SECTIONS 1917.130-1917.135 - California Statutes

CIVIL CODE

SECTION 1917.130-1917.135

1917.130. Lenders may make shared appreciation loans pursuant to
this chapter for the purchase of real property improved with one- to
four-dwelling units, including structures ancillary to such dwelling
units and including attached single-family dwelling units,
single-family mobilehome units placed upon permanent foundations,
residential condominium units, and dwelling units within a planned
unit development. Shared appreciation loans shall be made to finance
only owner-occupied dwelling units, but in the case of two- to
four-unit dwellings financed under this chapter only one of the units
need be owner-occupied. A dwelling unit shall be conclusively deemed
to be owner-occupied for purposes of this chapter if an original
recipient of the shared appreciation loan certifies in writing to the
lender at the time the loan is made that he or she will occupy the
property.

1917.131. A shared appreciation loan shall include the following
terms and conditions:
(a) The term of the loan, excluding any refinancing under Section
1917.133, shall be at least seven years, but not more than 30 years.
(b) The repayment schedule for the loan, excluding any refinancing
under Section 1917.133, shall be cast so that full amortization of
the principal amount of the loan would occur in not less than 30 nor
more than 40 years, regardless of the actual term of the loan. Any
principal balance remaining at maturity shall be due and payable at
that time, unless refinanced as provided in Section 1917.133. Monthly
installment payments shall be equal in amount, except for the final
payment when a principal balance is remaining at maturity, and in
addition to amortization of principal shall include fixed interest
pursuant to subdivision (d).
(c) The loan shall be secured by a deed of trust on the real
property financed.
(d) The loan shall bear interest at a fixed rate, which shall be
established in relation to the prevailing rate (1) in effect 90 days
prior to the loan closing, (2) in effect at another date between that
date and the loan closing if and as mutually agreed by the lender
and borrower, or (3) in effect at the time of the lender's loan
commitment given to the borrower or to the person from whom the
borrower purchases the property. The percentage by which the fixed
interest rate is reduced below the applicable prevailing rate shall
be at least one-half the lender's percentage share of net appreciated
value which is contingent deferred interest, except that if the
shared appreciation loan is for less than 80 percent of the borrower'
s purchase price of the property, the percentage by which the fixed
interest rate is reduced below the applicable prevailing rate shall
be at least two-thirds the lender's percentage share of net
appreciated value which is contingent deferred interest.
(e) The borrower shall additionally be obligated to pay to the
lender contingent deferred interest (1) at the time of sale of the
property if the lender accelerates the principal balance of the loan
in accordance with a provision in the shared appreciation loan
authorized by Section 1917.162, (2) at the time the loan is prepaid
in full, upon acceleration of the loan upon default, or (3) upon the
maturity of the loan, whichever first occurs.
(f) The aggregate amount of any fee charged to the borrower by the
lender for processing an application, preparing any necessary
documents, obtaining a credit report, or any other costs incurred by
the lender in connection with originating a shared appreciation loan
shall not exceed two percent of the principal amount of the loan or
five hundred dollars ($500), whichever is greater. No prepaid
interest shall be charged to the borrower, but nothing in this
chapter shall preclude a lender from requiring a fee for providing
commitments for shared appreciation loans to builders or others who
purchase such commitments and who will not be the ultimate borrower.

1917.132. (a) The borrower shall have the right to prepay, at any
time, in full or in part, the principal loan balance of the shared
appreciation loan, together with accrued interest, including
contingent deferred interest.
(b) Nothing in this chapter shall prevent a borrower from
obligating himself or herself, by an agreement in writing, to pay a
prepayment charge upon prepayment of the loan, in full or in part,
made within five years of the date of execution of the shared
appreciation loan.
(c) Any prepayment charge imposed upon the prepayment of a shared
appreciation loan shall not exceed the amount authorized and
specified in subdivision (b) of Section 2954.9.
(d) No prepayment charge shall be imposed as to any portion of the
contingent deferred interest.

1917.133. (a) If a shared appreciation loan with an original term
of less than 10 years is not prepaid in full or the property is not
sold or transferred prior to maturity of the loan, and provided the
borrower is not then in default, the lender shall offer or arrange
for refinancing of the unpaid balance of the loan upon maturity and
all contingent deferred interest. The refinancing may be provided
directly by the lender or another mortgage lender, or the lender may
arrange at the time of making the shared appreciation loan for the
refinancing to be provided by a federally or state chartered bank or
savings and loan association doing business in this state or by a
qualified mortgage banker. As used in this section "qualified
mortgage banker" means a lender (1) meeting the criteria established
by the Government National Mortgage Association for lenders selling
over ten million dollars ($10,000,000) in mortgage loans to that
organization annually and (2) which either has conducted an ongoing
business of mortgage lending in this state for not less than five
years immediately preceding the making of the shared appreciation
loans, or made over fifty million dollars ($50,000,000) in mortgage
loans in this state during the 12 months immediately preceding the
making of the shared appreciation loan. If a refinancing commitment
is arranged by the lender upon origination of the shared appreciation
loan, this fact shall be fully and fairly disclosed to the borrower,
a copy of the lender's contract with the bank, savings and loan
association or qualified mortgage banker making the commitment shall
be supplied to the borrower at such time, and the contract shall be
fully enforceable by the borrower as a third-party beneficiary
thereto, but the lender shall not be a guarantor of the obligation of
the bank, savings and loan association, or qualified mortgage banker
to provide refinancing.
If the original lender is a bank or savings and loan association
doing business in this state or a qualified mortgage banker, it may
provide the refinancing commitment to the borrower required by this
section and assignees or successors in interest of the original
lender shall not be guarantors of the refinancing obligation,
provided the shared appreciation loan contains this limitation, which
is fully and fairly disclosed to the borrower, and the original
lender's refinancing commitment is fully enforceable by the borrower.
(b) The term of the loan for refinancing shall be established so
that the borrower's repayment schedule provides for the final
installment payment not less than 30 years from the date of
origination of the shared appreciation loan. However, if loans at
that duration are not available, within the meaning of subdivision
(d), the lender or other obligor shall give the borrower a choice of
any form of loan and maturity for that type of loan which is
available at the time of refinancing, within the meaning of
subdivision (d). The lender or other obligor shall inform the
borrower of the types of loans (and maturities) available for
refinancing under this section not less than 60 days prior to
maturity of the shared appreciation loan.
(c) The interest rate for the refinancing loan shall not exceed
rates generally available in the market for the type of loan
instrument provided under subdivision (d) at the time of maturity of
the shared appreciation loan. No loan origination fees shall be
required of the borrower, either as prepaid interest or for
processing services, as a condition of obtaining a refinancing loan
pursuant to this section, but the borrower may be required to pay the
costs of obtaining a policy of title insurance in accordance with
the lender's requirements. The refinancing loan need not be a fixed
interest rate loan, subject to the limitations of subdivision (d).
(d) The refinancing loan may be any form of loan which, at the
time of refinancing, is generally offered to and utilized by the
public for financing housing like the borrower's property by banks or
savings and loan associations doing business in this state.
(e) The lender may require as a condition of the refinancing loan
that it be secured by a deed of trust having a lien of first
priority.

1917.134. Except as provided in this article, the terms and
conditions of the refinancing loan shall be subject to all laws
applicable to loans in effect on the date of refinancing.

1917.135. Nothing in this chapter shall preclude the borrower from
obtaining any other financing, in lieu of the refinancing provided
for in Section 1917.133, including refinancing on other terms
mutually agreeable to the borrower and lender.