(a)  Except as otherwise provided in subdivision (b) and notwithstanding the provisions of Sections 711, 711.5, and 1916.5 of the Civil Code, the agency shall not permit assumption of the obligation of any mortgage loan made pursuant to Chapter 5 (commencing with Section 51100) by a subsequent ineligible purchaser or transferee of the prior borrower. If the subsequent purchaser or transferee does not meet the agency’s eligibility requirements, the agency shall require acceleration of repayment of the principal balance of the loan to be all due and payable upon the sale or transfer of the property.

(b)  With respect to mortgage loans made prior to July 1, 1979, the agency may waive the requirements of subdivision (a) when necessary to permit participation in mortgage insurance, guarantee, or purchase programs, or when the provisions of subdivision (a) would interfere with the financial structuring or the administration of any bond financing program.

(c)  The requirements of subdivision (a) may be waived pursuant to subdivision (b) with respect to any mortgage loan made on or after July 1, 1979, only if the loan is federally assisted or insured and the waiver is necessary to obtain the federal assistance or insurance. As a condition to authorizing assumption of a mortgage loan pursuant to this subdivision, the agency shall 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 any lower rate of interest which is the maximum allowed by an entity that provided any insurance or other assistance with respect to which a waiver was granted pursuant to this subdivision. Any additional increment of interest produced by increasing the rate of interest upon a mortgage loan pursuant to this subdivision shall be transmitted or forwarded to the agency for deposit in the California Housing Finance Fund.

(d)  The agency may also waive the requirements of subdivision (a) if it determines that its application would result in undue hardship, that the failure to meet the agency’s eligibility requirements resulted from circumstances beyond the mortgagor’s control, and if the waiver is for a limited period of time as specified by the agency.

(e)  The agency shall implement appropriate measures to assure compliance with this section.

(f)  This section applies to all mortgage loans made by the agency pursuant to Chapter 5 (commencing with Section 51100), whether directly or through a qualified mortgage lender, and including mortgage loans made prior to September 22, 1979.

(Added by renumbering Section 51068.5 by Stats. 1987, Ch. 1034, Sec. 31.)