Shared Appreciation Loans of E.r.i.s.a. Pension FundsLegislative Findings and Declarations

Section § 1917.010

Explanation

This law emphasizes the need for California to offer alternative, affordable housing solutions due to high interest rates making traditional mortgages unaffordable for most. It encourages development of alternative mortgage options, like shared appreciation mortgages, which involve the lender sharing in the value increase of the property. These mortgages provide lower monthly payments than traditional ones, making them more affordable for borrowers.

The law highlights that pension funds might benefit from investing in shared appreciation loans because their returns are tied to property value increases, potentially protecting against inflation.

The Legislature hereby finds and declares that:
(a)CA Civil Law Code § 1917.010(a) It is necessary and essential that the state provide and promote alternative means of supplying affordable housing to the citizens of the state.
(b)CA Civil Law Code § 1917.010(b) High interest rates have caused payment schedules for new long-term, fixed-rate and adjustable-rate mortgages to exceed affordable levels for the vast majority of the state’s households.
(c)CA Civil Law Code § 1917.010(c) Because of current economic conditions, including high and volatile interest rates, alternative mortgage instruments must be developed to supplement the standard long-term, fixed-rate mortgage.
(d)CA Civil Law Code § 1917.010(d) Because the interest to which the lender is entitled under a shared appreciation mortgage includes a share of the appreciated value of the property securing the loan, the periodic payments under a shared appreciation mortgage are lower and, therefore, more affordable to borrowers than under a mortgage in which the lender’s interest does not include a share of the appreciated value of the property. State authorization of the shared appreciation loan for pension fund lenders will serve the need to develop alternative and more affordable means of financing the construction of new housing and the subsequent marketing of new homes, and to create vitally needed jobs in the construction industry.
(e)CA Civil Law Code § 1917.010(e) Pension funds may find shared appreciation loans suited to their investment needs since yields are keyed to appreciation in property values, which may serve as a hedge against inflation.
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