The California Tax Credit Allocation Committee (TCAC) has issued a memo saying that it will no longer subordinate its regulatory agreements to new deeds of trust, except in cases when such deeds are for rehabilitation loans or FHA-insured loans. In its April 29, 2014 memo, TCAC explained that the “moratorium” was necessary in light of increased requests for subordination in cases where a project is being sold after the 15-year compliance period. In such cases, TCAC’s willingness to subordinate “leaves the property with a large encumbrance while no benefit per se accrues to the low-income residents.” This policy change affects refinancing of existing debt; TCAC will continue to subordinate its regulatory agreements in cases where an initial permanent lender records its deed of trust after TCAC’s regulatory agreement is recorded.
For more information, see the full TCAC memo or contact Goldfarb & Lipman.