 8300) of Chapter 7 of Division 1 of Title 25 of the California Code of Regulations) or successor regulations. The department may charge a transaction fee to cover its costs for processing such these restructuring transactions. The department may waive or defer some or all of this fee, if it determines that a particular development or class of developments does not have the ability to make these payments.
(c)  Principal and accumulated interest is due and payable upon completion of the term of the loan. The loan shall bear simple interest at the rate of 3 percent per annum on the unpaid principal balance. The department may forgive that portion of that loan that is used to cover costs of developing child care facilities. The department shall require annual loan payments in the minimum amount necessary to cover the costs of project monitoring. For the first 30 years of the loan term, the amount of the required loan payments shall not exceed forty-two hundredths of 1 percent (.42%) per annum.
(d)  The department may establish maximum loan-to-value requirements for some or all of the types of projects that are eligible for funding under this chapter.
(e)  The department shall establish per-unit and per-project loan limits for all project types.