Sacramento Convention Center 8 a.m. - 11:30 a.m. Thursday June 10, 2010 Sacramento, California
Mission statement:The Committee is a Policy committee. Its mission is to develop C.A.R.'s overall policy agenda as it relates to the practice of real estate. It has original jurisdiction to evaluate transactional issues, legislation and regulation in the following issues areas: Licensure Liability and Risk Management Transactional
Presiding: Liz Claus, Chair David Barca, Vice Chair
Issues Chairs: Liability and Risk Management - Timothy Brigham License - Erik Weichelt Transactions - Lisa Muetterties
Executive Committee Liaisons: Annette Graw Kevin Brown
Staff Coordinator: Stan Wieg
I. Welcome and Opening Remarks - Liz Claus, Chair
II. Political and Regulatory Overview A. Member mobilization - DeAnn Kerr B. State Budget and ballot propositions C. Other
III. Selected 2010 C.A.R. Sponsored Legislation
A. SB 1427 (Price) Local Property Maintenance Ordinances C.A.R. sponsored, SB 1427 will provide an REO owner notice of a violation of an abandoned property ordinance and opportunity to repair before fines for the violation can attach. SB 1427 requires that the cost of nuisance abatement measures taken by cities be limited to what is actual and reasonable. The measure also requires cities to adopt a schedule of these costs so that property owners will know how much it will cost them if they do not make the repairs themselves. C.A.R. is working to achieve a consensus with local government on this proposal. Status: Senate Floor
B. SB 1000 (Correa) Portable appraisal Current law permits, but does not require, lenders to utilize current appraisals ordered by a different lender. C.A.R. is sponsoring SB 1000 which will enact FHA rules that require lenders to accept a "portable" appraisal, with specified limitations to all transactions, at the request of the borrower. Put simply, if an appraisal is ordered and prepared for one lender on a particular property, the second lender would be required to accept that appraisal to support a mortgage even though the lender did not order that appraisal, provided that the appraisal is in compliance with the Uniform Standards of Professional Appraisal Practices and does not contain any other material deficiencies. Status: Held in Senate Banking, Finance and Insurance Committee
C. SB 1178 (Corbett) Anti-Deficiency Protections in Refinanced Mortgages Anti-Deficiency rules protect a borrower from personal liability on a purchase money mortgage which goes into default and eventually foreclosure. Due in part to lower interest rates, many purchase mortgages have been refinanced and have lost their characterization as "purchase money" because of the refinance. Furthermore, most homeowners were not informed by their lender that when they refinanced they lost their legal protections and now may be personally liable for the difference between the value of the foreclosed property and the amount owed to the lender. C.A.R. is sponsoring SB 1178 to extend borrowers’ anti-deficiency protections to cover refinances that refinanced a purchase loan and "cash out" refinances to the extent that homeowners can prove that the money was used to improve the property. Status: Senate Floor
D. SB 1123 (Negrete McLeod) DRE "Poison Pill" During the 1990’s the Governor and Legislature raided DRE reserve funds to help balance the budget’s general fund during budget crises. In response, C.A.R. sponsored legislation to create a two part “poison pill” that would roll back licensee fees to 1982 levels if DRE funds were again raided and/or borrowed by the general fund or if DRE reserves exceed 18 months. As a part of the 2009 budget bill, the legislature loaned $500,000 from the DRE operating reserve to the Department of Justice to start up a new foreclosure consultant registration program. This loan did not trigger the so-called “poison pill” statute and roll back license fees because the recipient was a special fund agency and not the state’s general fund. C.A.R. is sponsoring SB 1123 to prevent DRE reserve fund transfers (“loans”) to other special fund agencies. According to the finance analysis the bill has a $2 million price tag, and is opposed by the Department of Finance. Status: Senate Appropriations Committee
E. AB 1762 (Hayashi) Advance Fee Definition Clarification In 2009, SB 94 (Calderon) was signed into law to prohibit "cash up front" loan modification contracts. C.A.R. negotiated amendments with the author and DRE to clarify the definition of an advance fee in other sorts of transactions and to ensure licensees’ ability to engage in a fee for service contract (e.g. a listing agreement). Even with those amendments, the current statute is confusing. C.A.R. is sponsoring AB 1762 to clarify the current "advance fee" statute (SB 94) in order to make very clear that fee for service contracts do not trigger the advance fee requirements. Status: Senate Banking, Finance and Insurance Committee
F. AB 1796 (Hall) Appraisal Management Company (AMC) Regulatory Oversight Appraisal Management Companies (AMCs) have grown enormously over the last few years, driven primarily by the Home Valuation Code of Conduct adopted by Fannie Mae and Freddie Mac. In 2009, C.A.R. supported SB 237 (Calderon), which was signed into law and subjects AMCs to registration and review by the Office of Real Estate Appraisers (OREA). C.A.R. sponsored AB 1796 to clarify and enhance OREAs oversight of Appraisal Management Companies, specifically in connection with conflicts of interest, “out of area” appraisers, timeliness and accuracy of work product and to ensure compliance with other requirements of law applicable to licensed appraisers. C.A.R. has obtained a commitment from Assembly member Hayashi, the Chair of the Assembly Business, Professions and Consumer Protections Committee, to hold an oversight hearing to discuss appraisal management companies (AMCs), their impact on the housing industry and to provide a forum to allow members of the industry and the public to discuss their concerns. Status: Held in Assembly Business and Professions Committee
IV. Transaction Issues - Lisa Muetterties, Issue Chair
A. Point of Sale issues 1. AB 1103 Energy Commission regulations for commercial buildings Since the passage of AB 1103 (Saldana, 2007), C.A.R. has been actively participating as a key stakeholder in the development of the Commercial Building EnergyStar Benchmarking program which will require building owners to register and benchmark all nonresidential buildings within the US EPA EnergyStar program and disclose this information to a prospective buyer, lessee or lender when an entire building is sold, leased financed or refinanced. Currently, the draft language for the proposed regulations is being finalized and will be released to the public for review in June and should be adopted by the end of December. The proposed regulations will go into effect on a tiered schedule by property size base on the following: January 1, 2011: property solely occupied by the owner or is more than 50,000 square feet, January 1, 2012: property that is 10,000 to 50,000 square feet, July 1, 2012: property that is less than 10,000 square feet.
2. SB 183 (Lowenthal), disclosures and carbon monoxide detectors As introduced, SB 183 would have required the recording of a separate disclosure of compliance, a point-of-sale mandate forcing home sellers and their agents to certify carbon monoxide (CO) alarm installation. C.A.R. achieved amendments removing the point-of-sale mandate and which consolidated relating existing disclosure forms. As amended, the bill provides for a statewide, "date-certain" rule that requires ALL existing single-family homes to install a CO detector by July 1, 2011, and all other dwelling units (i.e. multifamily, new homes, etc.) to do so by January 1, 2013. C.A.R. amendments also add CO detectors disclosure to the TDS, via a new check-off and a footnote. The additional TDS footnote provides a necessary safeharbor to sellers and their agents by explaining that the CO detector is not a precondition of sale and may not be in compliance with the safety standards. This safeharbor is similar to how the auto-reversing garage door opener requirement is handled in the current TDS form. C.A.R.'s amendments also eliminated the existing law's requirement for a separate form to certify compliance with water heater strapping and smoke detector requirements by bringing the certifications into the TDS. Status: Signed into law
3. HR 2336, federal energy efficiency and appraisals HR 2336, which was reported out of committee on April 22, 2010, includes a provision that relates to appraisals. The legislation proposes to 1) revise the standards for appraisals of federally-related transactions; and 2) establish specific requirements for appraisers related to energy-efficiency features.
4. AB 1809 (Smyth) Home inspector HERS audits Existing law required the State energy Resources Conservation and Development Commission to develop a statewide home energy rating program for residential dwellings, known as the Home Energy Rating System (HERS). This system has recently been completed. AB 1809 would authorize a home inspector who is HERS certified to include an energy efficiency inspection or a (HERS) audit in their home inspection if one is requested by the client. Status: Senate Business, Professions and Economic Development Committee
B. Confidentiality of Transfer Taxes* The party recording the document conveying real property can under existing law request that the amount of the documentary transfer tax due be shown on a separate paper. This was intended to allow individuals to keep the amount of the tax and, thus, the price paid for the real property, private. However, in July 2007, Attorney General Jerry Brown reiterated in a published opinion that the internal accounting records of county recorders are subject to inspection under the Public Records Act. As a result, C.A.R. staff was contacted by the representatives for the County Recorders Association of California to determine what C.A.R.’s position would be if legislation were introduced to eliminate the ability of the individual paying the tax to request that amount of the tax due be shown on a separate paper. C.A.R. staff discussed this issue with the leaderships of both the Taxation and Government Finance Committee and the Transactions and Regulatory Committee, and there was a split of opinion. Clearly, there is a tension between the desire for privacy on the part of the homebuyer and the need of potential homebuyers to know how much is appropriate to pay for a home in that neighborhood.
C. FHA electronic signature – update After a long wait, the FHA announced in early April that they would begin accepting electronic signatures for FHA loans. Intended to modernize and speed FHA transactions, the FHA will begin by accepting electronic signatures on third party documents originated and signed outside of the lender’s control, such as real estate contracts. The FHA is expected to expand the number and types of documents with electronic signatures it will accept over time.
D. Fannie Mae "First Look" program - update The Fannie Mae First Look Program requires brokers who sell Fannie Mae REOs to only accept offers from buyers who intend to occupy the home as their principal residence for the first 15 days the property is listed. The purpose of this program is to promote homeownership under the policy that communities are better off with higher rates of homeownership.
There is discussion of extending this program from 15 days to 30 days. This is in response to increasing incidents of offers not being received or responded to for two weeks or more.
E. HAFA Update
1. Federal Non-Agency Home Affordable Foreclosure Alternative Program HAFA is a government-subsidized Home Affordable Foreclosure Alternatives program for distressed homeowners to sell their homes to avoid foreclosure, even if the sales price is not enough to pay off their existing mortgage loans. Under HAFA, a participating lender will pre-approve the terms of a short sale and give the borrower at least 4 months to market and sell the property using a licensed real estate professional. HAFA currently applies to non Fannie Mae, Freddie Mac and FHA loans. Please see link to C.A.R. HAFA Fact Sheet
2. GSE Home Affordable Foreclosure Alternative Program Fannie Mae and Freddie Mac have submitted their own version of HAFA guidelines to their regulator for approval. Details of their HAFA program have yet to be released, but it is anticipated to be very similar to the non-agency program.
F. AB 2678 (Fuentes) Prohibiting Notice of Sale during loan modification negotiations Existing law requires a mortgage holder to publish a notice of sale prior to a foreclosure sale. C.A.R. supports AB 2678 because it prohibits a mortgage holder from giving a notice of sale and foreclosing while the mortgagor is in negotiations for a loan modification.
Position: Support Status: failed passage Assembly Banking & Finance Committee
G. Other Transaction Issues
V. Liability and Risk Management - Timothy Brigham, Issue Chair
A. AB 2317 (Saldana) Nuisance abatement (see SB 1427 (Price), above) AB 2317 is similar to C.A.R.’s sponsored bill SB 1427 regarding local Government collection of abandoned property fines. This bill would allow nuisance abatement costs as well as fines related to nuisance abatement to become liens against a property; however it does not allow liens related to maintenance costs to survive foreclosure. Status: Senate Floor
B. AB 1720 (Galgiani) "buyer's choice" in escrow The Buyer’s Choice Act, enacted last year, currently prohibits an REO seller from requiring a buyer to purchase title insurance or escrow services from a particular title company as a condition of the sale. AB 1720 would further clarify the Buyer’s Choice Act by requiring the REO seller to provide the buyer with a standardized form which states the buyer’s right to choose an escrow or title company. The bill will also clarify that sellers can not make the selection of a title company a condition of the sale. Position: Amend Status: Senate Judiciary Committee
C. SB 931 (Ducheny) Short sales and anti-deficiency Existing law allows the holder of a mortgage to demand the right to a “deficiency” for the balance due on a note as part of the lender’s negotiations in connection with a short sale. SB 931 would prohibit a deficiency on a first mortgage note secured by real property when the property is sold in a “short sale.” This legislation would pertain only to a first mortgage on a property and would provide that written consent to a “short sale” would require the first lien holder to accept the payment agreed upon for the sale as full payment for any additional indebtedness. The bill was amended to exempt junior noteholders from the new rule. Position: Favor Status: Senate Floor
D. FTC’s Proposed Mortgage Assistance Relief Services Rule In early March 2010, the Federal Trade Commission (FTC) issued a proposed rule that would classify a short sale transaction as a mortgage assistance relief service (MARS). The FTC has come out with this proposed rule in response to fraudulent entities preying on troubled homeowners who seek mortgage assistance. The rule would cover how MARS providers are able to advertise and what information must be disclosed. NAR has submitted a comment letter asking for clarification and that an exclusion be made for real estate professionals who do not collect up front fees or hold themselves to be MARS providers. The FTC has yet to issue a final rule on this. NAR Comment Letter (http://www.realtor.org)
E. Other Liability and Risk Management Issues
VI. License Issues - Erik Weichelt, Issue Chair
A. AB 2038 (Eng) License revocation for tax delinquents* Beginning January 1, 2012, AB 2038 would require the Departments of Real Estate, Consumer Affairs and Insurance along with the Attorney General, State Bar and any other state licensing entity to deny, revoke or suspend a person's license if they appear on the Franchise Tax Board’s (FTB) certified list of persons failing to pay income taxes. Licensing entities would be permitted to issue a 90 day temporary license pending a release from FTB that the licensee has either entered into an installment plan or paid the delinquent taxes in full. Additionally, if a notice of a state tax lien has been recorded, and the licensing entity has failed to suspend the individual’s license, FTB would be given a superseding authority to suspend the individual’s license. AB 2038 would require FTB to provide a notice of the suspension to both the licensee and the licensing entity. This bill would sunset January 1, 2016. Status: Assembly Appropriations Committee
B. AB 2257 (Nava) Super-Department of Financial Services regulatory consolidation A re-introduction of AB 33 from 2009, this bill proposes to abolish the Departments Corporations (DOC), Financial Institutions (DFI), and the Office of Real Estate Appraisers (OREA). AB 2257 would transfer the powers, duties, purposes, jurisdiction and responsibilities of the DOC and DFI to a newly created "Super Department" of Financial Services. The OREA would be consolidated into the DRE. The bill also proposed to shift the Department of Real Estates (DRE) regulation of mortgage loan brokerage over the new "Super Department" of Financial Services. C.A.R. has been monitoring the developments of this bill closely. Status: Assembly Banking and Finance Committee
C. AB 2727 (Bradford) Hiring of ex-offenders AB 2727 would prohibit a public agency, private individual or corporation from denying an application for employment based upon previous criminal offenses, unless the employer determines that there was a direct relationship between the criminal offense and employment sought, or that the individual posed an unreasonable risk to property or the safety and welfare of others. The Department of Real Estate already requires pre-license background checks and the Real Estate Commissioner can suspend, revoke or deny the issuance of a real estate license to a person who is convicted of a felony or a crime involving moral turpitude. C.A.R. opposes AB 2727 unless it is amended to include a safe harbor for real estate licensees that rely on the DRE license in making hiring decisions. In discussions with the author’s office, they have indicated that he is amenable to C.A.R.’s proposed amendment. Position: Oppose Unless Amended Status: Assembly Appropriations Committee
D. DRE: Broker Supervision Task Force - Update. The Commissioner's Task Force on Broker Supervision will have completed two meetings prior to the Committee meeting and staff will provide an oral update. E. Electronic examinations - Update on usage and consumer acceptance. F. License Examination project - Update on progress of DRE project to review the relevance and accuracy of the license examination. G. New Continuing Education Course rules - Update on new rules for continuing education courses. The rules are in effect and respond to suggestions of the C.A.R. task force on issues including examinations and limits on so-called "all in one" one-day courses. H. Other License Issues