2009 California Civil Code - Section 1917.320 :: Article 1. Definitions

1917.320.  For the purposes of this chapter:
   (a) "Actual contingent interest" means the lender's appreciation
share of the net appreciated amount. In no event, however, shall the
rate of appreciation upon which actual contingent interest is
calculated at the end of the loan term exceed 2 1/2 times the rate at
which projected contingent interest had been calculated.
   (b) "Actual life expectancy" shall be calculated based upon
actuarial tables for women only, regardless of the sex of the
borrower, and acceptable to both the state and the insurance
industry.
   (c) "Annuity base amount" means the projected loan amount less (1)
the initial advance and (2) the projected contingent interest based
on the reasonable appreciation rate used in calculating the projected
loan amount.
   (d) "Borrower" means the recipient or recipients of a shared
appreciation loan for seniors who is obligated by execution of a
promissory note and who is at least 65 years of age.
   (e) "Borrower's life expectancy" means the actual life expectancy
of the borrower plus no more than five years. In the case of a loan
executed by two borrowers, the actual life expectancy shall be based
upon the youngest of the two.
   (f) "Cessation of occupancy" means the rental to a third party of
the right of exclusive occupancy of the subject property, or the
abandonment by all coborrowers of the property as his or her
residence.
   (g) "Lender" means any corporation organized as a public benefit
corporation pursuant to the Nonprofit Corporation Law (Part 2
(commencing with Section 5110), Div. 2, Title 1, Corp. C.).
   (h) "Lender's appreciation share" means a proportion not to exceed
25 percent of the appreciation of the property securing the loan
calculated in accordance with this chapter.
   (i) "Shared appreciation loan for seniors" means any loan made
pursuant to this chapter upon the security of owner-occupied real
property of a type specified in Section 1917.330, and in connection
with which the lender has a right to receive a share of the
appreciation in the value of the security property. "Shared
appreciation loan" includes a deed of trust and any evidence of debt
issued in connection with the loan.
   (j) "Maturity event" means the earliest of any of the following:
   (1) The death of the borrower. In the case of a married couple who
are coborrowers, the death of the surviving spouse.
   (2) The date of sale.
   (3) The date a loan made pursuant to this chapter is refinanced or
repaid in full.
   (4) Cessation of occupancy.
   (k) "Monthly annuity" means an amount paid in equal monthly
installments to the borrower which, together with interest calculated
at the stated rate, shall exhaust the annuity base amount during the
borrower's life expectancy.
   In the event that the calculated monthly annuity exceeds the cap
or ceiling determined in accordance with this subdivision, the lender
may limit the actual monthly annuity payment to an amount not lower
than the cap. If the cap is imposed, the lender's appreciation share
shall be limited to 25 percent times the ratio between the actual
capped monthly payment and the monthly payment calculated in
accordance with the first sentence of this subdivision. For example,
if the monthly payment calculated in the first sentence is five
thousand dollars ($5,000), but the lender applies a two thousand five
hundred dollar ($2,500) ceiling, the lender's share of the home's
appreciation shall be likewise reduced by 50 percent.
   The minimum cap shall be two thousand five hundred dollars
($2,500) for loans made during the calendar year 1989. In subsequent
calendar years, the minimum cap shall be two thousand five hundred
dollars ($2,500) increased to reflect the proportional increase in
the Consumer Price Index for the State of California, as determined
by the United States Bureau of Labor Statistics, for the period from
January 1, 1989, until the November monthly index figure for the year
prior to the year in which the loan agreement is entered into.
   (l) "Net advance" means any lump-sum advance of funds by the
lender to the borrower made at the time of the loan closing. Net
advance shall not exceed 15 percent of the projected loan amount.
   (m) "Net appreciated value" means the difference between the fair
market value of the property securing the loan at the time the loan
is made and the fair market value of the property securing the loan
at the time of the maturity event, less any credit for approved
improvements made during the term of the loan.
   (n) "Prevailing rate" means the yield of a 30-year mortgage
commitment for delivery within 30 days for a standard conventional
fixed rate mortgage of the Federal Home Loan Mortgage Corporation.
   (o) "Projected contingent interest" means the lender's
appreciation share of the projected appreciation of the property
securing the loan from the date of the loan until the end of the
borrower's life expectancy, using the same reasonable projection of
annual appreciation used in determining the projected loan amount.
   (p) "Projected loan amount" means not less than 75 percent of the
estimated fair market value of the borrower's home at the end of the
borrower's life expectancy, calculated by applying to the fair market
value a reasonable projection of appreciation over the borrower's
life expectancy based on a reasonable projected annual appreciation
rate of the fair market value of the home.
   (q) "Sale" means any transfer of title to the property and
includes the execution of an installment sale contract giving the
purchaser a right to possess the property before transfer of title,
refinancing, judicial sale on execution, or other legal process of
foreclosure or trustee's sale, but "sale" does not include a transfer
specified in Section 2924.6 if any spouse to whom the property is
transferred is also a coborrower.
   (r) "Stated interest rate" means a total interest rate of not more
than four-fifths of the prevailing rate.
   (s) "Total loan obligation" means the net original loan and the
sum total of all monthly annuity payments received by the borrower,
with interest on all outstanding amounts calculated no more often
than monthly at the stated interest rate, and actual contingent
interest plus interest at the prevailing rate as disclosed to the
borrower at the time the loan was entered into on all of the above
amounts from the date of any maturity event until the outstanding
loan obligation is repaid in full. In no event shall the total loan
obligation exceed the actual fair market value of the home on the
date of the maturity event.