California Codes, Civil Code - CIV, Division 2 — Property, Part 1 — Property in General, Title 2 — Ownership, Chapter 2 — Modifications of Ownership, Article 2 — Conditions of Ownership, Section 711.5

(a) Notwithstanding the provisions of Sections 711 and 1916.5, a state or local public entity directly or indirectly providing housing purchase or rehabilitation loans shall have the authority to deny assumptions, or require the denial of assumptions, by a subsequent ineligible purchaser or transferee of the prior borrower of the obligation of any such loan made for the purpose of rehabilitating or providing affordable housing. If such a subsequent purchaser or transferee does not meet such an entity’s eligibility requirements, that entity may accelerate or may require the acceleration of the principal balance of the loan to be all due and payable upon the sale or transfer of the property.

(b) As a condition of authorizing assumption of a loan pursuant to this section, the entity may recast the repayment schedule for the remainder of the term of the loan by increasing the interest to the current market rate at the time of assumption, or to such lower rate of interest as is the maximum allowed by an entity that provided any insurance or other assistance which results in an assumption being permitted. Any additional increment of interest produced by increasing the rate of interest upon a loan pursuant to this subdivision shall be transmitted or forwarded to the entity for deposit in the specified fund from which the loan was made, or, if no such fund exists, or the public entity has directed otherwise, then to the general fund of such entity.

(c) The state or local public entity providing assistance as specified in this section may implement appropriate measures to assure compliance with this section.