55B - RESO - WARNER ASSESSMENT DISTRICT

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Reserve Fund is depleted and if there are additional delinquencies, the City is not required to transfer into the Redemption Fund the amount of the delinquency out of any other moneys of the City. Bankruptcy and Foreclosure The payment of Assessment Installments and the ability of Bondowners to foreclose on a delinquent unpaid Assessment Installment, as discussed in the section entitled "SECURITY FOR THE BONDS - Covenant to Commence Superior Court Foreclosure," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the law of the State relating to judicial foreclosure. In addition, the prosecution of a foreclosure could be delayed due to crowded local court calendars or procedural delays. In addition, potential investors should be aware that judicial foreclosure proceedings are not summary remedies and can be subject to significant procedural and other delays caused by crowded court calendars and other factors beyond the control of the City. Potential investors should assume that, under current conditions, it is estimated that a judicial foreclosure of the lien of assessments may take two or three years from initiation to the lien foreclosure sale. At an assessment lien foreclosure sale, each parcel will be sold for not less than the "minimum bid amount" which is equal to the sum of all delinquent Assessment Installments, penalties and interest thereon, costs of collection (including reasonable attorneys' fees), post - judgment interest and costs of sale. Each parcel is sold at foreclosure for the amounts secured by the assessment lien on such parcel and multiple parcels may not be aggregated in a single "bulk" foreclosure sale. If any parcel fails to obtain a "minimum bid," the City may, but is not obligated to, seek superior court approval to sell such parcel at an amount less than the minimum bid. Such superior court approval requires the consent of the owners of 75% of the aggregate principal amount of the outstanding Bonds. Delays and uncertainties in the assessment lien foreclosure process create significant risks for Bondowners. High rates of assessment payment delinquencies which continue during the pendency of protracted assessment lien foreclosure proceedings, could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of property upon foreclosure. In that event, there could be a delay or default in payment of the principal of, and interest on, the Bonds. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although bankruptcy proceedings would not cause the obligation to pay the assessment to become extinguished, bankruptcy of a property owner or of a partner or other equity owner of a property owner, could result in a stay of enforcement of the lien for the assessments, a delay in prosecuting superior court foreclosure proceedings or adversely affect the ability or willingness of a property owner to pay the assessments and could result in the possibility of delinquent assessments not being paid in full. In addition, the amount of any lien on property securing the payment of delinquent assessments could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent assessments in excess of the reduced lien could then be treated as an unsecured claim by the court. Any such stay of the enforcement of the lien for the assessment, or any such delay or non - payment, would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent assessments not being paid in full. Moreover, amounts received upon foreclosure sales may not be sufficient to fully discharge delinquent installments. Topography; Seismic Activity; Other Events [DISCUSS] Topography. The Assessment District is located in the portion of the City of Santa Ana. As described in the studies referenced in the following paragraphs, the Assessment District is not in an area specifically determined to be in danger of potential slope instability but is adjacent to areas subject to surficial creep and/or mudflow in the event of heavy rains, particularly following the occurrence of wildfires 29 55B -99