Cal. Code Regs. tit. 10 § 260.140.114.10

Current through Register 2024 Notice Reg. No. 24, June 14, 2024

Section 260.140.114.10 - Lending Practices

(a) On financing made available to the program by the sponsor, the sponsor may not receive interest and other financing charges or fees in excess of the amounts which would be charged by unrelated lending institutions on comparable loans for the same purpose in the same locality of the property. No prepayment charge or penalty shall be required by the sponsor on a loan to the program secured by either a first or a junior or all-inclusive trust deed, mortgage or encumbrance on the property, except to the extent that such prepayment charge or penalty is attributable to the underlying encumbrance. Except as permitted by subsection (b) of this section, the sponsor shall be prohibited from providing permanent financing for the program.

(b) The sponsor may provide permanent financing for the purchase of property by the program through use of an "all-inclusive" or "wrap around" note provided all of the following conditions are complied with:

(1) The sponsor under the all-inclusive note shall not receive interest on the amount of the underlying encumbrance included in the all-inclusive note in excess of that payable to the lender on that underlying encumbrance;

(2) The program shall receive credit on its obligation under the all-inclusive note for payments made directly on the underlying encumbrance, and

(3) A paying agent, ordinarily a bank, escrow company, or savings and loan, shall collect payments (other than any initial payment of prepaid interest or loan points not to be applied to the underlying encumbrance) on the all-inclusive note and make disbursements therefrom to the holder of the underlying encumbrance prior to making any disbursement to the holder of the all-inclusive note, subject to the requirements of subparagraph (1) above, or, in the alternative, all payments on the all-inclusive and underlying note shall be made directly by the program.

(c) For purposes of this Section, the term "permanent financing" shall mean all indebtedness encumbering program properties or incurred by the program, the principal amount of which is scheduled to be paid over a period of not less than 48 months, and not more than 50 percent of the principal amount of which is scheduled to be paid during the first 24 months. Nothing in this definition shall be construed as prohibiting a bona-fide prepayment provision in the financing agreement.

Cal. Code Regs. Tit. 10, § 260.140.114.10

1. Amendment of subsection (a) filed 3-12-74; effective thirtieth day thereafter (Register 74, No. 11).
2. Amendment of subsection (a) filed 1-22-75; effective thirtieth day thereafter (Register 75, No. 4).
3. Amendment filed 1-27-84; effective thirtieth day thereafter (Register 84, No. 4).
4. New subsection (c) filed 5-18-92; operative 6-17-92 (Register 92, No. 22).

Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25140, Corporations Code.