8:00 a.m. - 11:20 a.m.
Thursday May 3, 2012
Sacramento Convention Center

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 issue areas:

Licensure
Liability and Risk Management
Real Estate Finance
Transactional

Each issue area is managed during the Committee's meeting by an Issue Chair, under the direction of a committee Chair and committee Vice-Chair.  The Committee has jurisdiction over issues that are potentially real estate related that do not fall into another committee's jurisdiction.  The Committee reports to the Legislative or Federal level of government committee(s), as appropriate, and to the Executive Committee and the Board of Directors. 

Presiding:
Greg Galli, Chair
Virginia Butler, Vice Chair

Issues Chairs:
John Schulte, Risk Management and Liability
Clay Sigg, Transaction
Larry Black, Real Estate Finance
Michael Tessaro, License and Regulatory

Liaisons:
Mel Wilson, Executive Committee 
Bill Brown, NAR representative

Staff:
Stan Wieg
Matt Roberts

I. Introductions and Welcome - Greg Galli, Chair

II. Political and Legislative Update

A. State budget developments
B. Member mobilization and Legislative Day – DeAnn Kerr
C. Attorney General Anti-Foreclosure bill package

III. Sponsored Bill Update

A. AB 1590 (Campos) Assessment Appeals Boards
The Brown Act requires that local government meetings be properly noticed and prohibits those which have not been. A 1996 attorney general’s opinion found that local assessment appeals boards are not required to comply with the Brown Act. C.A.R. is sponsoring AB 1590 to clarify that property tax assessment appeals boards are subject to the Brown Act. This legislation also includes provisions specifying that deliberations may be held in closed session.
Status: Assembly Local Government Committee

B. AB 1711 (Galgiani) Burdensome Retrofit Standards
Existing law prohibits required energy efficiency retrofits from unreasonably or unnecessarily affecting the home purchase process.  This bill will define “unreasonable or unnecessary effects” to include any additional upfront costs, time delays or retrofits where the cost of implementation cannot be recovered over the life of the retrofit.
Status: Assembly Utilities and Commerce Committee

C. AB 1718 (Hill) Degree Brokers
Under current law an applicant for a brokers’ license must have either two years of active real estate experience or have graduated from a four-year college or university with a specialization in real estate. The Department of Real Estate (DRE) has interpreted the “degree” provisions to mean any four-year degree. C.A.R. is sponsoring AB 1718 to clarify the law to require "degree brokers" to have an undergraduate degree with either a major or a minor in real estate in order to claim the experience exemption. Status: Assembly Business, Professions and Consumer Protection Committee

D. AB 1745 (Torres) Dual Tracking
Currently, the banks’ ability to simultaneously process a short sale and a foreclosure on a single property has resulted in the foreclosure sale of homes which have an approved short sale pending. C.A.R. is sponsoring AB 1745 to rohibit a mortgagee, trustee, beneficiary, or authorized agent from proceeding to a foreclosure sale against a property if that property has been approved for a short sale. This measure will still allow the mortgagee to withdraw its short sale approval due to a change in the conditions under which the approval was granted. The lien holder would be required to provide a written notice at least 3 days before the withdrawal of approval explaining the reason for the retraction. Status: Assembly Banking and Finance Committee

E. AB 2225 (Perea) Debt Forgiveness Income Tax
The federal government enacted the Mortgage Debt Relief Act of 2007 that permitted 3 years of mortgage debt relief by not requiring borrowers to pay income tax on debt forgiven in a “short” sale. In late 2008 the federal government extended this relief through December 31, 2012. In 2008, California enacted and C.A.R. supported SB 1055 (Machado) which provided conformity with the federal statute for the 2007 and 2008 tax years and, in 2010, C.A.R. supported and California enacted SB 401 (Wolk) which extended the income tax debt forgiveness until December 31, 2012, conforming to the federal law. C.A.R.is sponsoring AB 2225, as a place holder to extend California’s existing mortgage income debt forgiveness sunset date to conform to federal law if the federal government extends their mortgage debt forgiveness sunset date. Status: Assembly Revenue and Taxation Committee

IV.  Risk Management and Liability - John Schulte, Issue Chair

A. AB 1763/ SB 1474 - Attorney General sponsored special grand jury; statewide anti-fraud program
Currently, the Attorney General has the authority to convene a special grand jury to investigate Medi-Cal fraud. AB 1763 and SB 1474 would allow the Attorney General, regardless of the District Attorney's opinion, to petition the California county courts for permission to convene a special grand jury to investigate fraud and/or theft cases. While this measure does not specifically state it, the intent of this measure is to provide the Attorney General with the ability to prosecute individuals committing real estate fraud.

B. AB 1950 - Attorney General sponsored real estate fraud fees, NOD recording fee increase
Existing law allows a local government to adopt a real estate document recording fee of up to $3 to fund the Real Estate Fraud Prosecution Trust Fund. AB 1950 would, among other things, expand the definition of what constitutes a "real estate instrument" to include any recorded real estate document not already subject to a transfer tax. The Author of AB 1950 has agreed to take C.A.R.'s amendments which clarify that this fee cannot be applied to documents recorded in connection with the sale or transfer of property. Once these amendments are in print, C.A.R. will move to a Watch position. Status: Assembly Public Safety Committee

C. AB 1954, Nestande; Class action solicitation disclosure
The State Bar Act regulates legal advertising, prohibiting any false or misleading statements from being included. AB 1954 would require an advertisement soliciting participants for a class action to include a disclosure informing participating plaintiffs that they may be liable for the defendant's attorney fees if the defendant wins. If a member of the Bar fails to abide by this requirement they may be subject to disciplinary action.

D. AB 2314/ SB 1472, Attorney General sponsored blight reduction fines increase
Until January 1, 2013 local government are allowed to impose civil fines and penalties of up to $1,000 a day against a vacant property owner who is not maintaining the property. Local governments are required to notify the property owner of any maintenance violations at least 14 days in prior to imposing any fines and penalties. These measures would remove the January 1, 2013 sunset, extending these provisions indefinitely. The Government agency must provide a new property owner at least 60 days to abate any issues before they take an action. If the nuisances are not abated a local government enforcement agency can request to have a receiver take over the property. Under these measures, the owner would be personally liable for all fees associated with the receivership.

E. AB 2257, Achadjian; Disclosure of landfill proximity
Existing law defines a nuisance as anything that interferes with the "quiet enjoyment" of property. AB 2257 would exempt a landfill facility, which has been in operation for 3 years, from being classified as a nuisance due to changes in the makeup of the area surrounding the facility. This measure would also require a seller of residential property in close proximity to a landfill facility to provide written notice to a potential purchaser prior to the close of escrow. C.A.R. opposes the disclosure provision as unworkable and unnecessarily exposing homeowners and agents to "buyer's remorse" lawsuits. C.A.R. is seeking amendments to remove the disclosure requirement and defer to local government to determine if additional disclosure is needed. Status: Assembly Local Government Committee

F. AB 2517, Eng; labor dispute liens
Under current law, an individual who works on the creation or improvement of a property can hold a mechanic's lien against the property to ensure payment. AB 2517 would expand this provision by allowing an employee, employees' representative or the Labor Commissioner to record a lien against an employer's real or personal property for any wages owed to the employee. The owner of the property shall be provided with notification of the recorded lien by registered mail, certified mail, or first class mail. Once the lien is recorded it will take precedence over all other liens against the property except for tax liens. C.A.R. is opposed to this measure as it allows for the recordation of liens against a property without judicial supervision or due process. Status: Assembly Labor and Employment Committee

G. Short Sale Addendums – lender negotiations
C.A.R. has been working on numerous fronts to address your concerns related to short sale transactions.  Over the past year, C.A.R. has made significant improvements through discussions with legislators, housing regulators, and lenders.

Recently improvements have been made by Bank of America (BofA) to their Short Sale Addendum because of C.A.R.’s recommendations.  The changes will enable BofA short sale specialists to complete tasks such as document collection, valuations and underwriting at the same time, reducing the time from initiation to closing.

Specific changes that took effect April 14:
  * In line with C.A.R.’s request and recommendation, BofA’s Short Sale Addendum will no longer include the agent/broker language, and agents and brokers are no longer required to sign it.

  * The BofA Short Sale Real Estate Licensee Certification has addopted some of our suggested language, but we will continue to work with BofA to make additional changes.

C.A.R. is pleased BofA has made these changes to its short sale documents in line with C.A.R.’s recommendations.  We will continue to work with BofA to improve the short sale process in ways that will mutually benefit both REALTORS® and lenders.

More info: https://realestateagent.bankofamerica.com/shortsale/default.aspx

H. Other

V. Transaction - Clay Sigg, Issue Chair

A. SB 1394, Lowenthal; smoke detectors
This legislation is sponsored by the California State Firefighters' Association.  It is intended to further refine and update the laws governing installation and maintenance of carbon monoxide devices and smoke detectors. In summary, this bill requires that, after January 1, 2014, the State Fire Marshall cannot approve and list a smoke detector as acceptable for sale unless it displays the date of manufacture, provides a place where date of installation can be written, incorporates "hush" and "end-of-life" features, and if battery operated, must contain a tamper- resistant 10 year battery. Also after January 1, 2014, any owner of a residential dwelling unit seeking a permit for $1000 or more of alterations or repairs to the dwelling must update the smoke detectors in the home to meet new requirements. Owners of rental dwellings are also required, after the "magic" 2014 date, to ensure that smoke detectors are operable at the time a tenant takes possession of the rental home or unit. The bill DOES NOT require property owners to retrofit existing smoke detectors that are operable. The bill does make it illegal, after January 1, 2014, for retailers to sell battery-operated smoke alarms without a 10 -year tamper-resistant battery. Status: Senate Transportation & Housing Committee   Position: Oppose Unless Amended

B. AB 2610 / SB 1473 Tenants rights in REOs - Attorney General sponsored bill; codifying federal-style tenant protections in REO properties
Currently, treatment of tenants in a foreclosure situation is governed by provisions in federal law. This law, which will sunset on December 31, 2012, states that if a rental property is sold in a foreclosure sale, the new owners are required to provide the tenant who is renting on a month- to-month basis with either a new lease or a 90-day notice to vacate the property. If a tenant has a lease longer than 90-days, the new owner must honor it unless they plan to occupy the property themselves.  AB 2610 and SB 1473 would institute a California law which extends these requirements beyond the federal "sunset date", making the 90–day notice requirement and lease validation permanent. C.A.R. is seeking amendments to insert a 5- year sunset date into the bill and language requiring leases to be "bona fide". Status: Assembly and Senate Judiciary Committees

C. AB 1511, Bradford – NHD company disclosure of pipeline map
When experts in natural hazard disclosure are hired to provide a report on natural hazards they are required to include the properties proximity to certain "nuisances", such as airports or farmland. AB 1511 would require an expert, in addition, to determine and report if the property is within 2,000 feet of a gas transmission or hazardous liquid pipeline shown on a specified official map. This proximity is to be determined based on the federal National Pipeline Mapping System which is a public Internet website. C.A.R. is seeking amendments to this measure to ensure that the required disclosure adequately deals with seller responsibility via a “substituted disclosure”. Status: Assembly Judiciary Committee

D. Federal update

- Dual Track (see also AB 1602 and AB 1745)
The issue of dual tracking, where a servicer forecloses on a property even after a short sale offer has been accepted and escrow opened, continues to be a problem many of our members face.  Recently, two major steps have been taken to address this problem.  The recent national settlement between 49 state Attorney Generals and five of the nation’s largest loan servicers includes language that prevents dual tracking.  The settlement states the servicers can’t foreclose on a property where a short sale has been accepted by all parties.

Additionally, recent efforts by Fannie Mae and Freddie Mac to bring their servicing requirements in line with each other, known as the Servicing Alignment Initiative (SAI) includes language that would make it more difficult for a servicer of their loans to foreclose while an approved short sale is in progress.  The language states the servicer must perform a review of the loan prior to foreclosure and certify an approved short sale is not in progress.

Because these are still relatively new policies we expect a delay of implementation while they continue to train staff and modify their servicing process.  Members who encounter a dual track situation should contact C.A.R. 

 - Short Sale legislation

 - HR 1498, Rooney
On April 12, 2011, Representatives Tom Rooney (R-FL) and Robert Andrews (D-NJ) introduced H.R. 1498, the "Prompt Decision for Qualification of Short Sale Act of 2011". This legislation makes it mandatory for mortgage servicers to reply to a short sale application within 45 days of submission. If the servicer fails to provide a decision to the short sale applicant within that time period, the application is deemed approved.

- HR 3164, Speier, Honda
On October 12, 2011, California Congresswoman Susan Davis, along with Congresswoman Jackie Speier and Congressman Mike Honda introduced H.R. 3164, the “Short Sale Transparency Act of 2011.”  The legislation would require when a short sale for a Fannie Mae or Freddie Mac property is denied based on the offer price not being sufficient, the GSE would have to inform the prospective buyer how much more is need to approve the transaction.

E. Other

VI. Real Estate Finance – Larry Black, Issue Chair

A. Proposed Legislation to statutorily change variable interest rate loans* Bay East A.O.R. resolution

B. SB 1284, Lieu; employment verification via EDD database
Under current law, any employee who submits a written request must be provided with their wage information. This measure would allow the Director of Employment Development to electronically transmit an individual's wage information to a creditor, provided that that employee has signed a release.

C. AB 1602, Eng / SB 1470 Leno, Attorney General sponsored "super" pre- foreclosure restrictions; super dual track, private causes of action, state office of homeowner protection
Under current law a lender is required to contact the borrower prior to beginning the foreclosure process. SB 1470 and AB 1602 would require a lender to provide the borrower with a deadline by which an application for a loan modification must be submitted and would prohibit the lender from beginning the foreclosure process until after that date. The lender would also be prohibited from filing a notice of default or notice of sale if a loan modification is in process or approved. These measures will also allow a borrower to stop a foreclosure sale if they feel the lender or servicer has violated any of these provisions and would authorize the borrower to see compensation of up to $50,000. The office of Homeowner Protection will be created to assist homeowners with complaints about foreclosure processes both in person and through a website that is capable of receiving questions and complaints. C.A.R. is opposed to these measures as it is concerned that SB 1470 and AB 1602 are too far reaching and so will reduce the availability of mortgage credit, and increase the cost of funds, to legitimate qualified borrowers attempting to participate in the emerging recovery of the California real estate market. C.A.R. feels that it is premature to lock in to California statute some version of the new national mortgage settlement before it has been proven in the market. Status: Senate and Assembly Banking and Finance Committee

D. AB 2425, Mitchell / SB 1471, DeSaulnier; Foreclosure process - Nevada style process, "Robosigning" prohibitions, required recordings of each note transfer
California's existing foreclosure laws specify the necessary procedures a mortgage services must complete in order to foreclose on a property.  SB 1471 and AB 2425 increase these requirements by requiring a mortgage servicer to designate a single point of contact for a borrower in default to assist with for any loan modification, short sale or foreclosure information and processes. These measures will also define a "robsigned document" in statute as any document that contains false information or that has not been reviewed by the signer.  SB 1471 and AB 2425 will make any entity that records or files with a court a robsigned document liable for a civil penalty of up to $50,000 and allows a borrower to bring a suite against the mortgage servicer if they believe there has been a violation of these new restrictions. C.A.R. is concerned that the codification of a "robosigning" offense in California law pushes lenders/servicers toward the use of judicial foreclosure, which would dramatically increase the cost to the state of enforcing legitimate security claims, and increase the costs of funds to homeowners. C.A.R. is also concerned that the rule will have a negative effect on the ability to utilize legitimate non-judicial foreclosure processes, as demonstrated by the impacts of similar legislation in Nevada. C.A.R. believes it is premature to lock in to California statute some version of the new national mortgage settlement before it has been proven in the market. Status: Senate and Assembly Banking and Finance Committee

D. AB 1599, Feuer; Translated Foreclosure Notice
During a foreclosure sale, the mortgagee, trustee, beneficiary or authorized agent is currently required to provide a summary of mortgage terms in the borrower's primary language if their primary language is one of five major languages. As introduced AB 1599 would have required that all documents related to a delinquency, default, loan modification, foreclosure proceeding or foreclosure sale be provided to the mortgagor or trustor in their primary language. C.A.R. sought to amend the measure as it felt that requiring translation to every language spoken by a California resident placed an unrealistic burden on lenders and their representing agents. AB 1599 was amended to limit the required languages to the five already specified in existing law. However, as the measure places the responsibility for posting a translation on the department of real estate, C.A.R. is seeking additional amendments limit the requirement until after the official translation is available. Status: Assembly Judiciary Committee

E. AB 2476, Veterans Committee; Extension of interest rate cap on service members' loans
Under current law, certain loans to military personnel cannot charge more than 6% interest at any time during the individuals military service. AB 2476 would extend this prohibition to mortgages for up to 12 months after return from service.

F. Federal Issues Update

- REO Pilot project by GSEs
Government Sponsored Enterprise and Federal Housing Administration "REO Initiative"

On February 27 the Federal Housing Finance Agency (FHFA) announced a pilot program to be operated by Fannie Mae to sell nearly 2500 foreclosed properties in six hard hit foreclosure states for the purpose of providing rental housing. This is the first pilot project to be offered in the Obama Administration’s plan to expedite the disposition of foreclosed properties held by Fannie Mae, Freddie Mac, and FHA.

Applications for pre-qualification for investors began on February 1. The latest announcement begins a further round of qualification with potential bidders required to demonstrate financial capacity, management capabilities and other qualifications. Only fully qualified bidders will be allowed to bid on pools ranging from 99 properties in Chicago to more than 600 in Riverside/San Bernardino/Los Angeles.

C.A.R. continues to express the opposition of members from around the state about whether this pilot should be conducted at all in areas with diminished REO inventories, making the point that owner occupants and small investors should have more assistance to take advantage of foreclosed properties.

FHFA announcement and further details on the pilot

- PTF (Private Transfer Fees)
The Federal Housing Finance Agency (FHFA) released their long awaited final rule on private transfer fees (PTF). The final rule is not substantively different than the proposed rule; however, it does include minor changes advocated for by C.A.R. FHFA removed the 1,000 yard requirement under the direct benefits section of the rule and instead offers a two-tier test. First, fees can be a direct benefit if property is open to the general public and is directly adjacent to the burdened community. Second, transfer fees may apply to more distant properties if said properties are primarily for the benefit of the burdened community.  The rule also grandfathers in PTF that were created prior to February 8, 2011.

C.A.R. opposes private transfer fees and has continuously advocated they be prohibited. In a series of letters to FHFA, C.A.R. argued that private transfer fees increase the cost of homeownership and do little more than generate revenue for developers, investors, and environmental groups and typically provide no benefit to homebuyers.

- GSE reform legislation
On July 6, 2011, Representatives Gary Miller (R-CA) and Carolyn McCarthy (D-NY) introduced H.R. 2413, the Secondary Market Facility for Residential Mortgage Act of 2011. The Miller and McCarthy bill is a comprehensive secondary mortgage market reform bill that espouses many of C.A.R.'s and NAR's GSE principals and recommendations. C.A.R. is supportive of this bill because it maintains a government role within the secondary mortgage market, which is required to ensure the viability of long-term mortgage financing for consumers (e.g. 30-yr fixed-rate mortgages). 

In addition to H.R. 2413, California Congressman John Campbell introduced H.R. 1859, the Housing Finance Reform Act of 2011, with Democratic member Gary Peters (D-MI).  HR 1859 would also comprehensively reform the mortgage finance system, but would set up multiple private companies in the marketplace with the government offering a catastrophic guarantee of their securities. 

Fannie Mae and Freddie Mac (Government Sponsored Enterprises or GSE) have now been under the conservatorship of the Federal Housing Finance Agency (FHFA) since September 2008.  Reforming these mortgage giants, which guarantee or own roughly 50 percent of all outstanding mortgages, is a top priority for both sides of the isle.

Besides H.R. 2413 and HR 1859 there have been many different proposed ideas, but perhaps the toughest question facing the Administration and Congress is what, if any, role should the government play in the housing finance market?  The House Financial Services Leadership has introduced over a dozen smaller bills which have already begun hearings and sub-committee markups.  These smaller bills stand no chance at making it to the President's desk and are more for press headlines than anything else.  It remains unclear when the Senate will attempt to address the GSE reform issue; however, their delay seems to indicate a good possibility the issue will likely wait till after the 2012 elections.  

- FHA Update

- Premium increases
In March, HUD announced changes to the FHA single family mortgage insurance premiums that would be implemented in April and June of this year.  These changes include:

  *  Increasing the upfront premium from 1 percent to 1.75 percent (effective for case numbers assigned on or after April 9, 2012),

  *  Adding .25 percent to its annual mortgage insurance premium for loans exceeding $625,500 (effective for case numbers assigned on or after June 11, 2012),

  *  Increasing the annual mortgage insurance premium by .10 percent as required by the Temporary Payroll Tax Cut Continuation Act (Effective for case numbers assigned on or after April 9, 2012).

The first two changes were made in an effort to increase the financial health of the Mutual Mortgage Insurance Fund, which continues to be below its statutory minimum of 2 percent reserves.   

  - Seller concessions
In March the US Department of Housing and Urban Development (HUD) announced a proposed rule on permitted seller concessions for loans insured by the Federal Housing Administration (FHA). This proposed rule is one of three initiatives HUD is undertaking to contribute to the restoration of the Mutual Mortgage Insurance Fund (MMIF). Similar to what was proposed in the President’s budget, the rule limits concessions to 3 percent or $6,000, whichever is greater. It also limits acceptable use of concessions to borrower closing costs, prepaid items, discount points, the FHA Upfront Premium, and interest rate buy downs. The seller concession cannot exceed the actual closing costs prohibiting cash to the borrower at closing.  When the rule was initially proposed in 2010 HUD was working to reduce permitted concessions from 6 percent to 3 percent with no $6,000 cap.

- Attorneys General settlement
In March, the nation’s five largest mortgage servicers agreed to a landmark $25 billion settlement with a coalition of state attorneys general and federal agencies. The settlement addresses past mortgage loan servicing, foreclosure abuses and fraud, provides substantial financial relief to borrowers harmed by bank fraud, and establishes significant new homeowner protections for the future.

The joint state-federal group announced the agreement with the nation's five largest servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup, Inc., and Ally Financial, Inc. (formerly GMAC). Collectively, the five banks service nearly 60 percent of the nation’s mortgages.

Under the agreement, the five servicers agree to:

  *  Commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction. Servicers will likely provide up to an estimated $32 billion in direct homeowner relief.

  *  Commit $3 billion to an underwater mortgage refinancing program.

  *  Pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).

  *  Provide homeowners with comprehensive new protections from new mortgage loan servicing and foreclosure standards.

Additionally,

  *  An independent monitor will ensure mortgage servicer compliance.

  *  States can pursue civil claims outside of the agreement including securitization claims as well as criminal cases.

  *  Borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.

Additional information may be found at: http://www.nationalmortgagesettlement.com/

- NFIP (flood insurance)
On Dec. 17, 2011, Congress extended National Flood Insurance Program (NFIP) authority through May 31, 2012. This latest extension was a part of H.R. 2055, the so-called "megabus" conference report combining the remaining nine appropriations bills to fund the federal government for FY2012. C.A.R. and NAR is urging Congress to use the additional time to complete work on a 5-year NFIP re-authorization bill (H.R. 1309) to provide certainty and avoid further disruption to real estate markets.

-NAR Real Property Valuation Principles
At NAR's November business meetings in Anaheim, the NAR Appraisal Committee considered adoption of "Real Property Valuation Principles."  While supportive of the principles, NAR has decided to table this issue until their May meetings so the newly created Real Property Valuation Committee (which is replacing the Appraisal Committee) may review and vote on the principles. 

See Link for Proposed NAR  Real Property Valuation Principles (Please see attached)

- QRM (Qualified Residential Mortgage)
On August 1, 2011, C.A.R. commented on the proposed rule on risk retention, implementing section 941 of the Dodd-Frank Act. Section 941 requires lenders that securitize mortgage loans to retain a percentage of the risk unless the mortgage is a qualified residential mortgage (QRM) or is otherwise exempt. The proposal would have defined a QRM using excessively stringent underwriting standards that would have forced the majority of homebuyers, especially in high-cost states such as California, to pay more in spite of qualifying for a prime loan.

Proposed Definition of a QRM would:

  *  Require an 80% LTV, which requires a 20% down payment. 
  *  Limit the mortgage payment to 28% of gross income and 36% of all debts.
  *  Require that the borrower is not currently 30 or more days past due on any debt obligation.
  *  Require the borrower must not have been 60 or more days past due on any debt obligation within the preceding 24 months. 
  *  Require the borrower must not have, within the preceding 36 months, been through bankruptcy, foreclosed on, engaged in a short sale or deed-in-lieu of foreclosure, or been subject to a Federal or State judgment for collection of any unpaid debt.

C.A.R. QRM Comment Letter

- GSE (Fannie/Freddie) Guarantee Fee increase
Legislation recently signed into law by President Obama taxes housing to pay for the extension of the payroll tax, and maintain Medicare payments and unemployment benefits.

Despite REALTORS® strong opposition to the diversion of housing resources to pay for non-housing uses, increases in Guarantee Fees on Fannie/Freddie mortgages and premium charges for FHA loans are being used to pay for the extensions. These increases will translate into additional costs for homebuyers and will divert fees needed to minimize the loss exposure of the government-sponsored enterprises, investors, and ultimately, the taxpayer.

G. Other

VII. License and Regulatory - Michael Tessaro, Issue Chair

A. AB 2519,Berryhill; Brokers' experience equivalency for appraiser license; codifying federal limitations
Under current law, licensed real estate appraisers can use up to 1,000 hours of accumulated property valuation experience as a licensee to satisfy appraiser license requirements. AB 2519 would, among other things, delete the experience exception and only allow appraisal experience to fulfill pre-license requirements. C.A.R. is seeking amendments to remove this provision from the bill in an effort to protect licensees who have received their licenses based on experience rather than course credits. Status: Assembly Business, Professions and Consumer Protections Committee

B. Governor’s Reorganization Plan
Among other things, this plan moves the Department of Real Estate (DRE), making it a Bureau within the Department of Current Affairs. The proposal will be heard by the Little Hoover Commission prior to being referred to the Legislature for consideration. C.A.R. will testify before the Little Hoover Commission. The proposal cannot be changed by either the Commission or the Legislature, but the Legislature has until June 27th to disapprove the proposal. If the Legislature does not vote to disapprove the reorganization it will take effect. After meeting with the governor's staff, C.A.R. has changed its position to "watch".

C. DRE Update

D. Regulatory agency updates:

- Treasurer; California Alternative Energy and Advanced Transportation Financing Authority (CAETFA): Implementation of AB 14x (Saldana, 2011) California’s Clean Energy Upgrade Financing Program -EMERGENCY REGULATIONS. 

In 2011, C.A.R. supported AB 14 of the First Extraordinary Session, which authorizes the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) to administer a Clean Energy Upgrade Financing Program using up to $25 million from the funds originally appropriated to the SB 77 PACE Bond Reserve Program. During the first phase of regulatory development, CAEATFA is focusing on providing financial assistance in the form of credit enhancements to financial institutions providing homeowners with loans to finance energy or water efficiency improvements and audits on existing homes. The goal of the Program is to increase access to retrofit financing by reducing its cost.

The second phase of implementation will focus on providing financial assistance for distributed generation renewable energy sources, electric vehicle charging infrastructure or small commercial properties installing energy or water efficiency improvements. C.A.R. has been an active participant in the proceeding and sought amendments that would have assured improvements create a reliable combined cost savings for both energy use and loan repayment.

Requiring efficiency improvements to pay for themselves would have further protected CAEATFA’s Loan Loss Reserve Account, assuring that CAEATFA was not left covering risky loan products.

Information pertaining to this proceeding can be found at: http://www.treasurer.ca.gov/caeatfa/abx1_14/index.asp  

Upon adoption of these emergency regulations, CAETFA will provide a voluntary program to help ensure the availability of affordable financing options to homeowners seeking energy and water efficiency audits and improvements for properties three units and less. Loans covered under this program shall not exceed 10% of the properties assessed value, and improvements must achieve a minimum 10% reduction in the properties energy use, which must be verified by pre/post-installation HERS audits.

Note: Property Assessed Clean Energy (PACE) programs allow municipal financing districts to provide loans to property owners to finance energy retrofits. The loans are repaid over 20 years via an annual assessment on the property tax bill. SB 77 (Pavely, 2010) authorized CAEATFA to finance reserves for qualifying PACE bonds by creating a $50 million PACE Bond Reserve Program to reduce the overall bond costs in an effort to reduce consumer costs. Soon after CAEATFA began the initial outreach to develop the Program, most residential PACE programs were stalled as a result of legal and legislative/regulatory challenges at the federal level.  Regulatory Authority: State Treasures Office. Status: Emergency Regulations / pending approval: Hearing scheduled April 17, 2012 - If approved, program should be in place by the end of May 2012

- CEC; Nonresidential Building Energy Use Disclosure Program: Implementation of AB 1103 (Saldana, 2007).

- The proposed regulations require utilities serving the building to release 12 months of energy use data for the entire building to an owner's U.S. Environmental Protection Agency (EPA) Portfolio Manager Account. Owners of nonresidential buildings are required, in advance of the sale, lease, or financing of the entire building, to benchmark the building's energy use using the U.S. EPA’s Portfolio Manager System and to disclose statements of the building's energy usage to potential buyers, lessees, and lenders. In lieu of any missing information in the disclosure, if the owner has made a reasonable effort to ascertain the missing information, the owner may use an approximation of the information, provided that the approximation is reasonable and based on the best information available to the owner.

The regulation contains an implementation schedule based on building size and requires non-residential building owners to open an account at the EPA's ENERGY STAR® program Portfolio Manager website at least 30 days before a buildings energy use disclosure is required.

The schedule for implementation is as follows:
1.)          January 1, 2013: Buildings with a total floor area measuring more than 50,000 square feet.
2.)          July 1, 2013: Buildings with a total floor are measuring more than 10,000 square feet.
3.)          January 1, 2014: Buildings with a total floor area measuring at least 5,000 square feet.

C.A.R. has participated as a stakeholder in the development of these regulations and sought to ensure that the regulations requirements are workable and do not increase owner liability.  

Note: AB 1103 (Saldana, 2007) requires electric and gas utilities to provide the energy consumption data for non-residential buildings in a format that is compatible with the United States Environmental Protection Agency's Energy Star Portfolio Manager (ESPM), and to upload information consumption to the ESPM on behalf of the owner or operator upon their request. The bill further requires a non-residential building owner or operator to disclose to a prospective buyer, lessee, or lender the ESPM's benchmarking data and scores for the building that is being sold, leased, financed, or refinanced. C.A.R. obtained amendments to the bill that provide a safe harbor provision for property owners and real estate licensees regarding the disclosure of this information. Regulatory Authority: California Energy Commission.  Status: Pending adoption by Commission - 45 Day language to be considered and possibly adopted by the Commission on May 9, 2012

- PUC; 2013-2014 Energy Efficiency Portfolios and 2012 Marketing, Education and Outreach: Rulemaking Proceeding R. 09-11-014: On-Bill Financing Workshop.

The Public Utilities Commission (PUC) is currently in seeking to develop policy for the utilities during what is known as the "bridge period," which is essential a program planning and development period for efficiency pilot projects. Included in this policy development is an attempt to locate both public and private energy efficiency financing opportunities. A major focus in this proceeding has been on-bill financing. In recent years the PUC authorized certain utility providers to offer on-bill financing to commercial properties. With this pilot, the PUC is hoping to find out whether or not on-bill financing mechanism could be used for all building sectors as a successful efficiency improvement financing tool. C.A.R. has been an active participant in these proceedings and provided input to the PUC and responded to inquiries from other interest parties in the proceeding. Many questions have been asked about when it would be most beneficial to offer on-bill financing to utility customers. Because there was not universal agreement by the interested parties and the PUC, the PUC, in its recent draft decision suggested that there are too many unanswered questions, and that more exploration for on-bill financing is necessary before the option is made available to all properties. Regulatory Authority: Public Utilities Commission.  Status: Pending adoption of Administrative Law Judge recommendations

E. Other

VIII. Other

IX. Adjournment