(a) The department shall establish the actual interest rate to be paid. To this end, the department, within 60 days of receipt of the survey of the financial condition of the Division of Farm and Home Purchases required at the close of each fiscal year conducted by an independent public accounting firm of recognized standing as provided under various veterans bond acts, shall report to the California Veterans Board and the Veterans’ Finance Committee of 1943, regarding the recommended uniform rate of interest payable upon the amount remaining unpaid under any veteran’s purchase contract executed on or after September 26, 1974. The department shall make its finding as to the rate of interest to be charged, determined by a floating rate based upon the actual cost of general obligation bond and revenue bond sales, plus a certain percent for administrative costs, taking into consideration the current value of money, the solvency of the Veterans’ Farm and Home Building Fund of 1943, and the interest paid on any participation contracts to which the interest of the department may be subject. Upon approval by the board and the committee, the department may raise or lower the effective rate of interest payable under these contracts annually as it deems to be for the best interests of the department, as well as the contractholders, if in so doing this action is made applicable alike to any and all of these contracts. The interest rate shall not be raised so that the effective date of a higher rate of interest occurs more than once in any calendar year, unless the board and committee, by a two-thirds vote of the members of each, make a finding that an additional increase in the interest rate is necessary to enable the department to maintain the financial solvency of the fund or to meet its obligations to bondholders or purchasers. At least 90 days’ advance written notice to the contractholders shall be given before any increase in the interest rate becomes effective.

(b) The total amount of any installment payment shall be raised or lowered to reflect any change in the effective rate of interest. The department may, however, adjust or postpone any installment payment for good cause pursuant to Section 987.71 and, for these purposes, good cause shall include a consideration of whether an increased installment payment would be excessively burdensome in light of a purchaser’s financial circumstances. The department shall include notice of this provision in the 90 days’ advance notice required under subdivision (a).

(c) Notwithstanding subdivision (a) and Section 987.875, the department may establish separate rates of interest payable on the amounts remaining unpaid under veterans’ purchase contracts for any and all contractholders who are called to active duty in the military service of the United States, and who qualify for relief under the provisions of the federal Soldier’s and Sailor’s Civil Relief Act of 1940, as amended. The rates need not be uniform for all who qualify, but shall not be greater than the rate provided for in that act. Rates shall be established at the discretion of the department, and may apply to any contract from the date of entry into active duty to, and including, 90 days after the date of release from active duty.

(Amended by Stats. 2002, Ch. 473, Sec. 2. Effective January 1, 2003.)