California Code of Regulations
Title 25 - Housing and Community Development
Division 1 - Housing and Community Development
Chapter 7 - Department of Housing and Community Development Programs
Subchapter 16 - Family Housing Demonstration Program Regulations-Proposition 84
Article 4 - Program Operations
Section 8136 - Defaults and Loan Cancellations

Universal Citation: 25 CA Code of Regs 8136

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) In the event of a breach or violation by the sponsor of any of the provisions of the Regulatory Agreement, the Standard Agreement, the Development Agreement, the promissory note, or the deed of trust, or any other agreement pertaining to the project, the department may give written notice to the sponsor to cure the breach or violation within a period of not less than 15 days. If the breach or violation is not cured to the satisfaction of the department within the specified time period, the department, at its option, may declare a default under the relevant document and may seek legal remedies for the default including the following:

(1) The department may accelerate all amounts, including outstanding principal and interest, due under the loan and demand immediate repayment thereof. Upon a failure to repay such accelerated amount in full, the department may proceed with a foreclosure in accordance with the provisions of the deed of trust and state law regarding foreclosures.

(2) The department may seek, in a court of competent jurisdiction, an order for specific performance of the defaulted obligation or the appointment of a receiver to complete the project or operate the rental housing development in accordance with program requirements.

(3) The department may at its option seek such other remedies as may be available under the relevant agreement or any law.

(b) In the event that the breach or violation involves charging tenants rent or other charges in excess of those permitted under the Regulatory Agreement, the department may demand the return of such excess rents or other charges to the affected households. In any action to enforce the provisions of the Regulatory Agreement, the department may seek as additional remedy the repayment of such overcharges.

(1) the objectives and requirements of the program cannot be met;

(2) the sponsor cannot meet the department's requirements for entering into the Regulatory Agreement, Development Agreement, promissory note, deed of trust or other agreement pertaining to the department in a timely fashion in accordance with the approved plans and schedules;

(3) special conditions for the disbursement of funds have not been fulfilled within required time periods;

(4) the construction or rehabilitation work has not commenced within one year of the date of loan approval;

(5) there has been a material change in the principals or management of the sponsor or project which was not approved by the department.

(6) a valid state or federal law or regulation precludes the department from fulfilling its obligations under the commitment;

Upon demonstration by the sponsor of good cause, the department may extend the date for compliance with any of the conditions in this subdivision.

(d) Upon receipt of a notice of intent to cancel the loan commitment from the department, the sponsor shall have the right to appeal to the Director.

(e) The department may use amounts available in the Account pursuant to section 8140(b) for the purpose of curing or avoiding a sponsor's default under the terms of any loan or other obligation if the department believes such default will jeopardize the completion of construction or rehabilitation, the fiscal integrity of such sponsor's project or the department's security in the project. Such default may include a failure or impending failure in payment due on a loan secured by a mortgage on the rental housing development, failure to pay taxes, or failure to maintain insurance or required reserves. The payment or advance of funds by the department pursuant to this subdivision shall be solely within the discretion of the department, and no sponsor shall be entitled to or have any right to payment of these funds. All funds so advanced shall be part of the program loan to the sponsor and subject to the same terms of repayment. Where it becomes necessary to use the Account for the purpose of assisting a project to avoid a threatened default or foreclosure, the department shall take those actions necessary including, but not limited to, foreclosures or forced sale of the rental housing development to prevent similar occurrences and insure compliance with the terms of the applicable agreements.

1. New section filed 12-14-90 as an emergency; operative 12-14-90 (Register 91, No. 11). A Certificate of Compliance must be transmitted to OAL by 4-15-91 or emergency language will be repealed by operation of law on the following day.
2. Repealed by operation of law on 4-16-91.
3. New section filed 7-19-91 as an emergency; operative 7-19-91 (Register 92, No. 16). A Certificate of Compliance must be transmitted to OAL 11-6-91 or emergency language will be repealed by operation of law on the following day.
4. New section refiled 11-15-91 as an emergency; operative 11-15-91 (Register 92, No. 16). A Certificate of Compliance must be transmitted to OAL 3-16-92 or emergency language will be repealed by operation of law on the following day.
5. Certificate of Compliance as to 11-15-91 order transmitted to OAL 12-12-91 and filed 1-13-92 (Register 92, No. 16).

Note: Authority cited: Section 50406(n), 50884 and 50895, Health and Safety Code. Reference: Section 50883.5(b), Health and Safety Code.

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