Hyatt Grand Champions
Thursday February 4, 2010
8:00 a.m. - 11:30 a.m.
Indian Wells, 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
Liability and Risk Management
Liz Anderson Fitzgerald, Chair
David Barca, Vice Chair
Issues Chairs: Liability and Risk Management -
License - Erik Weichelt
Transactions - Lisa Muetterties
Executive Committee Liaisons:
NAR Representative -
Staff Coordinator: Stan Wieg
I. Welcome and Opening Remarks - Liz Fitzgerald,
II. Review of the Reorganized Policy Committee Structure*
- Committee Issue Area Missions - Oral update on the reorganized policy
committee structure. Please see included Issues Briefing Paper that sets
out the division of various policy issue areas among the three general
issue areas of the Committee's jurisdiction. The issues areas are
descriptive and illustrative and not necessarily comprehensive.
III. Political and Regulatory Overview a. Member mobilization - DeAnn Kerr - Oral update from
staff on member mobilization programs for 2010.
b. State Budget and ballot propositions - Oral update on
the latest developments in the on-going state budget confrontation, with
emphasis on its potential effect upon REALTORS(R).
c. Considerations in sponsoring legislation* - Please see
included Issues Briefing Paper on factors that should be taken into
consideration in deciding whether to sponsor legislation to achieve policy
IV. Selected 2010 C.A.R. Sponsored Legislation - Please
see the State Legislative Program Report on the car.org website for a more
complete description of sponsored legislation and real estate related
legislation of others.
a. Local Property Maintenance Ordinances - This
legislation will pre-empt overreaching local vacant property maintenance
ordinances that may adversely effect the market or unfairly expose
REALTORS(C) to liability.
b. Anti-Deficiency Protections in Refinanced Mortgages -
This legislation will extend the existing borrower protections against
personal liability (beyond the property) for a purchase money mortgage to a
re-finance of that mortgage debt or additional debt for improvements to the
extent that it increases the value of the property.
c. Appraisal Management Company (AMC) Regulatory Oversight
- Appraisal Management Companies (AMCs) have grown enormously over the last
two 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.'s Board of Directors
has approved the sponsoring of legislation in 2010 to clarify and enhance
OREAs oversight of Appraisal Management Companies.
d. DRE "Poison Pill" - During the 1990’s the Governor and
Legislature both raided and borrowed DRE reserve funds to help balance out
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 another special fund and not the state’s general fund.
C.A.R.'s Board of Directors has approved the sponsoring of legislation in
2010 to prevent DRE reserve fund transfers (“loans”) to other special fund
e. Advance Fee Definition Clarification - SB 94 (Calderon)
was signed into law in 2009 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 and to ensure licensees’ ability to engage
in a fee for service contract (e.g. a listing agreement). Even with
C.A.R.’s amendments, the current statute is confusing. C.A.R.'s Board of
Directors has approved the sponsoring of legislation in 2010 to clarify the
current "advance fee" statute established by SB 94 in order to make very
clear that fee for service contracts do not trigger the advance fee
V. Liability and Risk Management - Timothy Brigham, Issue
a. AB 260 (Lieu) Loan brokerage; one-sided attorney fees - AB 260
was a re-introduction of AB 1830, which was opposed by C.A.R and vetoed by
the Governor last year. Like its predecessor, AB 260 creates new
restrictions on mortgage brokers and attempted to create a new one-sided
attorney fee rule that would only allow successful plaintiffs to collect
attorney fees in suits over violations. This bill also creates an unequal
standard that does not hold ALL loan originators to the same rules and
restrictions. It would disadvantage mortgage brokers originating loans but
not residential mortgage lenders (like Countrywide) to the same extent. AB
260 was amended in July to remove the private right of action provision
that would have permitted one-sided attorney's fees. C.A.R. continued to
oppose AB 260 and sought amendments that would have created a uniform
standard for loan origination, or a governor's veto.
Position: Oppose Unless Amended
Status: Signed by the Governor on October 11, 2009 (Chapter 629, Statutes
b. Formaldehyde and Prop. 65 posting - In the summer of
2009 a number of real estate offices in northern California received notice
of a possible lawsuit for failure to post open houses with Proposition 65
toxic substances warnings. C.A.R. worked with the Attorney General's office
and industry groups to question the validity of the claim, and the suit
never went beyond the preliminary notice stage.
c. SB 318 (Calderon) dog fighting forfeitures - This bill
sets up a forfeiture process modeled after the drug forfeiture law to
punish illegal dog fight promoters by seizing and forfeiting their assets
related to the offense. C.A.R. sought and received amendments that protect
innocent landlords or owners, similar to the protections in the drug law.
The bill was signed into law by the Governor.
d. AB 1118 (Hayashi) Home inspector licensure - The bill
was designed to create a regulatory scheme to license home inspectors, a
concept that C.A.R. has supported in the past. The author was
attempting create a consensus among home inspection providers, but home
inspection groups could not reach consensus and the bill was not moved in
IV. License Issues - Erik Weichelt, Issue Chair a. License numbers on first contact materials. The new
requirement for license numbers on "first contact" materials is now in
place. Please see the Legal section of car.org for an advisory.
b. AB 33 (Nava) Super-Department of Financial Services regulatory
consolidation - The Administration sponsored bill to consolidate
all financial services within a new "super agency" Department of Financial
Services has been amended at C.A.R. request to preserve the separate
identity of Department of Real Estate, but would transfer regulation of
mortgage loan originators to the new agency. The bill has been held
in the senate as a 2-year bill pending resolution of objections by banks
and other lender groups; it is not clear if it will be moved in 2010.
c. Mortgage loan originator license and registration
requirements - SB 36 (Calderon) has become effective and DRE has
issued regulations for seeking the new license endorsement, and contacted
many licensees with a letter seeking immediate registration with the
department for all mortgage loan originators. The legislation was in
response to a federal mandate (SAFE Act) and DRE licensed loan originators
must have the new license endorsement by fall of 2010. The legislation is
d. "DRE: Opportunities to Improve Consumer Protection" -
Update on the status of DRE response to the Legislative Analyst's Report on
1. DRE increased fines and penalties* - Please see
included Issues Briefing Paper on a proposal regarding increased fines and
penalties. No legislation or regulation is authorized now.
2. DRE cost of prosecution recovery* - Please see included
Issues Briefing Paper on DRE recovery of costs of prosecution from a
disciplined licensee; No legislation or regulation is authorized now.
3. DRE changing 4-year license to 2-year license* -
Please see included Issues Briefing Paper on changing (shortening) the term
of the real estate license. No legislation or regulation is authorized now.
e. SB 496 (Maldonado) license disqualification for sex
offenders - Under SB 496, the DRE would either revoke or deny and
individual's application for licensure, renewal or reinstatement if that
individual is required to register as a sex offender. Real estate licensees
convicted of a sex offense, who are required to register as a sex offender,
would also be required to notify the DRE within five days of that
conviction. Real estate licensees are in a unique position of trust, and
because of that position have more opportunities to re-offend. C.A.R.
supported SB 496. The author decided not to pursue the passage of SB 496 in
f. License Examination project - update report - Oral
update on the progress of the DRE Task Force to update the real estate
g. Electronic examinations - Oral update on the "roll out"
of electronic examinations for both sales and broker licenses in 2009.
V. Transaction Issues - Lisa Muetterties, Issue Chair
a. Point of Sale issues
1. SB 407 (Padilla), Toilet retrofit - C.A.R. obtained amendments
that removed its opposition to SB 407, a bill that would have required that
residential and commercial properties be retrofitted at point-of-sale with
low-flow toilets, shower heads and faucets. While C.A.R. appreciated the
goal of conserving water, C.A.R. opposed SB 407 because its point-of-sale
approach would have burdened escrows and further destabilized the already
weak housing market. C.A.R.'s amendments removed the point-of-sale
provisions from the bill and instead require all properties to be
retrofitted by 2017. In the final days of session the author removed all of
the Transfer Disclosure Statement requirements from SB 407 in order to
avoid any conflict with another bill (see SB 183) which adds C.A.R.
language to the TDS. The bill is now law.
2. SB 183 (Lowenthal), disclosures and carbon monoxide
detectors - SB 183, which began as a reintroduction of SB 1386
from 2008, would have required the recording of a separate disclosure of
compliance that amounted to point-of-sale mandate to force home sellers and
their agents to certify carbon monoxide (CO) alarm installation. C.A.R.
obtained amendments that removed the specified point-of-sale mandate. As
amended, the bill provides for a statewide, "date-certain" rule that
requires ALL existing single-family homes to install a CO detector by
January 1, 2011, and all other dwelling units (i.e. multifamily, new homes,
etc.) by July 1, 2012 to have a CO detector. SB 183 also adds CO detectors
to the TDS, via a new check-off and a footnote, similar to how the
auto-reversing garage door opener requirement is handled in the current TDS
form. In addition, C.A.R.'s amendments eliminate the existing law's
requirement for a separate form to certify compliance with water heater
strapping and the smoke detector requirements in existing law by bringing
the certifications into the TDS. C.A.R. is neutral as amended. The bill was
stalled in 2009 because of concern from the Governor, it may be acted upon
any time in 2010.
3. AB 758 (Skinner), comprehensive home energy conservation
program - The California Energy Commission is moving forward with
regulatory implementation of AB 758 (Skinner). AB 758 was a reintroduction
of AB 2678 (Nunez), the home energy audit and retrofit bill from 2008,
where the California Energy Commission would have required energy audits
and recommended retrofits to be made at point-of-sale. The point of sale
language was removed at C.A.R.'s request. In 2009, AB 758 did not include
point-of-sale and instead requires that any home energy audit or
improvement not unreasonably or unnecessarily affect the home purchasing
process and must be cost effective. C.A.R. supported AB 758 because it
tasks the State Energy Commission and Public Utilities Commission with
creating a comprehensive statewide campaign of flexible cost-effective
energy efficiency improvements for existing buildings that will not impact
the home purchasing process.
Status: Signed by the Governor on October 11, 2009 (Chapter 470, Statutes
4. HR 2454 (Waxman), federal mandate for energy rating
disclosure - The federal mandate was amended to remove single
family residential dwellings from the point of sale disclosure requirement.
b. HVCC (Home Valuation Code of Conduct) Update on pending
c. HAMP (Home Affordable Foreclosure Alternatives) and HAMP (Home
Affordable Modification Program) Update on pending federal
d. 957 (Galgiani) "buyer's choice" in escrow - RESPA
prohibits lenders from forcing buyers to purchase title insurance form a
particular provider. C.A.R. supported AB 957, which strengthens buyer
protections by prohibiting a REO seller from forcing a buyer to purchase
title and escrow coverage from providers selected by that seller. This bill
is modeled after RESPA applying that rule to REO sellers for both title and
escrow services. Please see also the Legal section of car.org for an
article on the effect of the legislation.
The author's staff has indicated that she intends to introduce follow-up
legislation in 2010 to give buyers and borrowers better disclosures and
more options to negotiate for their choice of services providers.
Status: Signed by the Governor on October 11, 2009 (Chapter 264, Statutes