(a)  In the event a borrower has defaulted in making its payments on the loan insured by the office to the lender or the borrower’s bond trustee, at any time thereafter, the office may do any of the following:

(1)  Decease a portion or all of the bonds or may purchase a portion or all of the bonds at a private or public sale or on the open market. For this purpose, the office may use any funds available, including, but not limited to, funds in the Health Facility Construction Loan Insurance Fund, funds that the office may receive either from settlement or recoveries from lawsuits, funds from the sale of assets of the borrower, or funds held by the borrower’s bond trustee. If requested by the office, the Treasurer shall purchase the bonds on behalf of the office. Upon the purchase of any bonds under this section, the office shall direct the borrower’s bond trustee to cancel the bonds purchased.

(2)  Issue bonds used for the sole purpose of refunding any part or all of the defaulted bonds, provided that, in the opinion of the office, there are adequate present value savings to refund all or part of the defaulted bonds. If requested by the office, the Treasurer shall act as the issuer for this purpose.

(3)  Require the lender or borrower’s bond trustee to accelerate the borrower’s debt and the maturity dates of the bonds, if any. If the bond trustee accelerates the bond debt and maturity dates, the office shall pay from the fund to the lender or borrower’s bond trustee the full amount of the remaining principal of the loan, any interest accrued and unpaid on this amount, and any costs enumerated in Section 129125.

(b)  For the purposes of this section, “bonds” mean bonds, certificate of participation, notes, or other evidence of indebtedness of a loan insured by the office.

(Amended by Stats. 2002, Ch. 351, Sec. 6. Effective January 1, 2003.)