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12/03/2012 circumstances, commence such a foreclosure action. See "SECURITY FOR THE BONDS --- Covenant for Superior Court Foreclosure." No assurances can be given that a Taxable Parcel in the District that would be subject to a judicial foreclosure sale for delinquent Special Taxes will be sold or, if sold, that the proceeds of such sale will be sufficient to pay the delinquent Special Tax installment. Although the Act authorizes the City to cause such an action to be commenced and diligently pursued to completion, the Act does not specify any obligation of the City with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale in any such action if there is no other purchaser at such sale and the City has not in any way agreed nor does it expect to be such a bidder. In a foreclosure proceeding, a judgment debtor (i.e., the property owner) has 140 days from the date of service of the notice of levy in which to redeem the property to be sold and may have other redemption rights afforded by law. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 90 days of the date of sale if the purchaser at the sale was the judgment creditor. If a foreclosure sale is thereby set aside, the judgment is revived and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made. If foreclosure proceedings were ever instituted, any holder of a mortgage or deed of trust on the affected Taxable Parcel could, but would not be required to, advance the amount of the delinquent Special Tax installment to protect its security interest. In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in principal and interest payments to the owners of the Bonds pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale, if any. judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions and other factors beyond the control of the City, including delay due to crowded local court calendars or legal tactics and, in any event could take several years to complete. In particular, bankruptcy proceedings involving the owner of a delinquent Taxable Parcel could cause a delay, reduction or elimination in the flow of Special Tax Revenues to the Fiscal Agent. See "—Bankruptcy Delays." Natural Disasters The value of the Taxable Parcels in the future can be adversely affected by a variety of natural occurrences, particularly those that may affect infrastructure and other public improvements and private improvements on the Taxable Parcels and the continued habitability and enjoyment of such private improvements. Such occurrences include, without limitation, wildfire, earthquakes, tsunamis and floods. One or more of such natural disasters could occur and could result in damage to improvements of varying seriousness. The damage may entail significant repair or replacement costs and that repair or replacement may never occur either because of the cost, or because repair or replacement will not facilitate habitability or other use, or because other considerations preclude such repair or replacement. Under any of these circumstances, the value of the Taxable Parcels may well depreciate or disappear. Like other areas of Northern California, property in the District is subject to the risk of major earthquake damage. During the past 150 years the San Francisco Bay Area has experienced several major and numerous minor earthquakes. The San Andreas fault, at its closest, is about seven miles to the west of the District; the Hayward fault, at its closest, is about 15 miles to the east. A significant earthquake along these or other faults is possible during the period the Bonds will be outstanding. The most recent major earthquake was the -35- 43 RESO. # 15237 MUFF # 505