(a) Notwithstanding any other law, the department shall reduce the interest rate on any loan issued by the department to a rental housing development to as low as forty-two hundredths of 1 percent per annum, or a rate determined by the department that is sufficient to cover the costs of project monitoring described in subdivision (c) of Section 50675.6, whichever is greater, if the following conditions are met:
(1) The development will utilize low-income housing tax credits.
(2) The department determines either one of the following:
(A) The loan issued by the department is not eligible to be treated as debt for federal or state low-income housing tax credit purposes without a reduction in the interest rate of the loan.
(B) The department determines that the rental housing development is not able to syndicate due to projected negative capital account balances.
(3) The change in the interest rate will materially increase the feasibility of the proposed project and will ensure long-term affordability for the residents.
(b) The department is authorized to change the current interest rate for any loan issued by the department for which it receives a loan extension request associated with an award of federal or state low-income housing tax credits made on or after January 1, 2014, to the applicable federal rate published by the United States Internal Revenue Service and in effect at the time of the project closing. The additional tax credit equity generated by the change in interest rate shall be used for rehabilitation of the development. If the total amount of debt and accrued interest at the end of the loan term would be greater after making this change than it would have been under the original interest rate, the department may forgive an amount of accrued interest equal to the lesser of either the amount necessary to make the expected principal and accrued interest the same as it would have been using the original interest rate, or the total amount of interest accrued at the time of the sponsor’s request.
(c) The department may charge a fee in an amount sufficient to cover administrative costs associated with a loan modification requested by a borrower pursuant to this section.
(d) For purposes of a determination made under paragraph (2) of subdivision (a), the department may require a third-party tax professional to verify the determination, the cost of which shall be borne by the sponsor.
(e) The amendments made to this section by Assembly Bill 2562 of the 2017–18 Regular Session shall not be construed to affect any interest rate reduction authorized by the department pursuant to this section as it read prior to the effective date of these amendments.
(Amended by Stats. 2018, Ch. 765, Sec. 1. (AB 2562) Effective January 1, 2019.)