SECTIONS 50660-50671.6

50660.  The Legislature finds and declares that the rehabilitationof existing housing is necessary to the continued viability ofneighborhoods, the elimination of health and safety hazards, theprevention of the overcrowding and the continued availability of adwindling stock of low-cost housing. Economic conditions have notprovided sufficient incentive to home improvement and elimination ofsubstandard conditions, and financial assistance in the form ofdeferred-payment rehabilitation loans is necessary for those ownersof residential real property who would otherwise be unable to obtainsufficient public or private financing to bring their properties intocompliance with rehabilitation standards. Deferred-payment loansprovide a means of financing rehabilitation which the owner could nototherwise afford. Such assistance is particularly necessary wherelocal agencies are undertaking concentrated or systematic enforcementprograms to require compliance with rehabilitation standards, andwhere persons or families of low or moderate income are affected.50660.5.  (a) It is the intent of the Legislature to encourage localgovernments to assist residents to repair and rebuild housing in acost-efficient and expeditious manner following a disaster. To thisend, the Legislature recognizes that local governments may enactordinances following disasters to expedite the permit process. Theseordinances may include, but not be limited to, ordinances waivingfees and streamlining requirements affecting disaster-relatedrepairs. (b) The Legislature finds and declares that homeowners and ownersof rental housing who apply for assistance pursuant to Sections50662.7, 50671.5, and 50671.6 may be unable to utilize expeditedprocedures or liberalized standards because loan approval and repairmay occur after the expiration of the local ordinance. It is,therefore, the intent of the Legislature to encourage localgovernments to extend the application of these local ordinances tohomeowners and owners of rental housing who are utilizing disasterassistance programs, including the respective loan programsauthorized by Sections 50662.7, 50671.5, and 50671.6, so that housingcan be repaired or rebuilt in a cost-efficient and expeditiousmanner.50661.  (a) There is hereby created in the State Treasury theHousing Rehabilitation Loan Fund. All interest or other incrementsresulting from the investment of moneys in the Housing RehabilitationLoan Fund shall be deposited in the fund, notwithstanding Section16305.7 of the Government Code. Notwithstanding Section 13340 of theGovernment Code, all money in the fund is continuously appropriatedto the department for the following purposes: (1) For making deferred-payment rehabilitation loans for financingall or a portion of the cost of rehabilitating existing housing tomeet rehabilitation standards as provided in this chapter. (2) For making deferred payment loans as provided in Sections50668.5, 50669, and 50670. (3) For making deferred payment loans pursuant to Sections 50662.5and 50671. (4) Subject to the restrictions of Section 53131, if applicable,for administrative expenses of the department made pursuant to thischapter, Article 3 (commencing with Section 50693) of Chapter 7.5,and Chapter 10 (commencing with Section 50775). (5) For related administrative costs of nonprofit corporations andlocal public entities contracting with the department pursuant toSection 50663 in an amount, if any, as determined by the department,to enable the entities and corporations to implement a programpursuant to this chapter. The department shall ensure that not lessthan 20 percent of the funds loaned pursuant to this chapter shall beallocated to rural areas. For purposes of this chapter "rural area"shall have the same meaning as in Section 50199.21. (b) There shall be paid into the fund the following: (1) Any moneys appropriated and made available by the Legislaturefor purposes of the fund. (2) Any moneys that the department receives in repayment of loansmade from the fund, including any interest thereon. (3) Any other moneys that may be made available to the departmentfor the purposes of this chapter from any other source or sources. (4) Moneys transferred or deposited to the fund pursuant toSections 50661.5 and 50778. (c) Notwithstanding any other provision of law, any interest orother increment earned by the investment or deposit of moneysappropriated by subdivision (b) of Section 3 of Chapter 2 of theStatutes of the 1987-88 First Extraordinary Session, or Section 7 ofChapter 4 of the Statutes of the 1987-88 First Extraordinary Session,shall be deposited in a special account in the HousingRehabilitation Loan Fund and shall be used exclusively for purposesof Sections 50662.5 and 50671. (d) Notwithstanding any other provision of law, effective with thedate of the act adding this subdivision, appropriations authorizedby the Budget Act of 1996 for support of the Department of Housingand Community Development from the California Disaster Housing RepairFund and the California Homeownership Assistance Fund shall insteadbe authorized for expenditure from the Housing Rehabilitation LoanFund.50661.5.  (a) There is hereby created in the State Treasury theCalifornia Disaster Housing Repair Fund, into which shall be paid allmoneys appropriated by the Legislature pursuant to subdivision (b)or transferred pursuant to subdivision (c) for housing repair loanspursuant to Sections 50662.7, 50671.5, and 50671.6. All interest orother increments resulting from the investment of moneys in theCalifornia Disaster Housing Repair Fund shall be deposited in thefund, notwithstanding Section 16305.7 of the Government Code.Notwithstanding Section 13340 of the Government Code, all money inthat fund is continuously appropriated to the department for thefollowing purposes: (1) For making deferred payment loans and predevelopment loanspursuant to Sections 50662.7, 50671.5, and 50671.6. (2) For related administrative expenses of the department. (3) For related administrative expenses of any entity contractingwith the department, pursuant to Sections 50662.7, 50671.5, and50671.6 in an amount, if any, as determined by the department, toenable the entities to implement a program pursuant to thosesections. (4) For providing loan guarantees for disaster-related loans madeby private institutional lending sources. (b) There shall be paid into the fund the following: (1) Any moneys appropriated and made available by the Legislaturefor purposes of the fund. (2) Any moneys transferred from the Special Fund for EconomicUncertainties prior to July 1, 1996, pursuant to subdivision (c). (3) Any other moneys which may be made available to the departmentprior to July 1, 1996, for the purposes of this section from anyother source or sources. (4) The director may authorize the sale of the beneficiaryinterest of loans made pursuant to Section 50662.7. The proceeds fromthat sale prior to July 1, 1996, shall be deposited into theCalifornia Disaster Housing Repair Fund. Proceeds from that saleafter July 1, 1996, shall be deposited in the General Fund. (c) (1) To the extent that funds are not available, the Departmentof Housing and Community Development shall submit to the Departmentof Finance, within 90 days after a disaster, a deficiency requestbased on a minimum funding level based on a damage survey completedby the California Emergency Management Agency and the FederalEmergency Management Agency. The request shall distinguish betweenowner-occupied housing of one to four units and rental housing offive or more units. (2) Upon receipt of the deficiency request from the Department ofHousing and Community Development pursuant to paragraph (1), theDepartment of Finance shall make a funding determination and notifythe Legislature of the approval or disapproval of the deficiencyamount. Any deficiency amount approved shall distinguish betweenowner-occupied housing of one to four units and rental housing offive or more units. (3) Any payments made pursuant to this subdivision from funds madeavailable under Section 50671.5 shall be matched by a correspondingand equal payment from funds made available under Section 50671.6,except that, upon the determination of the Director of Finance thatone of the two rental repair programs has excess funds, moneys fromthat fund may be used for either of the other two disaster repairprograms. (d) In the event of a natural disaster, as defined in Section8680.3 of the Government Code, the Director of Finance may transfermoneys from the Special Fund for Economic Uncertainties establishedby Section 16418 of the Government Code to the California DisasterHousing Repair Fund, provided the transfer is not made sooner than 30days after notification in writing of the necessity therefor isprovided to the Joint Legislative Budget Committee. (e) Notwithstanding any other provision of law, on or after July1, 1996, the unencumbered fund balance and reserves shall betransferred to the Housing Rehabilitation Loan Fund and subsequentincome and other resources payable pursuant to Sections 50662.7,50671.5, and 50671.6, shall be deposited to the HousingRehabilitation Loan Fund, except that payments of principal andinterest on loans issued pursuant to Sections 50662.7, 50671.5, and50671.6 shall be deposited in the General Fund. (f) In making funds available to disaster victims pursuant toSections 50662.7, 50671.5, and 50671.6, the department shall impose aone-year deadline for submission of applications. (g) Any changes made on or after January 1, 1994, to any programfunded by the California Disaster Housing Repair Fund shall not applyto applications submitted on or before December 31, 1993. Thedepartment may administer the program in accordance with guidelinesuntil regulations are adopted.50661.7.  The Director of the Department of Housing and CommunityDevelopment may transfer moneys appropriated or otherwise madeavailable for the purposes of the programs established under Sections50662.7 and 50671.5 between those programs when there isinsufficient funding to meet the loan demand in either of thoseprograms and an uncommitted funding balance in the other program.50662.  The department shall adopt regulations establishing termsupon which deferred-payment rehabilitation loans may be made. Theamount of a deferred-payment rehabilitation loan shall in no caseexceed the costs of meeting rehabilitation standards. The amount,when combined with other financing provided, shall in no case exceedthe combined costs of meeting rehabilitation standards andrefinancing existing indebtedness. Except for loans made to localagencies pursuant to Section 50664, deferred-payment rehabilitationloans shall bear interest at the rate of 3 percent per annum on theunpaid principal balance. In the discretion of the department, whichmay differentiate among the types of programs specified in Section50663, such interest shall either be payable periodically as itaccrues during the term of the loan or payment of interest shall bedeferred until payment of the principal is due. However, regulationsof the department may provide for waiver of interest payments when alocal public entity or nonprofit corporation contracting pursuant toSection 50663 remits to the department in advance on behalf of theborrower a sum equal to not less than 15 percent of the originalprincipal balance, which may be in lieu of interest. The regulationsof the department may also provide for payment of interest asaccrued, in circumstances determined appropriate by the department toserve the purposes of this chapter. In the case of adeferred-payment rehabilitation loan to an elderly person who is theowner of an owner-occupied one-to-four family residence, the note anddeed of trust securing the loan shall require payment of theobligation upon transfer of the property. Notwithstanding any otherprovisions of this chapter, the department may permit the making of adeferred-payment rehabilitation loan to an elderly person of lowincome who is the owner of an owner-occupied dwelling withoutrequiring that other financing be provided to the extent of the owner's ability to afford the cost of such other financing. In the case ofa deferred-payment rehabilitation loan to a nonelderly person who isthe owner of an owner-occupied one-to-four family residence, paymentshall be required after five years or upon transfer of the property,whichever first occurs. However, the loan may be renewed foradditional five-year terms so long as the property is not transferredand the owner is unable to refinance the obligation when the debtcomes due. In the case of a deferred-payment rehabilitation loan toan owner of a residence other than an owner-occupied one-to-fourfamily residence, payment shall be required after five years unlessit is determined by the department that a longer term is required toensure the economic feasibility of obtaining other rehabilitationfinancing or accepting subsidies. The loan may be renewed for up tofive additional five-year terms so long as persons of low incomeresiding in the residence will benefit. The department shallestablish standards and determine eligibility for renewal.Regulations of the department shall permit the assumption of adeferred-payment rehabilitation loan authorized by this section whenthe property which has been rehabilitated by such loan is transferredto a person who meets the eligibility requirements of this section,as determined by the department.50662.2.  Deferred-payment loans may be made to finance actual costsincurred to meet rehabilitation standards for rehabilitation ofmobilehome parks, as defined in Section 18214, for occupancy by lowerincome households.50662.5.  For the purpose of providing disaster relief to thoseowners of owner-occupied single-family dwellings that were damaged ordestroyed as a result of the Los Angeles-Whittier Narrows Earthquakeon October 1, 1987, or subsequent aftershocks, resulting in a stateof emergency proclaimed by the Governor pursuant to Section 8625 ofthe Government Code, financial assistance may be provided to disastervictims as prescribed in this chapter under the following specialconditions, which shall prevail over conflicting provisions of thischapter and administrative regulations: (a) The loans shall be provided in the counties proclaimed by theGovernor to be in a state of disaster (1) to persons who do notqualify for loan assistance from an agency of the United States forrehabilitation of the damage caused by the earthquakes of October1987, (2) to the extent that federally provided or assisted financingmay be insufficient to accomplish the necessary rehabilitation, and(3) to the extent required to enable the recipient to obtain andafford loan assistance from an agency of the United States to financethe necessary rehabilitation. The loans shall be made only tohouseholds that are victims of the earthquakes specified in thissection and only to the extent that other federal, state, local, orprivate resources are not available or do not provide the assistanceor coverage needed to rehabilitate or reconstruct their homes. (b) The loans shall be for the purpose of rehabilitating,including reconstruction, of single-family dwellings that areowner-occupied or would be owner-occupied but for the damage causedby the earthquake or earthquakes. (c) The maximum loan amount shall not exceed twenty thousanddollars ($20,000), except that the department may waive thislimitation in individual cases to permit compliance with health andsafety standards or to restore the dwelling to a conditionsubstantially similar to its condition prior to the earthquakes. (d) The loan, together with any existing indebtedness encumberingthe security property, shall not exceed 100 percent of theafter-rehabilitation value of the property, except that thedepartment may waive this limitation in individual cases to permitcompliance with health and safety standards or to restore thedwelling to a condition substantially similar to its condition priorto the earthquakes. (e) The department shall impose no income criteria or other meanstest as a prerequisite to obtaining a loan under this section. (f) Repayment of the principal amount of a loan under this sectionand interest thereon shall not be required until the borrowertransfers ownership of the rehabilitated property. Payments ofprincipal and interest on the loans shall, notwithstanding Section50661, be deposited in the General Fund. (g) The adoption by the department of rules for implementation ofthis chapter shall not be subject to Chapter 3.5 (commencing withSection 11340) of Part 1 of Division 3 of Title 2 of the GovernmentCode. (h) No commitments of loan funds under this section may be madeafter December 31, 1990. (i) Section 50668 does not apply to loans made pursuant to thissection.50662.7.  For the purpose of providing disaster relief to thoseowners of owner-occupied dwellings that were damaged or destroyed asa result of a natural disaster defined by Section 8680.3 of theGovernment Code, resulting in a state of emergency proclaimed by theGovernor pursuant to Section 8625 of the Government Code, financialassistance may be provided to disaster victims as prescribed in thischapter under the following special conditions, which shall prevailover conflicting provisions of this chapter and administrativeregulations: (a) (1) The loans shall be provided in any city, county, or cityand county proclaimed by the Governor to be in a state of disaster:(A) to persons who do not qualify for loan assistance from an agencyof the United States for repair of the damage caused by a naturaldisaster, (B) to the extent that federally provided or assistedfinancing may be insufficient to accomplish the necessary repair, and(C) to the extent required to enable the recipient to obtain andafford loan assistance from an agency of the United States to financethe necessary repair. (2) The loans shall be made only to households that are victims ofa natural disaster and only to the extent that other federal andstate resources, private insurance proceeds, or private institutionallending sources, are not available or do not provide the assistanceor coverage needed to rehabilitate or reconstruct their homes. (3) This subdivision shall not be construed to prevent theprocessing of a loan application once a person or household hasreceived loan approval from a federal, state, or privateinstitutional lending source, nor shall this subdivision be construedto prevent the funding of short-term loans until other federal,state, or private loan proceeds become available. (4) In allocating grants and loans, the department shall in noevent provide a loan to a family with an annual income in excess of150 percent of statewide median income, adjusted for family size.This paragraph shall apply to any disaster that occurs on or afterJanuary 18, 1994. (b) (1) The loans shall be for the purpose of repairing, includingreconstructing, dwellings that are owner-occupied or would beowner-occupied but for the damage caused by the natural disaster andfor rental dwelling units of one to four units. Loan funds shall beused to fund work necessary to repair damaged dwellings and tocorrect serious, life-threatening violations of the state or localbuilding code or housing standards that are required to be correctedprior to occupancy, including ensuring compliance with applicableseismic safety standards and related property improvements or tofinance the reconstruction of dwellings destroyed as a result of thenatural disaster up to a maximum of fifty thousand dollars ($50,000)per unit. The department shall limit the square footage of unitsrepaired or reconstructed using funds provided pursuant to thissection to the predisaster size of the unit. (2) In the case of manufactured housing or mobilehomes, loan fundsshall be used to bring the manufactured home or mobilehome intocompliance with the standards set forth in Chapter 4 (commencing withSection 18025) of Part 2 of Division 13. (3) For the purposes of this section: (A) "Owner-occupied dwellings" include single-family units,attached owner-occupied units, condominiums, townhouses,cooperatives, and manufactured homes, including mobilehomes. (B) "Rental dwelling of one to four units" includes single-familyunits, condominiums, townhouses, cooperatives, duplexes, andmanufactured homes, including mobilehomes. (c) The loan, together with any existing indebtedness encumberingthe secured property, shall not exceed the after-repair value of theproperty, except that the department may waive this limitation inindividual cases to ensure, when necessary, correction of serious,life-threatening violations of the state or local building code orhousing standards, seismic safety standards, and general propertyimprovements relating to these standards pursuant to subdivision (b). (d) (1) The outstanding balance of a loan provided under thissection, including principal and accrued interest thereon, shall bedue and payable, after 30 years or when either of the followingoccurs: (A) the borrower transfers ownership of the rehabilitatedproperty, or (B) fails to occupy the rehabilitated property as his orher principal place of residence, whichever comes first. For rentaldwellings, the term of the loan shall be 20 years. (2) After the initial recordation of the deed of trust securingthe department's loan, the department shall not subordinate its deedof trust to additional or other financing except in cases of extremehardship necessary to protect the health or safety of the occupantsor to the extent that the total principal of loans senior to thedepartment's loan is unchanged or decreased and the department'ssecurity interest is not jeopardized, as determined by thedepartment. (e) The department may make loans directly to borrowers, orcontract for the administration under this section of loans with oneor more entities that it determines to have the necessary experienceto successfully administer the loan program, including, but notlimited to, local public agencies and private organizations. Thedepartment may authorize, under that contract, the payment ofexpenses incurred by the entities in administering the loan programand may prescribe the conditions pursuant to which the entities shalladminister the loans. (f) Sections 50663 and 50668 do not apply to loans made pursuantto this section. (g) The department may set aside or use funds that are madeavailable for the purposes of this section for the purpose of curingor averting an owner's default on the terms of any loan or otherobligation where that default would jeopardize the department'ssecurity in the owner-occupied housing assisted pursuant to thissection. The payment or advance of funds by the department pursuantto this subdivision shall be exclusively within the department'sdiscretion, and no person shall be deemed to have any entitlement tothe payment or advance of those funds. The amount of any fundsexpended by the department pursuant to this subdivision shall beadded to the loan amount secured by the deed of trust and shall bepayable to the department upon demand. (h) Any rule, policy, or standard of general application employedby the Department of Housing and Community Development inimplementing this section shall not be subject to the requirements ofChapter 3.5 (commencing with Section 11340) of Part 1 of Division 3of Title 2 of the Government Code. (i) Fund allocations made pursuant to this section shall not besubject to review or approval by the Loan Committee of the Departmentof Housing and Community Development operating pursuant toSubchapter 1 (commencing with Section 6900) of Chapter 6.5 of Title25 of the California Code of Regulations. (j) (1) In order to be eligible for one or more loans pursuant tothis section, the borrower shall agree to all of the followingconditions: (A) All buildings shall be connected to their foundation systemsas necessary to meet the seismic requirements of the 1973 Edition ofthe Uniform Building Code of the International Conference of BuildingOfficials in a manner approved by the department, which may includeseismic strengthening of foundation cripple walls and affixing orbolting sill plates to the foundation. (B) All water heaters shall be braced, anchored, or strapped toresist falling or horizontal displacement due to earthquake motion. (C) Hazard insurance shall be obtained and maintained as requiredby the department. (2) As a condition of receipt of assistance under this section,owners of rental dwellings shall agree, in writing, to all of therestrictions set forth in this subdivision. (3) The loan shall include an amount sufficient to meet therequirements of subparagraphs (A) and (B) of paragraph (1). (k) Initial rents for rental housing rehabilitated under thissection shall not exceed the rent charged immediately prior to thenatural disaster. The department may allow for adjustments to thepredisaster rents due to cost-of-living increases or increasesnecessary for debt service. ( l) The department shall adopt regulations establishing terms andconditions upon which repair loans may be made. These regulationsshall be made available to the public by the department. Thedepartment may set interest rates for individual loans for eachdisaster at a rate that shall not exceed the rate for veterans' homeloans established pursuant to Section 987.87 of the Military andVeterans Code on the date the Governor declares a state of emergencyfor that disaster, plus up to one-half percent for administrativecosts not included in the interest rate. The Department of Housingand Community Development shall prepare an annual audit ofadministrative costs for the Department of Finance. All loans foreach disaster shall bear the same interest rate. The department mayalso require periodic payments of interest, or principal andinterest, or provide incentives for earlier repayment of principaland interest on owner-occupied dwellings. Incentives may includereduction of interest rates to a minimum of 3 percent for repaymentthat occurs within three years of the closing of the loan. (m) Prior to full loan approval, the department may make loans notexceeding five thousand dollars ($5,000) per loan to pay for thecosts of predevelopment activity which must be undertaken prior tomaking eligible repairs if, in the opinion of the department, theborrower is unable to pay for these costs in advance of full loanapproval. These loans shall bear interest at the rate of 6 percentsimple interest per annum and shall be evidenced by a promissory notesecured by a deed of trust. At the time of full loan approval, thepredevelopment loan shall be canceled, and the principal amount ofthe loan and all accrued interest shall be included in the amount ofthe full loan and shall be subject to the same interest rate andterms and conditions as the full loan. For purposes of computing themaximum loan amount, the amount of any predevelopment loan shall beincluded.50662.8.  (a) Notwithstanding paragraph (1) of subdivision (d) ofSection 50662.7, the department may allow the assumption of any loanmade pursuant to subdivision (b) of that section for owner-occupieddwellings subject to all of the following conditions: (1) The original borrower dies. (2) The assumption is by a member of the original borrower'shousehold and is a spouse, domestic partner, or child of the originalborrower. (3) The person assuming the loan has legal ownership of the home. (4) The person assuming the loan will continuously reside in thehome as his or her principal place of residence and will not transferthe home to any other person or entity. If the person assuming theloan moves to another residence or transfers the home to any otherperson or entity, the loan shall become immediately due and payable. (5) The total income of the household assuming the loan is at orbelow 120 percent of the area median income, adjusted for householdsize. (6) The department determines that requiring immediate repaymentof the loan upon the borrower's death would be an economic hardshipfor the person assuming the loan. (7) The assumption is for a period of time necessary to permit theperson assuming the loan to repay the loan without economichardship. (b) The department may not permit subordination of a loan madepursuant to subdivision (b) of Section 50662.7 for owner-occupieddwellings except under the following circumstances: (1) The total household income of the borrower's household is ator below 80 percent of the area median income, or, in the case ofextreme hardship, where borrowing becomes necessary to either protectthe health and safety of the occupants, or pay health care costs forthe borrower's immediate family. (2) The total principal of the loans senior to the department'sloan is unchanged or decreased and the department's security interestis not jeopardized, as determined by the department. (c) With respect to any loans made pursuant to subdivision (b) ofSection 50662.7 for owner-occupied dwellings, the department shall doall of the following: (1) Annually mail, by the end of January, to any borrower who hasan outstanding balance a statement that provides all of the followinginformation: (A) The principal loan balance. (B) The interest accrued to the date of the statement. (C) The interest percentage rate. (D) Payment instructions with a disclaimer that a payment may notbe required until the outstanding loan balance is due and payable. (E) Contact information, including a telephone number and mailingaddress for borrower inquiries. (2) By July 1, 2005, adopt a written application process andevaluation guidelines to authorize the transfer of the borrower'sloan obligations described in subdivision (a) or the subordination ofthe deed of trust. The department shall provide a summary of thisprocess and the guidelines with all statements mailed on or beforeFebruary 1, 2006. (3) Mail to the party that applies to the department tosubordinate or assume the loan, the department's decision to approveor deny the application within 60 days of receipt, along with astatement of reasons for any denial. (d) With respect to any loans made pursuant to subdivision (b) ofSection 50662.7 for owner-occupied dwellings, the department maydelay the foreclosure of the loan if the department determines thatits security interest is not jeopardized. (e) The department may adopt guidelines for implementation of thissection. These guidelines shall not be considered to be regulationsas defined in Section 11342.600 of the Government Code and thereforeshall not be subject to the Administrative Procedure Act (Chapter 3.5(commencing with Section 11340) of Division 3 of Title 2 of theGovernment Code).50663.  The department may contract with a local public entity ornonprofit corporation to provide any portion of uncommitted funds inthe Housing Rehabilitation Loan Fund for making deferred-paymentrehabilitation loans through such local public entity or nonprofitcorporation in aid of a (a) rehabilitation loan program conducted ina concentrated rehabilitation area designated pursuant to Section51302; (b) residential rehabilitation financing program conductedpursuant to Part 13 (commencing with Section 37910) of Division 24;(c) systematic enforcement program for which the California HousingFinance Agency has allocated funds for mortgage loans pursuant toSection 51311; (d) code enforcement agency repairing substandarddwellings following the owner's failure to commence work following afinal notice or order from the enforcement agency; (e) programconducted by the agency in a mortgage assistance area, provided sucharea is located in a rural area; or (f) rehabilitation or codeenforcement program being undertaken by a local public entity ornonprofit corporation in an area in which federal funds are beingused or will be used in conjunction with the program establishedpursuant to this chapter. Eligibility for such loans shall begoverned by the provisions of Sections 50664, 50665, 50666, 50667,50667.5, or 50668.50664.  Deferred-payment loans may be made to local agencies forrepair of substandard dwellings through a master agreement and fundcommitment. Such agreements shall limit the amount ofdeferred-payment rehabilitation loans to actual rehabilitation coststo the local agency, shall require that the full amount ofrehabilitation costs be made a special assessment against theproperty involved, and shall require that the full amount collected,including any interest attributable to delinquency, be promptlyrepaid to the Housing Rehabilitation Loan Fund. However, loans madepursuant to this section shall not otherwise bear any interest.50665.  In residential rehabilitation areas designated pursuant toSection 37921, or in conjunction with financing of residentialrehabilitation outside such areas as provided in Section 37922.1 or37924.5, a person or family of low or moderate income that is theowner of an owner-occupied one-to-four dwelling unit property mayreceive a deferred-payment rehabilitation loan for the excess of thecost of meeting rehabilitation standards over the amount of financingthe local agency is able to provide without exceeding the owner'sability to afford the monthly payments required. Owners of rentalresidences may receive deferred-payment rehabilitation loans if theyhave agreed to limit rent increases as provided in Section 37922.5,and if such loans are necessary in addition to financing otherwiseprovided in order to avoid increases in monthly debt service whichwould result in rent increases causing permanent displacement ofpersons of low income residing in the residence prior torehabilitation. Such owners may also receive deferred-paymentrehabilitation loans in the amount, if any, necessary to avoid suchincreases in monthly debt service as would make it economicallyinfeasible to accept subsidies available to provide affordable rentsto persons of low income, if the owner agrees to accept suchsubsidies.50666.  In concentrated rehabilitation areas designated pursuant toSection 51302, a person or family of low or moderate income who isthe owner of an owner-occupied residential structure of one to fourunits may receive a deferred-payment rehabilitation loan for theexcess of the cost of meeting rehabilitation standards over theamount of the neighborhood improvement loan the administering agency,local public entity, or qualified mortgage lender is able to providewithout exceeding the owner's ability to afford the monthly paymentsrequired. Owners of rental housing may receive deferred-paymentrehabilitation loans if necessary to avoid increases in monthly debtservice which would result in rent increases causing permanentdisplacement of persons of low income residing in the residentialstructure prior to rehabilitation and if the owner contracts duringthe term of the loan not to raise residential rentals except aspermitted by regulations of the agency pursuant to subdivision (g) ofSection 51307. Owners of rental housing may also receivedeferred-payment rehabilitation loans in the amount, if any,necessary to avoid such increases in monthly debt service as wouldmake it economically infeasible to accept subsidies available toprovide affordable rents to persons of low income, if the owneragrees to accept such subsidies.50667.  In those counties and cities in which the California HousingFinance Agency has allocated funds for mortgage loans forrehabilitation of housing developments pursuant to Section 51311, aperson or family of low or moderate income who is the owner of anowner-occupied housing development may receive a deferred-paymentrehabilitation loan for the excess of the cost of meetingrehabilitation standards over the amount of mortgage-loan financingthe agency is able to provide without exceeding the owner's abilityto afford the monthly payments required. Owners of rental housingdevelopments in such counties and cities may receive deferred paymentloans if necessary to avoid increases in monthly debt service whichwould result in rent increases causing permanent displacement ofpersons of low income residing in the housing development prior torehabilitation, and if the owner accepts a mortgage loan from theagency with its limitation of rents and profits. Owners of rentalhousing developments in such counties and cities may also receivedeferred-payment rehabilitation loans in the amount, if any,necessary to avoid such increases in monthly debt service as wouldmake it economically infeasible to accept subsidies available toprovide affordable rents to persons of low income if the owner agreesto accept such subsidies.50667.5.  In areas in which a local public entity or nonprofitcorporation is undertaking a rehabilitation or code enforcementprogram for which federal funds are being used or will be used inconjunction with the program established pursuant to this chapter, aperson or family of low income who is the owner of an owner-occupiedone-unit to four-unit dwelling may receive a deferred-paymentrehabilitation loan for the excess of the cost of meetingrehabilitation standards over the amount of financing or assistancethe local public entity or nonprofit corporation is able to providewithout exceeding the owner's ability to afford the monthly paymentsrequired. Owners of rental housing in such areas may receivedeferred-payment loans if necessary to avoid increases in monthlydebt service which would result in rent increases causing permanentdisplacement of persons of low income residing in such housing and ifthe owner enters into an agreement with the local public entity ornonprofit corporation which provides for the regulation of rents,consistent with a fair rate of return for the owner, if such owner isnot a nonprofit corporation, and consistent with the provision ofaffordable rents, to assure that the purposes of this chapter arecarried out. Such agreement shall be binding on any successor ininterest of the sponsor. The department may adopt regulations whichgovern the terms of such agreements. Owners of rental housing in suchareas may also receive deferred-payment rehabilitation loans in theamount necessary to avoid such increases in monthly debt service aswould make it economically infeasible to accept subsidies availableto provide affordable rents to persons of low income if the owneragrees to accept such subsidies.50668.  (a) Except as provided in subdivision (b) or in Section50664, deferred-payment loans may be made only through agreementsbetween the local public entity which has received a fund commitmentand the owner of the dwelling unit or rental housing development orthrough agreements approved by the local public entity between anonprofit corporation which has received a fund commitment and theowner of the dwelling unit or rental housing development. Theagreements shall regulate contractor selection, work to be done, andthe schedule of contractor payments, and shall require that the loanbe secured by a deed of trust or other adequate security. Agreementsregarding housing other than owner-occupied one- to four-familydwellings shall have the prior approval of the department. (b) The department may provide deferred payment loans directly tothe owner-occupant of a dwelling unit or owner of a rental housingdevelopment if it has been determined by the department that thedwelling unit to be assisted is located in an eligible geographicalarea pursuant to the provisions of this chapter and no eligible localpublic entity exists in that area. (c) All moneys received by the department in repayment of loansmade pursuant to this chapter, including interest and payments inadvance in lieu of future interest, shall be deposited in the HousingRehabilitation Loan Fund.50668.5.  For the purpose of providing financial assistance pursuantto this chapter utilizing bond proceeds transferred to the HousingRehabilitation Loan Fund pursuant to paragraph (2) of subdivision (a)of Section 53130, paragraph (2) of subdivision (b) of Section 53130,and Sections 8878.20 and 8878.21 of the Government Code, deferredpayment loans made with these funds shall be subject to all of thefollowing special provisions, which shall prevail over conflictingprovisions of this chapter: (a) (1) Applications for fund commitments shall be accepted by thedepartment at any time. Fund commitments shall be based on a rankingof applications, which shall occur at least once every three monthsuntil there are insufficient funds available to commit according tothis ranking. In making this ranking for rental housing developments,priority shall be given to those projects which (A) serve thegreater number of eligible households as defined in Section 50105with the lowest incomes, (B) provide the greater number of units withthree or more bedrooms, (C) are located in areas where the housingneed is great as determined by the department, taking intoconsideration, among other factors, low vacancy rates, high marketrents, long waiting lists for subsidized housing, the stock ofsubstandard housing, and the potential loss of subsidized rentalhousing to market-rate housing through demolition, foreclosure, orsubsidy termination, (D) complement the implementation of an existinghousing program, (E) maximize private, local, and other fundingsources, and (F) maximize long-term benefits for eligible households,as defined in Sections 50079.5 and 50105. Subparagraph (B) aboveshall not apply to applications for fund commitments submittedpursuant to Section 50670 or to any application for residentialhotels and motels. In making this ranking for owner-occupied housing,priority shall be given to those applications which (A) serve thegreater number of eligible households, as defined in Section 50105,with the lowest income, (B) provide the greater number of units withthree or more bedrooms, (C) are located in areas where the need forrehabilitation is great as determined by the department, taking intoconsideration, among other factors, the amount of substandardowner-occupied housing, low vacancy rates, and limited availabilityof affordable housing, (D) complement the implementation of anexisting housing program, and (E) maximize available and appropriateprivate, local, and other funding sources. The department shall alsoevaluate the capability of the sponsor to rehabilitate, own, andmanage the rental housing development or the capability of theapplicant for funding for owner-occupied housing to implement theproposed program. (2) Loans for rental housing developments may be reviewed,approved, and funded by the department directly to the sponsor. Inthese cases, the department shall ensure that the sponsor notifiesthe local legislative body of the sponsor's loan application prior toa funding award. Loans to owner-occupants may be made by localpublic entities or nonprofit corporations which have received fundcommitments from the department. The department shall ensure that thelocal public entity or nonprofit corporation applying for fundcommitments for loans to owner-occupants notifies the locallegislative body of the application prior to a funding award. Whenthe department certifies a local public entity or nonprofitcorporation as being capable of making these loans, the departmentshall delegate responsibility for reviewing and approving these loansto the local public entity or nonprofit corporation. If it isdetermined by the department that the local public entity ornonprofit corporation is no longer capable of making or managingthese loans, the department may, at its sole discretion, revoke thatdelegation of responsibility or cancel the funding commitment to thelocal public entity or nonprofit corporation, or both. The department's regulations shall include procedures and standards forcertification and decertification. (3) A sponsor may apply for loans for one or more rental housingdevelopments. (b) (1) A housing development may utilize any combination offederal, state, local, and private financial resources necessary tomake the development affordable, for the term of the state'sregulatory agreement, to the eligible households. Notwithstanding therequirements of Section 50663, rental housing developments andowner-occupied units assisted by the program may be located anywherein the state. (2) In the case of loans for rental housing developments awardedto nonprofit sponsors, the total secured debt in a superior positionto the department's loan, plus the department's loan, shall notexceed 100 percent of the after rehabilitation value of the property,as determined by an appraisal of the property conducted pursuant toguidelines established in regulations of the department. (3) The maximum loan amounts per unit established in regulationspursuant to Section 50670 shall also apply to rental housingdevelopments rehabilitated or acquired and rehabilitated pursuant toparagraph (1) of subdivision (a) of Section 50661, except that thereshall not be a maximum loan amount established per project. Thesedollar limitations may be increased by the department, as necessary,in high-cost areas of the state or where the correction of severehealth and safety defects or the provisions of handicappedaccessibility standards necessitate greater assistance. Thedepartment, by regulation, may specify unit loan limits for loansmade for owner-occupied housing and the circumstances under which itmay grant exceptions to, or variances from, these limits. (4) (A) Loans made to sponsors of rental housing developments foracquisition and rehabilitation shall be for terms of not less than 30years. Loans made to sponsors of rental housing developments forrehabilitation only shall be for terms of not less than 20 years.However, the term shall not exceed the useful life of the rentalhousing development for which the loan is made. The sponsor may electto begin to repay the loan at any time in accordance with theprepayment plan established in accordance with paragraph (6), if itis determined by the department, that the sponsors can continue tomaintain the rents at levels affordable to eligible households. (B) The term of the loan and the time for repayment may beextended by the department for additional 10-year terms as long asthe rental housing development is operated in a manner consistentwith the regulatory agreement and the sponsor requires an extensionin order to continue to operate in a manner consistent with thischapter. (5) (A) In the case of loans made for rental housing developments,eligible costs shall include those costs relating to (i) realproperty acquisition, including refinancing of existing debt to theextent necessary to reduce debt service to a level consistent withthe provision of affordable rents and the fiscal integrity of theproject; (ii) rehabilitation or reconstruction, including theconversion of nonresidential structures to residential use; (iii)general property improvements which are necessary to correct unsafe,unhealthy, or unsanitary conditions, including renovations andremodeling, including, but not limited to, remodeling of kitchens andbathrooms, installation of new appliances, landscaping, and purchaseor installation of central air conditioning; (iv) necessary andrelated onsite improvements; (v) reasonable administrative expensesin connection with the planning and execution of the project, asdetermined by the department; (vi) reasonable consulting costs; (vii)rent-up costs; (viii) seismic rehabilitation improvements; and (ix)any other costs of rehabilitation authorized by the department."Rent-up costs," as used in this section, means costs incurred whilea unit is on the housing market but not rented to its first tenant."Seismic rehabilitation improvements," as used in this section, meansimprovements which are designed to increase seismic structuralsafety in accordance with a plan developed by a civil engineer, astructural engineer, or an architect for a particular building thathas been identified as hazardous by the city or county in which thebuilding is located in accordance with the criteria established bythe Seismic Safety Commission pursuant to Section 8875.1 of theGovernment Code or in accordance with a previously adopted city orcounty seismic safety ordinance adopted pursuant to Section 19163. (B) In the case of loans made for owner-occupied housing, eligiblecosts shall include those costs relating to (i) rehabilitation workexpenses; (ii) cost of room additions necessary to alleviateovercrowding; (iii) costs of general property improvements includingrenovations and remodeling, including, but not limited to, remodelingof kitchens and bathrooms, installation of new appliances,landscaping and purchase or installation of central air conditioning,to the extent that they are necessary to correct unsafe, unhealthy,or unsanitary conditions; (iv) costs related to necessaryarchitectural, engineering, and other technical consultants; (v)costs of preliminary reports, title policies, credit reports,appraisal reports, and fees for recording documents related to thedepartment's loans; (vi) costs of building permits and othergovernmental fees; and (vii) if in conjunction with otherrehabilitation work, costs for improvements related to making thehousing accessible to the handicapped. (C) Notwithstanding the provisions of Section 53130 which limitthe use of allocated proceeds with respect to project operatingcosts, and Sections 53131 and 53133, the department may set aside oruse any amounts available in the fund to establish a rental housingdevelopment default reserve for the purpose of curing or avoiding asponsor's defaults on the terms of any loan or other obligation whichjeopardizes the financial integrity of a rental housing developmentor the department's security in the rental housing development. Thepayment or advance of funds by the department pursuant to thissubparagraph shall be solely within the discretion of the departmentand no sponsor shall be entitled to or have any right to payment ofthese funds. Funds advanced pursuant to this subparagraph shall beadded to the loan amount secured by the deed of trust and shall bepayable to the department upon demand. (D) Notwithstanding the provisions of Section 53130 which limitthe use of allocated proceeds with respect to project operatingcosts, or Sections 53131 and 53133, the department may set aside oruse proceeds in the fund in an amount not to exceed 3 percent of theamount of encumbrances for loans for owner-occupied housing toestablish an owner-occupied housing default reserve for the purposeof curing or avoiding an owner's default on the terms of any loan orother obligation which jeopardizes the department's security in theowner-occupied housing. The payment or advance of funds by thedepartment pursuant to this subparagraph shall be solely within thediscretion of the department, and no homeowner shall be entitled to,or have any right to payment of, these funds. Funds advanced pursuantto this subparagraph shall be added to the loan amount secured bythe deed of trust and shall be payable to the department upon demand.Interest payments from loans for owner-occupied housing shall beallocated by the department into this reserve to replace theallocated proceeds until the percent established by the department isachieved solely with interest payments. (6) Upon request of the sponsor, the department may permitrepayment of a sponsor's loan on the basis of net cash-flow. Thedepartment shall develop a prepayment plan in conjunction with thesponsor which will ensure the maintenance of affordable rents and thefiscal integrity of the rental housing development. As an incentiveto encourage the prepayment of loans, the department may permit thesponsor to retain one-half of the net cash-flow. The department shalldetermine the method for calculating net cash-flow, which mayinclude a factor for excess debt service coverage or a return on cashinvestment to the sponsor. (7) If a loan is made pursuant to this chapter for both seismicrehabilitation improvements and other eligible rehabilitation costs,only those costs related to the seismic rehabilitation improvementsshall be counted and included for purposes of the fund reservationmade by Section 8878.20 of the Government Code. (c) Principal and accumulated interest is due and payable uponcompletion of the term of the loan. The loan shall bear interest atthe rate of 3 percent per annum on the unpaid principal balance.However, the department shall reduce or eliminate interest paymentson a loan for any year or, alternatively, defer interest until thedeferred payment loan is repaid, if necessary to provide affordablerents to households of very low and low income. The ability to payall or part of the 3 percent simple annual interest shall not beconsidered in determining the fiscal integrity of the rental housingdevelopment at the time of the rating and ranking of an application. (1) "Maintain affordable rent levels," as used in this section,means rents may be automatically increased by the sponsor on anannual basis pursuant to an inflation index to be determined by thedepartment. The inflation index shall reflect anticipated annualchanges in rental housing development operating costs from a baseyear when the rents are initially established. Any sponsor may appealto the department for a greater adjustment in rents necessary toensure the fiscal integrity of the rental housing development. If thedepartment does not respond within 60 days, the request shall bedeemed approved. A 30-day written notice shall be given to eacheligible household prior to an adjustment in the amount of rent. (2) (A) Upon prior written approval by the department, a sponsormay set income limits for incoming tenants at a level below the limitspecified in Section 50079.5. If a tenant's income exceeds thisincome limit established by the sponsor, but does not exceed thelimit specified in Section 50079.5, that fact alone shall neitherconstitute cause for the tenant's eviction, nor be a violation of thesponsor's loan agreement. If a tenant's income exceeds the incomelimit for a household specified in Section 50079.5, the tenant shallbe required to vacate the assisted unit within six months from thedate of income recertification or notice to the sponsor of anincrease in income over the permissible income level. That period maybe extended by the sponsor for an additional six-month period inhigh cost rental areas with low vacancy rates, as determined by thedepartment. Any vacant units shall be rented to eligible householdsuntil the required residency by eligible households is attained. (B) In the case of limited equity housing cooperatives, theprovisions of this paragraph shall apply, except that tenants whoseincomes, upon recertification, exceed the limit specified in Section50079.5 shall not be required to vacate their units. Instead, andupon six months' notice, these tenants shall be required to pay rentin an amount equal to the market rate rent for comparable units, asdetermined by the department. When a tenant's income exceeds thelimit specified in Section 50079.5, the next available membershipshare for occupancy in a comparable unit shall be sold to a householdwith an income at or below this limit. (3) When operating income as defined by the department is greaterthan operating expenses, debt service, deposits required for reserveaccounts, payments pursuant to paragraph (6) of subdivision (b) ifelected by the sponsor, approved annual distributions, and any otherdisbursements approved by the department, these excess funds shall bepaid into an account established in the fund. Funds in this accountshall be appropriated to the department for use to assist rentalhousing developments funded pursuant to this section with proceeds ofbonds issued pursuant to Chapter 27 of the Statutes of 1988, Chapter30 of the Statutes of 1988, or Chapter 48 of the Statutes of 1988,subject to the following requirements: (i) Excess funds in the account shall be allocated first into therental housing development default reserve established pursuant tosubparagraph (C) of paragraph (5) of subdivision (b). The balance ofthis default reserve shall not exceed the maximum level of fundingestablished by regulations adopted by the department. (ii) After the rental housing development default reserve is fullyfunded with these excess funds, the department shall use alladditional excess funds in the account for payment of eitherunforeseen capital improvements, the cost of which would jeopardizethe fiscal integrity and affordability of a rental housingdevelopment, or to further reduce rents in a rental housingdevelopment. The department may adopt regulations which specify theprocedures and standards for application for, and use of, thesefunds. Those payments used for capital improvements shall be added tothe loan amount secured by the deed of trust and shall be payable tothe department upon demand. (d) Prior to disbursement of any funds for loans to rental housingdevelopments made pursuant to this section, the department shallenter into a regulatory agreement with the sponsor in accordance withsubdivision (d) of Section 50670, except that (1) the term of theregulatory agreement shall be for the original term of the loan andthe agreement shall be binding upon the sponsor and successors ininterest upon sale or transfer of the rental housing development orprepayment of the loan and (2) a nonprofit sponsor, other than agovernmental agency, may maintain a debt service coverage ratio of115 percent and distribute earnings in an amount no greater than 8percent of the nonprofit sponsor's actual investment. The regulatoryagreement also shall contain provisions requiring annual inspectionsand review of year-end fiscal audits and related reports by thedepartment and provisions to maintain affordable rent levels to serveeligible households. (e) Where loans will be used in conjunction with federal or otherhousing assistance or tax credits and a conflict exists between theother state or federal program requirements and those of this chapterwith respect to the calculation of rents, the requirements of theDeferred Payment Rehabilitation Loan Program and the Special UserHousing Rehabilitation Program may be waived only to the extentnecessary to permit federal or other state financial participation oreligibility for tax credits. (f) "Sponsor," for purposes of this section, has the same meaningas defined in subdivision (c) of Section 50669. (g) (1) The department shall adopt emergency regulations toimplement this chapter and to amend the maximum loan amounts per unitestablished in regulations adopted pursuant to Section 50670, withrespect to loans made with funding subject to this section. Theregulations shall be conclusively presumed to be necessary for theimmediate preservation of the public peace, health, safety, orgeneral welfare within the meaning or purposes of Section 11346.1 ofthe Government Code. (2) Notwithstanding conflicting provisions of this chapter, thedepartment may elect to make the regulations referred to in paragraph(1) additionally applicable until December 31, 1993, to all otherdeferred payment loan programs authorized by this chapter, except theprograms specified in Sections 50662.5 and 50671, if the departmentdetermines that the uniformity achieved thereby will avoidsignificant additional administrative costs. (h) For purposes of this section, "rental housing development"means a single family house or a multifamily structure or structurescontaining two or more dwelling units, including efficiency units.One or more of the dwelling units in a rental housing developmentshall be rented or leased or otherwise occupied as a primaryresidence by a person or household who is not the owner of thestructure or structures. For the purposes of this section, motelsoperated pursuant to subdivision (b) of Section 50669, residentialhotels, group or congregate homes, and limited equity housingcooperatives are rental housing developments. Except for motels, thelimitations concerning types of residents and minimum number of unitsset forth in subdivision (b) of Section 50669 shall not apply. (i) "Affordable rent" for the purposes of this section shall beestablished by the department in the regulations authorized bysubdivision (g). However, the initial rents shall be established bythe department based on a designated family size for each unit size,and those initial rents shall not exceed 30 percent of 50 percent ofthe area median income adjusted by that designated family size forunits restricted to occupancy by very low income households; or 30percent of 60 percent of area median income adjusted by thatdesignated family size for units restricted to occupancy bylow-income households. In establishing affordable rent levels, thedepartment shall make provision in its regulations for projectsserving the physically and mentally handicapped persons.50669.  As used in Section 50670: (a) "Deferred-payment loan" means a loan for acquisition andrehabilitation of a rental housing development which (1) has a termof not more than 30 years, but which shall not in any event exceedthe useful life of the rental housing development for which such loanis made, as determined by the department, whichever is less, and (2)is repaid in a single payment upon refinancing of such developmentat the end of the term of the loan. Those loans shall bear interestat the rate of 3 percent per annum on the unpaid principal balance,provided, however, that the department shall reduce or eliminateinterest payments on a loan for any year or, alternatively, deferinterest payments until the deferred-payment loan is repaid, ifnecessary to provide affordable rents to households of very low andlow income. The ability to pay all or part of the 3 percent simpleannual interest shall not be considered in determining the fiscalintegrity of the rental housing development at the time of the ratingand ranking of an application. (b) "Rental housing development" means a residential structure orstructures containing five or more rental dwelling units for theelderly or handicapped, provided that each unit is equipped with akitchen and bathroom, or a structure or structures intended for useas a group home by five or more handicapped individuals or aresidential hotel for any low or very low income household."Residential hotel" shall have the same meaning as used in paragraph(1) of subdivision (b) of Section 50519 but, for purposes of thissubdivision, there shall be an additional requirement that a majorityof the guestrooms in the hotel be residential hotel units. A"residential hotel unit" means a room used or intended to be used asa primary residential unit by a person or persons, which is subjectto Chapter 2 (commencing with Section 1940) of Title 5 of Part 4 ofDivision 3 of the Civil Code, but which does not have either aself-containing kitchen or bathroom, or both. A "residential hotelunit" also includes an efficiency unit as defined in Section 17958.1."Rental housing development" also means a residential structure orstructures in operation or previously operated as a motel and subjectto subdivision (b) of Section 1940 of the Civil Code, which willcontain five or more dwelling units for any low or very low incomehouseholds. Eligible rehabilitation costs relative to motels mayinclude costs associated with adding self-containing kitchens andbathrooms in each unit. (c) "Sponsor" means any individual, joint venture, partnership,limited partnership, trust, corporation, cooperative, local publicentity, duly constituted governing body of an Indian reservation orrancheria, or other legal entity, or any combination thereof,certified by the department as qualified to own, manage, andrehabilitate a rental housing development. A sponsor may be organizedfor profit or limited profit or be nonprofit.50670.  (a) The department shall establish a Special User Ho