(a) There is hereby created the Preservation Opportunity Program.

(b) The department shall contract with the agency for the administration of this section, and the agency shall establish the terms upon which loans may be made consistent with this section.

(c) A project shall meet all of the following requirements to be eligible for a loan:

(1) It shall be an assisted housing development.

(2) The borrower shall, in conjunction with this loan, receive a loan from the agency’s Preservation Acquisition Program for the acquisition of this project.

(3) The borrower shall agree to obligate itself and any successors in interest to maintain the affordability of the assisted housing development for households of very low, low, or moderate income for a term of not less than 30 years. To the extent economically feasible, the development shall be continuously occupied in the approximate percentages that those households have occupied that development as of the date of acquisition by the purchaser or the approximate percentages specified in existing federal, state, or locally imposed use restrictions, whichever is higher. This obligation shall be recorded at the close of escrow in the office of the county recorder of the county in which the development is located. In addition, the regulatory agreement shall contain provisions requiring the renewal of rental subsidies, if they are available and are provided at a level sufficient to maintain the project’s fiscal viability. Nothing in this paragraph shall be construed to require the future income restriction of units unrestricted under the new regulatory agreement required by this subdivision.

(d) Projects that meet the requirements of subdivision (c) shall be evaluated for funding based on their ability to address the following priorities:

(1) First priority shall be given to projects whose rent restrictions have expired or are eligible to expire within two years of application for a loan under this program.

(2) Second priority shall be given to projects with rent restrictions expiring within five years.

(e) The loans for assisted housing developments under this section shall include the following terms:

(1) The agency shall determine the term of the loan. A loan may not exceed a term of two years, unless the agency determines, in its discretion, that a longer term is required to do both of the following:

(A) To preserve the affordability of a project.

(B) To ensure the financial viability of a project.

(2) The rate of interest shall not exceed 3 percent per annum on the unpaid balance for that portion of the loan made with General Fund or general obligation bond moneys. The rate of interest for portions of the loan made with non-General Fund, nongeneral obligation bond moneys shall be established by the agency.

(3) Simple interest shall accrue but be deferred until loan maturity or transfer of the property.

(4) Any other terms and provisions that the agency may deem proper.

(f) Notwithstanding paragraph (2) of subdivision (b) of Section 50601, with the exception of five million dollars ($5,000,000), all money that the agency receives in repayment of loans made with funds from the Housing and Emergency Shelter Trust Fund Act of 2002 shall be deposited into the Housing Rehabilitation Loan Fund created by Section 50661 for use in the Multifamily Housing Program. The five million dollars ($5,000,000) remaining in the Preservation Opportunity Fund and subsequent interest payments on loans made from this five million dollars ($5,000,000) shall be made available for the purposes of the Preservation Opportunity Program through at least December 31, 2008, at which time the agency may, based on an analysis of need, either continue to make these funds available for the purposes of the Preservation Opportunity Program or transfer all remaining funds to the Housing Rehabilitation Loan Fund for use in the Multifamily Housing Program.

(Amended by Stats. 2005, Ch. 74, Sec. 51. Effective July 19, 2005.)