(a) A borrower or grantee that receives funds from a loan or grant made pursuant to the program shall only use the funds as follows:

1. (1) To pay for property acquisition, rehabilitation, and repair costs and associated transaction costs for real property purchased through one of the following:

   1. (A) A trustee’s sale pursuant to Section 2924m of the Civil Code.
   2. (B) A preforeclosure intervention sale.
   3. (C) A foreclosure risk intervention sale.
2. (2) To pay for transaction costs, so long as no more than 10 percent of a single loan or grant funded by the program is used toward transaction costs.
3. (3) To pay operating expenses from any capitalized operating subsidy reserve established pursuant to Section 50720.6.

(b) A borrower or grantee that receives funds from a loan or grant made pursuant to this program shall ensure that all vacant units are restricted in one of the following ways:

1. (1) By those conditions of a contract described in paragraph (10) of subdivision (a) of Section 402.1 of the Revenue and Taxation Code.
2. (2) By those conditions of a contract described in paragraph (11) of subdivision (a) of Section 402.1 of the Revenue and Taxation Code.

3. (3)

   1. (A) To persons and families of extremely low, very low, low, or moderate income, with an affordable housing cost or an affordable rent, as defined in Sections 50052.5 and 50053, respectively, for a minimum of 55 years, or a longer duration as the department may require.
   2. (B) A property may be restricted pursuant to this paragraph by recording a lease agreement, ground lease agreement, or other recorded contractual agreement between a borrower or grantee and the residents of the property, or between a borrower or grantee and a resident-controlled corporation or association.
   3. (C) Any agreement made between a borrower or grantee and a resident-controlled corporation or association pursuant to subparagraph (B) shall ensure that the housing units are affordable to lower income households, as defined in Section 50079.5