Attachment_E-_Template_for_ADU_Loan_Note.pdf

SECURED PROMISSORY NOTE

(Affordable ADU Loan Program)

THE TERMS OF THIS PROMISSORY NOTE CONTAIN A BALLOON PAYMENT

$ City, California _______________, 20____

FOR VALUE RECEIVED, the undersigned _______________________________

(“Borrower”) promises to pay to the Orange County Housing Finance Trust, a California joint powers authority (“Lender”), at 1 League #62335, Irvine, California 92602, or any other place designated in writing by Lender to Borrower, the principal sum of ________________________ Dollars ($_______) together with interest and other sums as described below. Capitalized terms used in this Note without definition shall have the meanings set forth in the Agreement (defined below).

1. Loan Agreement. In connection with Borrower’s construction of an Accessory Dwelling Unit on the property located at ____________________, California (the “Property”), Borrower and Lender executed an Accessory Dwelling Unit Loan Agreement (the “Agreement”), dated the same date as this Note. Pursuant to the Lender’s Affordable Accessory Dwelling Unit Loan program, the Lender provided a deferred payment loan to Borrower in the amount of ________________________ Dollars ($____________) (the “Loan”). The Note Amount includes $________ for Mobility/Accessibility Costs (as defined in the Agreement). The Note Amount may be increased by the amount of Property Management Costs which are provided by Lender pursuant to the Agreement. This Secured Promissory Note (this “Note”) evidences Borrower’s obligation to repay the Loan pursuant to and in accordance with this Note.

2. Security. This Note is secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated the same date as this Note, executed by Borrower as maker in favor of Lender as beneficiary (the “Deed of Trust”). The Deed of Trust secures the Borrower’s performance under the Agreement and the payment of the debt evidenced by this Note, and all renewals, extensions and modifications of this Note.

3. Interest. Interest on the Loan shall accrue upon disbursement at the following rates, as applicable (as such terms are defined in the Agreement):

(a) Interest rate during construction of the ADU. Federal Funds Rate plus five percent (5%) simple interest, with the interest rate subject to forgiveness as provided in paragraph (5)(b) below.

(b) Interest rate during Affordability Term. Zero percent (0%) simple interest during such time that the Tenant of the ADU is a Vouchered Tenant, and three percent (3%) simple interest during such time that the Tenant of the ADU is a Non-Vouchered Tenant.

(c) Interest rate during vacancy of ADU. For the first ninety (90) days after vacancy, the interest rate applicable to the incoming Tenant in accordance with paragraph (b) above. From the ninety-first (91st) day after vacancy until a new Tenant occupies the ADU, the interest rate pursuant to (d) below.

(d) Interest rate during non-compliance with ADU requirements. Federal Funds Rate plus five percent (5%) simple interest.

(e) Interest rate after expiration of Affordability Term. If the ADU has been occupied by a Qualified Tenant for at least sixty (60) months, Federal Funds Rate plus one percent (1%) simple interest. If the ADU has not been occupied by a Qualified Tenant in accordance with all of the requirements of the Regulatory Agreement for at least sixty (60) months, Federal Funds Rate plus five percent (5%) simple interest.

(f) Interest rate after occurrence of a Repayment Event pursuant to Section 4 below: Federal Funds Rate plus six percent (6%) simple interest.

(g) For purposes of this Note, “Federal Funds Rate” means the Effective Federal Funds Rate as reported by the Board of Governors of the Federal Reserve as of the date of this Note. The Federal Funds Rate as of the date of this Note is _____________________ percent (___%). In the event that the Federal Funds rate decreases by 0.5% or more between the date of this Note and the date of the Lender’s first disbursement of the Loan proceeds, the Borrower may elect on a one-time basis to change the Federal Funds Rate to the then-current Federal Funds Rate by submission of a written notice of election to the Lender.

4. Repayment. The full amount of the Loan (principal and interest) shall be immediately due and payable to the Lender upon the earliest to occur of the following (“Repayment Events”):

(a) Upon sale or transfer of title to the Property.

(b) Upon expiration of the Affordability Term, if the Property is not owner-occupied at that time.

(c) Upon expiration of the Term of the Loan.

(d) Upon subdivision of the Property into two or more parcels.

(e) Upon the ADU no longer being permitted or approved for occupancy by the Land Use Jurisdiction.

(f) The Loan may be prepaid in full or in part to the Trust at any time, with no prepayment penalty.

5. Loan Forgiveness.

(a) Upon the expiration of the Affordability Term, the sum of Thirteen Dollars and Fifteen Cents ($13.15) shall be deducted from the Loan balance for each full day that a Qualified Tenant has occupied the ADU in compliance with the Regulatory Agreement.

Qualified Tenant occupancy of the ADU shall be verified in accordance with the procedures set forth in the Regulatory Agreement.

(b) Upon occupancy of the ADU by a Qualified Tenant in accordance with all of the requirements of the Regulatory Agreement for at least sixty (60) months, the construction period interest pursuant to Section 3(a) above shall be forgiven.

(c) Upon the issuance of a final certificate of occupancy for the ADU, the portion of the Loan attributable to the Mobility/Accessibility Costs shall be forgiven.

(d) Upon the commencement of occupancy of the ADU by an Eligible Household, the portion of the Loan attributable to the Property Management Costs shall be forgiven.

6. Term of Loan. Twenty (20) years from the date of this Note, unless earlier terminated or extended as provided hereunder.

7. Attorneys’ Fees. Borrower agrees to pay on demand all reasonable attorneys’ fees, costs of collection, costs, and expenses incurred by Lender in connection with the defense or enforcement of this Note and the Deed of Trust, whether or not a legal action or proceeding is filed.

8. No Waiver; Amendments in Writing. No previous waiver and no failure or forbearance by Lender in acting with respect to the terms of this Note, the Deed of Trust or the Agreement shall constitute a waiver of any breach, default, or failure of condition under this Note, the Deed of Trust, or the Agreement. A waiver of any term of this Note, the Deed of Trust, or the Agreement must be made in writing, signed by both parties, and shall be limited to the express written terms of such waiver. In the event of any inconsistencies between the terms of this Note and the terms of any other document related to the debt evidenced by this Note, the terms of this Note shall prevail. No modification or amendment of this Note shall be effective unless in a writing signed by Borrower and Lender.

9. Joint and Several Obligation. If this Note is executed by more than one person as Borrower, the obligations of each such person shall be joint and several, and each shall be primarily and directly liable hereunder.

10. No Offset; Borrower’s Waivers. Borrower hereby waives any rights of offset Borrower how has or may hereafter have against Lender, its successors and assigns. Borrower waives presentment, demand, notice of dishonor, notice of default or delinquency, notice of acceleration, notice of protest and nonpayment, notice of costs, expenses or losses and interest thereon, notice of interest on interest and late charges, and diligence in taking any action to collect any sums owing under this Note or in proceeding against any of the rights or interest in or to properties securing payment of this Note. Owner further waives any right to plead any and all statutes of limitation as a defense to any demand on this Note.

11. Time of the Essence; Governing Law; Severability. Time is of the essence with respect to every provision in this Note. This Note shall be construed and enforced in accordance with the substantive and procedural laws of the State of California, except to the extent that federal laws preempt the laws of the State of California, and all persons and entities in any manner obligated under this Note consent to the jurisdiction of any federal or state court within the State of California having proper venue and also consent to service of process by any means authorized by California or federal law. If any provision of this Note shall be found to be invalid, illegal or unenforceable by a court of competent jurisdiction, the remaining provisions hereof shall not be affected or impaired thereby.

12. Notices. Notices pertaining to this Note shall be delivered in accordance with Section 12(j) of the Agreement.

13. Transfer and Assignment. Lender may transfer this Note or otherwise assign its right to receive the proceeds of this Note to any person or entity, and upon Lender’s delivery of notice to Borrower of such transfer or assignment, all payments shall be made to the transferee or assignee.

IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the date first written above.

BORROWER:

Signature:_________________________________

Print Name:_______________________________

Signature:_________________________________

Print Name:________________________________

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