California Health and Safety Code 44559.5 – (a) The authority shall establish procedures under which …
(a) The authority shall establish procedures under which financial institutions participating in the program established pursuant to this article may submit claims for reimbursement for losses incurred as a result of qualified loan defaults. A participating financial institution that charges off all or part of an enrolled loan to the loss reserve account may file a claim for reimbursement with the authority if both of the following conditions are met:
(1) The claim occurs contemporaneously with the action of the participating financial institution to charge off all or part of the loan.
Terms Used In California Health and Safety Code 44559.5
- Authority: means the California Pollution Control Financing Authority. See California Health and Safety Code 44559.1
- Executive director: means the Executive Director of the California Pollution Control Financing Authority. See California Health and Safety Code 44559.1
- Financial institution: means a federal- or state-chartered bank, savings association, credit union, not-for-profit community development financial institution certified under Part 1805 (commencing with Section 1805. See California Health and Safety Code 44559.1
- Loss reserve account: means an account in the State Treasury or any financial institution that is established and maintained by the authority for the benefit of a financial institution participating in the Capital Access Loan Program established pursuant to this article for the purposes of the following:
California Health and Safety Code 44559.1
- Participating financial institution: means a financial institution that has been approved by the authority to enroll qualified loans in the program and has agreed to all terms and conditions set forth in this article and as may be required by any applicable federal law providing matching funding. See California Health and Safety Code 44559.1
- Program: means the Capital Access Loan Program created pursuant to this article. See California Health and Safety Code 44559.1
- Qualified loan: means a loan or a portion of a loan made by a participating financial institution to a qualified business for any business activity that has its primary economic effect in California. See California Health and Safety Code 44559.1
(2) The charge off on an enrolled loan is made in a manner that is consistent with the participating financial institution’s usual method for making determinations on business loans that are not enrolled loans.
(b) Costs for which a financial institution may be reimbursed from its loss reserve account include the amount of loan principal charged off, accrued interest on the principal, reasonable out-of-pocket expenses incurred in pursuing its collection efforts, including preservation of collateral, and any other related costs. Proper documentation of the expenses shall be presented at the time of the claim.
(c) If a participating financial institution files two or more claims contemporaneously, and there are insufficient funds in the reserve fund at that time to cover the entire amount of such claims, the institution may designate the order of priority in which the claims shall be paid.
(d) A financial institution may seek reimbursement of loan losses prior to the liquidation of collateral from defaulted loans. The financial institution shall repay its loss reserve account for any moneys received as reimbursement under this section if the financial institution recovers moneys from the borrower or from the liquidation of collateral for the defaulted loan, less any reasonable out-of-pocket expenses incurred in collection of such amount.
(e) In any case in which the payment of a claim under this section has fully covered a participating financial institution’s loss on an enrolled loan, the participating financial institution shall assign to the authority, and to any applicable federal agency in the event federal matching funds are involved, any right, title, or interest to any collateral, security, or other right of recovery in connection with a loan made under the program.
(f) The executive director may adopt necessary rules for the authority to carry out its duties, functions, and powers relating to the program established pursuant to this article.
(Added by Stats. 1993, Ch. 1164, Sec. 4. Effective January 1, 1994.)