(a) Following adoption of a resolution by its board of directors, a corporation shall be authorized to issue a commitment letter specifying the conditions under which it will issue a guarantee to a specified borrower.
(b) The terms and conditions of a guarantee shall be consistent with the resolution of the corporation approving the guarantee and shall include all of the following:
(1) Provision that the corporation promises to pay up to ninety percent (90%) of the principal and interest, subject only to the following restrictions:
(A) The lender has complied with all material conditions contained in the guarantee, including perfecting collateral; and,
(B) The lender has not engaged, and will not engage, in fraudulent or grossly negligent practices in connection with the borrower, guarantee, the loan, or the loan agreement.
(2) A statement that the lender shall send to the corporation executing the guarantee, a copy of all delinquency notices mailed to the borrower.
(3) A description of the procedures and the responsibilities of the lender and corporation subsequent to default.
(4) The demand procedures described in section 5285.
(5) Agreement to abide by binding arbitration by the American Arbitration Association in the event that either the corporation or the agency denies the requested demand pursuant to section 5285(d)(2) or (e)(2), or the amount paid to the lender is less than the amount contained in the demand letter.
(6) Acknowledgment by the lender that in the event of a demand, the lender will allow a representative of the California Department of Financial Institutions, or other auditor selected by the corporation and approved by the agency, to examine the lender's loan files.
(7) A designation as to whether the guarantee is a collection guarantee or a loan guarantee.
(8) A statement that the maximum amount of interest to be paid is ninety (90) calendar days at guaranteed percentage. The ninety (90) calendar day limit can only be exceeded with the written approval of the corporation.
(c) The duration of a guarantee on a loan shall not exceed seven (7) years.
(d) The maximum guarantee for any one applicant shall not exceed $100,000.
(e) The corporation shall be authorized to charge a loan guarantee fee not to exceed two (2) percent of the principal amount guaranteed.
(f) For a guarantee with a term greater than one year, the corporation may charge a guarantee servicing fee not to exceed .5% of the principal amount guaranteed. The servicing fee shall be authorized to commence on the first anniversary of the effective date of the guarantee, and to continue annually until the guarantee is released.
Credits
Note: Authority cited: Section 42106, Public Resources Code. Reference: Sections 42101, 42101.2 and 42102.4, Public Resources Code.
1. New section filed 7-26-2006 as an emergency; operative 7-26-2006 (Register 2006, No. 30). This regulatory action is deemed an emergency, was filed directly with the Secretary of State, and shall remain in effect until revised or repealed by the Business, Transportation and Housing Agency pursuant to Public Resources Code section 42106.
This database is current through 5/10/24 Register 2024, No. 19.
Cal. Admin. Code tit. 10, § 5284, 10 CA ADC § 5284
