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 5.5 - Special User Housing Rehabilitation Program
Section 7472 - Defaults, Transfers and Loan Cancellation

(a) In the event a sponsor should default on any of its debts to a lender or creditor whose loan is secured in any manner by the subject property, and the lender or secured creditor should proceed to force a sale of the subject property after a foreclosure procedure, or in the event a judgment has been taken against the property owner and the judgment creditor should proceed to force a sale of the subject property in satisfaction of its claim, the Department by this fact approves the sale.

(b) No sponsor shall sell, encumber or convey the rental housing development without express, prior written approval of the sale by the Department. Approval of a sale or conveyance shall be given, provided:

(c) In addition, the Department may permit a sale and termination of the regulatory agreement and all other obligations pursuant to this subchapter only if:

(d) In the event a sponsor or successor-in-interest defaults on any material provision of the deed of trust or regulatory agreement, the Department shall provide the sponsor with a written notice of breach or default and seek and encourage correction or compliance. If substantial progress is not made in rectification within 30 days of such notice, the Department may, at its discretion, declare the note evidencing the loan to be due and payable. In addition, the Department may seek any other remedy available in law or equity.

(e) In the event of foreclosure, default, or forced sale, the purchaser shall take title subject to the conditions of the regulatory agreement for the remaining duration of the original loan term.

(f) Unexpended loans to sponsors may be cancelled by the Department if the objectives of the loan cannot be met, implementation cannot proceed according to the sponsor's plans and schedule, special conditions have not been fulfilled within required periods, control/ownership of the rental housing development has not been obtained within six months, or rehabilitation has not commenced within twelve months of the date of loan approval. Upon receipt of a notice of intention to cancel the loan from the Department, the sponsor shall have a right to a hearing before the Loan Committee within thirty days; the Committee shall make a recommendation to the Director, who shall issue a written decision within ten working days of the hearing.