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 - Deferred-Payment Rehabilitation Loans
Section 7412 - Conditions of Loans to Borrowers

(1) A loan agreement, which, in the case of loans to rehabilitate rental units, shall be recorded or referenced in a recorded document;

(2) A promissory note;

(3) A security instrument to be recorded;

(4) Truth-in-lending disclosure; and

(5) Other documents required by the Department or required by the local entity and approved by the Department.

(1) Amount, term, and interest on the loan, including specific terms of payment and repayment of principal and interest;

(2) Terms and conditions regarding non-discrimination and affirmative action in hiring, as required by law;

(3) Terms and conditions regarding contractor selection, self-help, rehabilitation work to be done, bonding, and payments to contractors;

(4) Compliance with local, state or federal laws, ordinances and regulations applicable to proposed loans, rehabilitation, and use of the premises, including zoning ordinances, building codes, planning, historic preservation, environmental, and relocation regulations;

(5) Terms and conditions relating to defaults in repayment or compliance with the loan agreement;

(6) Provisions allowing the local entity or Department, their agents or employees, with the prior consent of the borrower and the occupant in each instance, to enter upon and inspect the lands, buildings, and equipment of the borrower at any time during or after rehabilitation of the subject property; or to inspect the books and records of the owner related to the subject loan funds, at any time during or after rehabilitation of the property assisted by the loan;

(7) Terms and conditions related to program reporting requirements;

(8) Terms and conditions related to extensions, refinancing, assumptions, or subordination of the loan; and

(9) Provisions that enforcement shall be by proceeding at law or in equity, at the option of the local entity or department, against any person or persons violating or attempting to violate any covenant, either to restrain violation or to recover damages.

(1) Pursuant to Section 7416(a)-(d), rental units in the residential property shall be rented to low income households;

(2) Loans pursuant to Section 7404(a)(1) shall be made only if the borrower agrees to restrict rents as required by regulation of the California Housing Finance Agency pursuant to subdivision (g) of Section 51307;

(3) Loans pursuant to Section 7404(a)(2) shall be made if the borrower contracts during the term of the loan to limit rent increases as provided in Section 37922.5 of the Health and Safety Code;

(4) Loans pursuant to Section 7404(a)(3) shall be made if the borrower accepts a loan for rehabilitation from the California Housing Finance Agency and agrees to limit rents and profits as required by such a loan;

(5) Loans pursuant to Section 7404(a)(5) and (6) shall be made if the borrower agrees to execute an agreement, to be provided by the Department, whereby the borrower agrees during the term of the loan not to raise residential rents for all assisted units in a rental housing development by an annual amount greater than 50% of the annual average percentage increase in the Consumer Price Index for All Urban Consumers, Western Region, All Items ("CPI") as published by the U.S. Bureau of Labor Statistics. In the event such index is no longer published or available, an alternative index shall be selected by the Department. The alternative shall be based on the same factors which determine the CPI to the extent possible. However, if the units are located in a community which has adopted rent stabilization ordinances which would require a lower increase in rents, the local provisions shall apply.

(6) Where program areas under Section 7404(a)(5) and (6) overlap with other eligible program areas, the provisions which require the lowest increase in rents shall apply.

(7) Loans to rehabilitate one or more units for which Section 8 Housing Assistance Payments will be used, shall be made only if the borrower agrees during the term of the loan not to raise rents by an amount greater than the annual rent adjustments for Section 8 units as determined and published by the U.S. Department of Housing and Urban Development;

(8) Terms and conditions related to tenancy standards and procedures pursuant to Section 7416.

(9) The loan agreement shall be binding on the borrower and successors in interest for the full term of the loan, regardless of sale, transfer or prepayment.