Shared Appreciation Loans for SeniorsTerms and Conditions

Section § 1917.330

Explanation

Lenders can offer shared appreciation loans to seniors for refinancing homes with one to four units, including condos and mobile homes. These loans are for owner-occupied units, but in buildings with two to four units, only one unit needs to be occupied by the owner. If a borrower writes to the lender confirming they live in the home at the time of the loan, it's considered owner-occupied. Also, lenders can base a loan solely on the land's value without considering home structures, and this part of the law just clarifies what's already allowed.

Lenders may make shared appreciation loans for seniors pursuant to this chapter for the refinancing of real property improved with one- to four-dwelling units, including structures ancillary to such dwelling units and including attached single-family dwelling units, single-family mobilehome units, residential condominium units, and dwelling units within a planned unit development. Shared appreciation loans shall be made to refinance 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. A dwelling unit shall be conclusively deemed to be owner-occupied for purposes of this chapter with respect to initial qualification for participation in the loan program if a borrower certifies in writing to the lender at the time the loan is made that he or she will occupy the property.
Nothing contained herein shall be deemed or interpreted to restrict a lender from providing a shared appreciation loan based solely upon the value of the real property upon which the borrower’s dwelling is situated, secured only by that real property and not by the improvements thereon. In that case, the lender’s actual contingent interest, and any other necessary calculations, shall be based upon the land value alone, not taking into account any improvements thereon. This paragraph is declaratory of existing law.
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Section § 1917.331

Explanation

This law outlines the terms for shared appreciation loans specifically designed for seniors. These loans have no fixed term and end when certain maturity events happen, like the borrower moving out or passing away, with the option to extend up to 12 months after such events. Borrowers can get an initial advance and monthly payments, with interest applied no more often than monthly. The property is secured by a deed of trust, and the combined fees for processing and documentation cannot exceed $500, with no prepaid interest allowed.

(a)CA Civil Law Code § 1917.331(a) A shared appreciation loan for seniors shall include all of the following:
(1)CA Civil Law Code § 1917.331(a)(1) The term of the loan shall be for an open-ended term, terminating upon the occurrence of a maturity event, or the failure of the borrower to meet the terms of a deed of trust granted by the borrower to the lender which are normally and customarily used by mortgage lenders in this state for loans secured by residential real property. However, if the maturity event is either cessation of occupancy of the property by the borrower or death of the borrower, the term shall be extended until the earlier of the sale or refinancing of the property or 12 months after the occurrence of the maturity event.
(2)CA Civil Law Code § 1917.331(a)(2) An initial advance, if desired by the borrower.
(3)CA Civil Law Code § 1917.331(a)(3) Monthly annuity payments which shall continue until the occurrence of a maturity event, or earlier termination in accordance with paragraph (1).
(4)CA Civil Law Code § 1917.331(a)(4) Interest on (2) and (3), calculated no more often than monthly at the stated interest rate.
(5)CA Civil Law Code § 1917.331(a)(5) Actual contingent interest.
(6)CA Civil Law Code § 1917.331(a)(6) Interest on paragraphs (2) to (5), inclusive, compounded no more often than monthly, from the date of a maturity event until the loan is repaid in full.
(b)CA Civil Law Code § 1917.331(b) The loan shall be secured by a deed of trust on the real property financed.
(c)CA Civil Law Code § 1917.331(c) The aggregate amount of any fee charged to the borrower by the lender for processing an application, preparing any necessary documents, obtaining a credit report, or any other costs incurred by the lender in connection with originating a shared appreciation loan for seniors shall not exceed five hundred dollars ($500). No prepaid interest shall be charged to the borrower.
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Section § 1917.332

Explanation

This law states that if a loan agreement tries to stop or end monthly payments before a specified event that ends the loan term, that part of the agreement is not valid and cannot be enforced.

Any provision in any loan made pursuant to this chapter for the discontinuation or termination of a monthly annuity other than upon the occurrence of a maturity event is void and unenforceable.
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Section § 1917.333

Explanation

This law gives borrowers the right to pay off their loan completely or partially whenever they choose, without waiting for the loan term to end.

(a)CA Civil Law Code § 1917.333(a) The borrower shall have the right to prepay, at any time, in full or in part, the total loan obligation.
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Section § 1917.334

Explanation

This law states that, unless otherwise specified in this article, the rules and conditions for shared appreciation loans for seniors must comply with all the loan laws that are in place when the loan is created.

Except as provided in this article, the terms and conditions of the shared appreciation loan for seniors shall be subject to all laws applicable to loans in effect on the date the loan is made.
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