Bill Text: CA SB750 | 2025-2026 | Regular Session | Introduced
Bill Title: California Residential Mortgage Insurance Act.
Spectrum: Partisan Bill (Democrat 7-0)
Status: (Introduced) 2025-02-21 - Introduced. To Com. on RLS. for assignment. To print. [SB750 Detail]
Download: California-2025-SB750-Introduced.html
CALIFORNIA LEGISLATURE—
2025–2026 REGULAR SESSION
Senate Bill
No. 750
| Introduced by Senator Cortese (Coauthors: Senators Arreguín, Becker, Cabaldon, and Wiener) (Coauthors: Assembly Members Quirk-Silva and Wilson) |
February 21, 2025 |
An act to add Part 4.1 (commencing with Section 51700) to Division 31 of the Health and Safety Code, relating to housing, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 750, as introduced, Cortese.
California Residential Mortgage Insurance Act.
Existing law, the California Health Facility Construction Loan Insurance Law, establishes an insurance program for health facility construction, improvement, and expansion loans in order to stimulate the flow of private capital into health facilities construction, improvement, and expansion and in order to rationally meet the need for new, expanded, and modernized public and nonprofit health facilities necessary to protect the health of all the people of this state.
Existing law establishes the California Housing Finance Agency in the Business, Consumer Services, and Housing Agency. Existing law also establishes the California Homebuyer’s Downpayment Assistance Program for purposes of assisting first-time low- and moderate-income homebuyers utilizing existing mortgage financing, as described, and requires the agency to administer the program.
Commencing January 1, 2027, and only if Senate Constitutional Amendment ____ of the 2025–26 Regular Session is approved by voters, this bill would enact the California Residential Mortgage Insurance Act (Cal REMIA) to establish, without cost, an insurance program for multifamily housing construction loans in order to stimulate the flow of private capital into multifamily housing construction and in order to rationally meet the need for new, expanded, and modernized multifamily housing necessary to house all the people of this state. Cal REMIA would require the agency to administer and implement the program, as provided, and would authorize the agency to insure and offer credit enhancements for construction loans and permanent loans for multifamily housing developments. Cal REMIA would require the agency to prepare an annual report and obtain an annual agreed-upon procedures engagement, as specified. Cal REMIA would set forth various powers and duties of the agency in
the event of a default of a loan insured by the program.
Cal REMIA would establish the California Residential Mortgage Insurance Fund in the State Treasury and would continuously appropriate moneys in the fund to the agency for the purpose of insuring construction loans and permanent loans and providing credit enhancements under the program and for the purpose of defraying administrative expenses incurred by the agency in operating and implementing the program. Cal REMIA would require the agency to establish a premium charge for the insurance of loans under the program and would require that this charge be deposited in the fund. Cal REMIA would authorize the premium rate to vary, as specified, but would prohibit the rate from being greater than 2%. Cal REMIA would also make related findings and declarations.
Existing law, the State General Obligation Bond Law, generally sets forth the procedures for the issuance and sale of
bonds governed by its provisions and for the disbursal of the proceeds of the sale of those bonds.
Cal REMIA would declare that its provisions are not subject to the State General Obligation Bond Law. Cal REMIA would also declare that its provisions are severable.
Digest Key
Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares all of the following:(a) In the fifth housing element cycle, which ends in March 2025, only 20 percent of the units required to house the state's very low income population were permitted. In other words, 277,523 units were needed and only 57,392 were permitted.
(b) The numbers are only slightly better for the state's low-income population, where only 30 percent of the units have been permitted. Of the 184,921 units needed, only 57,135 were permitted.
(c) In the San Francisco Bay area alone, 395 projects are currently in
predevelopment waiting for funding. Enterprise Community Partners estimate that over seven billion dollars ($7,000,000,000) is needed to get these projects out of the pipeline and into the construction phase.
(d) The New York City Residential Mortgage Insurance Corporation was created to insure mortgages for the production and rehabilitation of affordable housing throughout the City of New York through the issuance of mortgage insurance. In its 49 years of existence, the corporation has only had 16 claims for insured loans totaling six hundred fifty thousand six hundred forty-eight dollars ($650,648).
SEC. 2.
Part 4.1 (commencing with Section 51700) is added to Division 31 of the Health and Safety Code, to read:PART 4.1. California Residential Mortgage Insurance Act
CHAPTER 1. General Provisions
51700.
This part shall be known, and may be cited, as the California Residential Mortgage Insurance Act.51701.
The purpose of this part is to provide, without cost to the state, an insurance program for multifamily housing construction loans in order to stimulate the flow of private capital into multifamily housing construction and in order to rationally meet the need for new, expanded, and modernized multifamily housing necessary to house all the people of this state. The provisions of this part are to be liberally construed to achieve this purpose.51702.
For purposes of this part:(a) “Agency” means the California Housing Finance Agency.
(b) “Construction loan” means a short-term loan made for financing the construction or rehabilitation of a multifamily housing development.
(c) “Credit enhancement” means a method of reducing risk for a lender through letters of credit and bond and loan insurance.
(d) “Debenture” means any form of written evidence of indebtedness issued by the State Treasurer pursuant to this chapter, as authorized by Section 1.6 of Article XVI of the California Constitution.
(e) “Executive director” means the Executive Director of the California Housing Finance Agency.
(f) “Fund” means the California Residential Mortgage Insurance Fund, created pursuant to Section 51725.
(g) “Multifamily housing development” means a housing development with five or more residential units.
(h) “Permanent loan” means a long-term loan that is secured by a deed of trust.
(i) “Program” means the California Residential Mortgage Insurance Program established pursuant to this part.
51703.
(a) The agency shall administer and implement the program. The agency may do both of the following in the administration of the program:(1) Insure construction loans or permanent loans for multifamily housing developments pursuant to this part.
(2) Offer credit enhancements for construction loans and permanent loans for multifamily housing developments pursuant to this part.
(b) The agency may review, adopt, amend, and repeal guidelines to implement uniform standards or criteria that supplement or clarify the terms, references, or standards set forth in this part.
51704.
In conducting the business and affairs of this part, the executive director may do any of the following:(a) Enter into contracts of insurance.
(b) Decline to insure any risk in which the minimum requirements of the insurance fund are not complied with, or which is beyond the safe carrying of the fund.
(c) Reinsure any risk or any part thereof.
(d) Make rules for the settlement of claims against the fund and determine to whom and through whom the payments are to be made.
(e) Enter into any contracts or obligations relating to the fund.
(f) Conduct all business and affairs and perform all acts relating to the fund whether or not specifically designated in this part.
51705.
The agency may commence any action to protect or enforce any right conferred upon it by any law, mortgage, contract of insurance, or any other agreement. The agency may bid for and purchase property sold in satisfaction thereof at any foreclosure or other sale or may otherwise acquire and take possession of that property.51706.
(a) The agency shall establish a premium charge for the insurance of loans under this part, and this charge shall be deposited in the fund. A one-time nonrefundable premium charge shall be paid at the time the loan is insured. The premium rate may vary based upon the assessed level of relative financial risk determined by the agency, but shall in no event be greater than 2 percent. The amount of premium shall be computed on the basis of the application of the rate to the total amount of principal and interest payable over the term of the loan.(b) The agency may annually charge a portion of the premium in advance commencing at the time of issuing or extending the commitment
until the date the loan is insured or the commitment expires. The amount of the advance premium shall not exceed six dollars ($6) per year for each one thousand dollars ($1,000) of principal of the proposed loan. The total dollar amount of the premium advanced shall be nonrefundable and shall be credited against the amount of the premium charged pursuant to this section, or if the commitment expires and the loan is not insured, the advance shall be retained by the department to offset costs and expenses of the department related to preliminary work, underwriting the loan commitment, and monitoring construction.
51707.
(a) The agency shall prepare an annual report on the condition of the program that shall include an evaluation of program effectiveness in relation to cost and shall include recommendations and suggested legislation for the improvement of the program, if any.(b) The agency shall obtain an annual agreed-upon procedures engagement of the fund’s books and accounts with respect to its activities under this part to be made at least once for each calendar year by an independent certified public accountant.
(c) A copy of the annual agreed-upon procedures engagement and annual report shall be transmitted to the Governor, to the chairperson and vice chairperson of the Senate and
Assembly housing policy committees, the Senate and Assembly budget committees, and the Joint Legislative Budget Committee, and made available for review by interested parties no later than November 1 of each year for the annual agreed-upon procedures engagement and the program evaluation report.
(d) For purposes of this section, the agreed-upon procedures engagement shall be conducted in accordance with the most recent Statements on Standards for Attestation Engagements, as issued by the American Institute of Certified Public Accountants.
CHAPTER 2. Qualifications and Requirements for Insurance Loans
51708.
(a) The agency shall establish minimum qualifications for a proponent of a multifamily housing development to qualify for construction loan insurance, permanent loan insurance, or credit enhancements available under this part.(b) The agency shall establish minimum requirements for loans that are insured or subject to a credit enhancement pursuant to this part that shall include, but not be limited to, all of the following:
(1) Maximum duration.
(2) Maximum amount.
(3) Loan security requirements.
(4) Loan-to-value limitations.
(c) For the purpose of increasing the efficiency and minimizing the cost of the loan insurance and credit enhancement program, the agency may insure or issue commitments to insure loans upon the certification of an approved financial institution that the borrower is qualified for loan insurance according to eligibility requirements specified by the agency pursuant to this section.
51709.
A pledge by or to the agency of, or the grant to the agency of a security interest in, revenues, moneys, accounts, accounts receivable, contract rights, general intangibles, documents, instruments, chattel paper, and other rights to payment of whatever kind made by or to the agency pursuant to the authority granted in this part shall be valid and binding from the time the pledge is made for the benefit of pledgees and successors thereto. The revenues, moneys, accounts, accounts receivable, contract rights, general intangibles, documents, instruments, chattel paper, and other rights to payment of whatever kind pledged by or to the agency or its assignees shall immediately be subject to the lien of the pledge without physical delivery or further act. The lien of that pledge shall be valid and binding against all parties, irrespective of whether the parties have notice of the lien. The indenture, trust agreement, resolution, or another instrument by which that pledge is created need not be recorded or the security interest otherwise perfected.51710.
The agency may upon application of the borrower insure any loan that is eligible for insurance under this part, and upon the terms prescribed by the agency, may make commitments for the insuring of the loans prior to their date of execution or disbursement thereon. The decision to grant loan insurance upon an application of the borrower is within the discretion of the executive director. Showing need for the project or meeting the eligibility requirements for loan insurance and establishing financial feasibility of the project or recommendation for approval from the committee does not create any entitlement to loan insurance.51711.
(a) The agency shall not regulate, impose requirements on, or require approval by the agency of a professional, or a fee charged by a professional, used by applicants for the initial application for loan insurance. The choice of any professional and the funding source used shall be left entirely to the participants.(b) For purposes of this section, “professional” includes, but is not limited to, an underwriter, bond counsel, or consultant.
(c) Nothing in this section shall prohibit the agency, in the event of defaults, from taking any action
authorized under this chapter to protect the financial interest of the state.
51712.
(a) Not less than the general prevailing rate of per diem wages for work of a similar character in the locality in which the development is located, and not less than the general prevailing rate of per diem wages for holiday and overtime work fixed as provided in this chapter, shall be paid to all workers employed on a development under this part.(b) Notwithstanding subdivision (a), the Legislature may amend this section to prescribe applicable wage standards.
CHAPTER 3. Defaults
51713.
(a) (1) In any case when the lender under a loan insured under this part shall have foreclosed and taken possession of the property under a mortgage in accordance with regulations of, and within a period to be determined by the agency, or shall, with the consent of the agency, have otherwise acquired the property from the borrower after default, the lender shall be entitled to receive the benefit of the insurance as provided in this part, upon (A) the prompt conveyance to the office of title to the property that meets the requirements of the regulations of the agency in force at the time the loan was insured, and that is evidenced in the manner prescribed by the regulations, and (B) the assignment to the agency of all claims of the lender against the borrower or others arising out of the loan transaction or foreclosure proceedings except claims that may have been released with the consent of the agency. Upon the conveyance and assignment, the agency shall notify the Treasurer, who shall issue to the lender debentures having a total face value equal to the outstanding value of the loan.(2) For the purposes of this section, the outstanding value of the loan shall be determined, in accordance with the regulations prescribed by the agency, by (A) adding to the amounts of the original principal obligation of the loan and interest that are accrued and unpaid the amount of all payments that have been made by the lender for the following: taxes and assessments, ground rents, water rates, and other liens that are prior to the mortgage; charges for the administration, operation, maintenance and repair of the health facility property; insurance on the project
property, loan insurance premiums, and any tax imposed by a city or county upon any deed or other instrument by which the property was acquired by the lender and transferred or conveyed to the agency; and the costs of foreclosure or of acquiring the property by other means actually paid by the lender and approved by the agency; and by (B) deducting from the total amount any amounts received by the lender after the borrower’s default on account of the loans or as rent or other income from the property.
(b) In the event of a default on an insured loan not secured by a first mortgage, the agency may, in lieu of proceeding under subdivision (a), acquire the insured loan and any security therefor upon payment to the approved financial institution of an amount equal to the unpaid principal balance of the loan, accrued interest, and other costs that the agency finds are fair,
reasonable, and authorized.
51714.
In any case when a political subdivision defaults on the payment of interest or principal accrued and due on bonds or other evidences of indebtedness insured under this part, debentures in an amount equal to the outstanding original principal obligation and interest on the bonds that were accrued and unpaid on the date of default and bearing interest at a rate equal to and payment schedule identical with those of the bonds shall be issued by the Treasurer upon notification thereof by the agency to the bondholders upon the surrender of the bonds to the agency.51715.
Notwithstanding any requirement contained in this part relating to acquisition of title and possession of the project property by the lender and its subsequent conveyance and transfer to the agency, and for the purpose of avoiding unnecessary conveyance expenses in connection with payment of insurance benefits under the provisions of this part, the agency may, subject to regulations that it may prescribe, permit the lender to tender to the agency a satisfactory conveyance of title and transfer of possession direct from the borrower or other appropriate grantor and to pay to the lender the insurance benefits to which it would otherwise be entitled if the conveyance had been made to the lender and from the lender to the agency.51716.
(a) Upon receiving notice of the default of any loan insured under this part, the agency, in its discretion and for the purpose of avoiding foreclosure under Section 51712 and notwithstanding the fact that it has previously approved a request of the lender for extensions of the time for curing the default and of the time for commencing foreclosure proceedings or for otherwise acquiring title to the project property, or has approved a modification of the loan for the purpose of changing the amortization provisions by recasting the unpaid balance, may acquire the loan and security agreements securing the loans upon the issuance to the lender of debentures in an amount equal to the unpaid principal balance of the loan plus any accrued unpaid loan interest plus reimbursement for attorney’s fees and costs of the lender enumerated in Section 51712.(b) After the acquisition of the loan and security interests therefor by the department, the lender shall have no further rights, liabilities, or obligations with respect thereto. The provisions of Section 51712 relating to the issuance of debentures incident to the acquisition of foreclosed properties shall apply with respect to debentures issued under this section, and the provisions of this part relating to the rights, liabilities, and obligations of a lender shall apply with respect to the department when it has acquired an insured loan under this section, in accordance with and subject to any regulations prescribed by the department modifying the provisions to the extent necessary to render their application for these purposes appropriate and effective.
51717.
Notwithstanding any other provision of this chapter, after the agency determines that the lender and borrower have exhausted all reasonable means of curing any default, the agency within its discretion may, when it is in the best interests of the state, the borrower, and the lender, cure the default of the borrower by making payment from the fund directly to the lender of any amounts of the original principal obligation and interest of the loan that are accrued and unpaid. The payment shall be secured by an assignment to the agency of a pro rata share of the security agreements made to the lender and, upon the payment, the borrower shall become liable for repayment of the amount thereof to the agency over a period and at a rate of interest as shall be determined by the agency.51718.
The agency may at any time, under the terms and conditions that it may prescribe, consent to the lender’s release of the borrower from its liability under the loan or the security agreement securing the loan, or consent to the release of parts of the project property from the lien of any security agreement.51719.
Debentures issued under this part shall be in the form and denomination, subject to the terms and conditions, and shall include provisions for redemption, if any, as may be prescribed by the agency and may be in coupon or registered form.51720.
(a) (1) All debentures issued under this part to any lender or bondholder shall be executed in the name of the fund as obligor, shall be signed by the Treasurer, and shall be negotiable. Pursuant to Sections 51712 and 51713, all debentures shall be dated as of the date of the institution of foreclosure proceedings or as of the date of the acquisition of the property after default by other than foreclosure, or as of another date as the agency, in its discretion, may establish.(2) The debentures shall bear interest from that date at a rate equal to the insured loan or bonds, and shall be payable on a payment schedule identical with payments on the insured
loan or bonds. The Treasurer shall take appropriate steps to the extent feasible to provide that interest on the debentures is exempt from federal income taxation under Section 103 of the Internal Revenue Code to the extent interest on the insured loan or bonds is exempt from federal income taxation under Section 103 of the Internal Revenue Code on the date the insured loan or bonds is exchanged for debentures. All debentures shall be exempt, both as to principal and interest, from all taxation now or hereafter imposed by the state or local taxing agencies, shall be paid out of the fund, which shall be primarily liable therefor, and shall be, pursuant to Section 1.6 of Article XVI of the California Constitution, fully and unconditionally guaranteed as to principal and interest by the State of California, which guaranty shall be expressed on the face of the debentures.
(3) If the
fund fails to pay upon demand, when due, the principal of, or interest on, any debentures issued under this part, the Treasurer shall pay to the holders the amount thereof, which amount, notwithstanding Section 13340 of the Government Code, is hereby continuously appropriated from the General Fund, without regard to fiscal years, and thereupon, to the extent of the amount so paid, the Treasurer shall succeed to all the rights of the holders of the debentures. The fund shall be liable for repayment to the General Fund of any moneys paid from the General Fund pursuant to this section in accordance with procedures jointly established by the Treasurer and the agency.
(b) Any debenture issued under this chapter shall be paid on a par with general obligation bonds issued by the state.
51721.
(a) Notwithstanding any other law relating to the acquisition, management, or disposal of real property by the state, the agency shall have power to deal with, operate, complete, lease, rent, renovate, modernize, insure, or sell for cash or credit, in its discretion, any properties conveyed to it in exchange for debentures as provided in this part. Notwithstanding any other law, the agency shall also have power to pursue to final collection by way of compromise or otherwise all claims against borrowers assigned by lenders to the agency as provided in this part. All income from the operation, rental, or lease of the property and all proceeds from the sale thereof shall be deposited in the fund and all costs incurred by the agency in its exercise of powers granted in this section shall be met by the fund.(b) The power to convey and to execute in the name of the agency deeds of conveyance, deeds of release, assignments and satisfactions of loans and mortgages, and any other written instrument relating to real or personal property or any interest therein acquired by the department pursuant to the provisions of this part may be exercised by the agency or by any officer of the agency appointed by it.
51722.
A lender or borrower shall not have any right or interest in any property conveyed to the agency or in any claim assigned to it, and the agency shall not owe any duty to any lender or borrower with respect to the management or disposal of this property.51723.
Notwithstanding any other law, if, prior to foreclosing on any collateral provided by a borrower, the agency institutes a judicial proceeding or takes any action against a borrower to enforce compliance with the obligations set out in the regulatory agreement, the contract of insurance, or any other contractual loan closing document or law, that remedy or action shall not constitute an action within the meaning of subdivision (a) of Section 726 of the Code of Civil Procedure, or in any way constitute a violation of the intent or purposes of Section 726 of the Code of Civil Procedure, or constitute a money judgment or a deficiency judgment within the meaning of Sections 580a, 580b, 580d, or subdivision (b) of Section 726 of the Code of Civil Procedure. However, these provisions of the Code of Civil Procedure shall apply to any judicial proceeding instituted, or nonjudicial foreclosure action taken, by the department to collect the principal and interest due on the loan with the borrower.CHAPTER 4. Termination of Insurance
51724.
The obligation to pay any subsequent premium charge for insurance shall cease, and all rights of the lender and the borrower under this part shall terminate as of the date of the notice, as herein provided, in the event that (a) any lender under a loan forecloses on the mortgaged property, or has otherwise acquired the project property from the borrower after default, but does not convey the property to the department in accordance with this part, and the department is given written notice thereof, or (b) the borrower pays the obligation under the loan in full prior to the maturity thereof, and the department is given written notice thereof.51725.
The agency is authorized to terminate any insurance contract upon joint request by the borrower and the lender and upon payment of a termination charge that the agency determines to be equitable, taking into consideration the necessity of protecting the fund. Upon the termination, borrowers and lenders shall be entitled to the rights, if any, that they would be entitled to under this part if the insurance contract were terminated by payment in full of the insured loan.CHAPTER 5. California Residential Mortgage Insurance Fund
51726.
(a) The California Residential Mortgage Insurance Fund is hereby created in the State Treasury.(b) Notwithstanding Section 13340 of the Government Code, or any other provision of law, moneys in the fund are continuously appropriated, without regard to fiscal year, to the agency for the purpose of insuring construction loans and permanent loans and providing credit enhancements pursuant to this part and for the purpose of defraying administrative expenses incurred by the agency in operating and implementing this part.
(c) Notwithstanding Chapter 2 (commencing with Section 12850) of Part 2.5 of Division 3 of Title 2 of the Government Code, Article 2 (commencing with Section
13320) of Chapter 3 of Part 3 of Division 3 of Title 2 of the Government Code, or any other provision of law, expenditures of the fund shall not be subject to the supervision or approval of any other officer or division of state government.
