2009 California Civil Code - Section 1917.030-1917.034 :: Article 3. Terms And Conditions

SECTION 1917.030-1917.034

1917.030.  Lenders may make shared appreciation loans pursuant to
this chapter for the purchase of real property improved with one- to
four-family 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. The original recipient of a shared
appreciation loan shall certify in writing to the lender that he or
she will occupy the security property as his or her principal
residence, provided that failure to so occupy the security property
shall not void a shared appreciation loan, but at the option of the
lender the loan may be accelerated in accordance with the terms and
conditions provided in the shared appreciation loan. All shared
appreciation loans shall be originated by the lender on behalf of a
pension fund which is subject to the Employee Retirement Income
Security Act of 1974 (P.L. 93-406, 88 Stat. 829), pursuant to a prior
written commitment to purchase the loan.

1917.031.  A shared appreciation loan shall include the following
terms and conditions:
   (a) The term of the loan, excluding refinancing under Section
1917.033, shall be at least seven years, but not more than 30 years.
   (b) The repayment schedule for the loan, excluding refinancing
under Section 1917.033, shall be cast so that full amortization of
the principal amount of the loan would occur in 30 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 1917.033. Monthly installment payments shall be
equal in amount 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 or mortgage on
the real property financed.
   (d) The loan shall bear interest at a fixed rate, which shall be
one-third below the prevailing rate in effect 90 days prior to the
loan closing, or at another date between that date and the loan
closing if mutually agreed by the lender and borrower.
   (e) The borrower shall additionally be obligated to pay contingent
deferred interest in the amount of one-third of the net appreciated
value of the real property which secures the loan, at the time the
property is sold (including a sale pursuant to a land sale contract),
when title is transferred, other than a transfer specified in
Section 2924.6, when a lease with an option to purchase is entered
into, when a partnership is formed which in effect transfers the
beneficial ownership to another person, when a trust is created which
affects title to the property, upon a judicial or nonjudicial
foreclosure sale, at the time the loan is prepaid in full, or upon
the maturity of the loan, whichever first occurs.

1917.032.  (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 deferred
contingent 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, as authorized by this section, upon prepayment of
the loan, in full or in part, 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.

1917.033.  (a) If the shared appreciation loan is not prepaid in
full or the real property securing the loan is not sold or
transferred prior to maturity of the loan, the lender shall offer to
the original borrower refinancing of the unpaid balance of the loan
and all contingent deferred interest.
   (b) The term of the refinancing loan shall be at least 30 years
from the date of the refinancing, provided that if the interest rate
of the refinancing loan is not adjustable or variable during the term
of such loan, the loan may contain a call provision giving the
lender an option to accelerate the principal loan balance making it,
together with accrued interest, payable in full at a date specified
in the shared appreciation loan, which shall be no earlier than seven
years following the date of refinancing under this section. If such
a call provision is included in the refinancing loan, a concise
description thereof shall be included in upper case print in the
disclosures on refinancing required by Section 1917.071.
   (c) The interest rate for the refinancing loan shall not exceed
the prevailing rate existing at maturity of the shared appreciation
   (d) The lender may require as a condition of the refinancing loan
that it be secured by a deed of trust or mortgage of first priority
on the property financed.
   (e) The terms and conditions of refinancing pursuant to this
section shall be specified in the shared appreciation loan, shall be
a part of the shared appreciation loan contract, and shall be subject
to the applicable laws in effect on the date of execution of the
shared appreciation loan. The refinancing shall be fully amortizing
and the interest rate may be either fixed or adjustable as permitted
by law for home financing offered by banks or savings and loan
associations doing business in this state to the public for financing
housing similar to the borrower's property, provided that nothing in
this section shall preclude such other lawful refinancing terms as
may be mutually acceptable to the borrower and lender. If the lender
offers more than one form of refinancing, the borrower may select
from among the types of refinancing offered by the lender.

1917.034.  Nothing in this chapter shall preclude the borrower from
obtaining any other financing, in lieu of the refinancing provided
for in Section 1917.033, including refinancing on other terms that
are mutually agreeable to the borrower and lender.

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