Thursday, January 18, 2007. 1:00 p.m. – 5:00 p.m. Monterey Portola Plaza Hotel Monterey CaliforniaPresiding: Stephen Goddard, Chair Leigh Ruttledge, Vice Chair Heide Wolf-Reid, Vice Chair Frank Nelson, Executive Committee Liaison Susan Tilling, Executive Committee LiaisonC.A.R. Staff: Alex Creel Stan WiegI. Welcome and Opening Remarks – Stephen Goddard, ChairII. Overview of the Legislative and C.A.R. Policy Process – A review and update on how the legislative process works, and how it affects C.A.R. policy. The presentation will include an overview of the process by which C.A.R. identifies and reviews proposed C.A.R. policy, and how positions on proposed legislation and regulation are generated.
How a bill becomes law “Two-tier, three-track” C.A.R. committee process Member mobilizationIII. 2007 C.A.R. Sponsored Legislation
1. Agents of Equity Purchasers - Existing law effectively (and inappropriately) precludes legitimate agents from representing investor purchasers of properties that are in foreclosure. The prohibition is the inadvertent result of requiring buyers’ agents to purchase a bond for the sale at twice the value of the property. This bill will allow alternate means of demonstrating financial responsibility; either by maintaining E&O insurance in a similar amount or by certifying that the licensee is in good standing with the DRE and that consumers have access to the Real Estate Recovery Fund for fraud that he or she might commit.2. “Degree Broker” Education Requirements - The Board approved a motion in October 2006 to pursue a clarification of the “specialization in real estate” requirement for the “degree broker” exception to experience requirements. The two part motion is firstto seek the clarification by regulation at DRE; if that is unsuccessful, to sponsor legislation to achieve the desired clarification.3. Private Transfer Tax Prohibition - The bill will implement the recommendation of the C.A.R. Private Transfer Tax TaskForce and prohibit the imposition of such a transfer fee. “Private” transfer “taxes” are increasingly being used to settle disputes between opponents and builders or, in the alternative, by builders to proactively avoid a lawsuit or to smooth development negotiations with the local government. Typically, in return for an agreement by a potential opponent group to not pursue a lawsuit, the builder agrees to the imposition of one or more PTTs through a covenant included in thecovenants, conditions and restrictions (CC&Rs). These PTTs have totaled as much as 1.75 percent of the purchase price of a home and is paid by every buyer of a home in the development for 20 to 25 years or, even, in perpetuity. Even worse,private parties and real estate licensees, are being solicited nationwide by a Texas firm selling a pre-packaged business plan which imposes a similar deferred “royalty” on each subsequent transfer of an interest in a property.
4.Housing Impact Statement Requirement for Local Land Use Decisions - The decision of a local government to downsize or disapprove a proposed development will necessarily have an impact on adjacent communities and jurisdictions. The bill will requirea local government to make a finding as to what effect their decision will have on the ability to meet the identified housing needs both inside and outside their jurisdictional boundaries.
5. Housing Project Application; Pre-Hearing Availability of Staff Reports - Local government (e.g. planning commission) staff analyses, reports on and critiques proposed housing projects will be made available to developers as part of the preparation for hearings. Developers need to receive this information prior to the hearing so that they can respond appropriately and not be subjected to “trial by ambush.”
6. Sponsored Amendment to Tow Truck Regulation Law of 2006 (AB 2210, Goldberg) - C.A.R. will sponsor an amendment to the 2006 law (AB 2210, Goldberg) so that the law does not create a trap for property managers and expose them to civil and criminal liability for good faith approval of a vehicle tow. The amendment will be sought in a relevant bill of others as available.IV. Update on Electronic Recording Delivery Systems Regulations – After an extensive drafting effort throughout most of 2006, the Department of Justice has begun the final approval process for regulations governing ERDS (Electronic Recording Delivery Systems). The program is in response to C.A.R.-sponsored legislation approved in 2005. The Department anticipates approval of vendors and county systems in 2007 and hopes to see electronic “recording” underway by fall of 2007. V. Department of Real Estate
1. Commissioner’s report – Please see documents released on Wednesday, January 17 as part of the Commissioner’s open forum.
2. Encouraging reporting of salesperson violations – possible sponsored legislation* - Please see included Issues Briefing Paper. The central issue is how to deal with concerns by employing real estate offices that a report of a violation involving an employed salesperson will prejudice the office by unnecessary audits or sanctions.
3. Management education requirements for brokers – possible sponsored legislation* - Please see included Issues Briefing Paper. The working group of the 2006 Legislative Committee recommended that broker education standards be changed to include a requirement for a course in office management or supervision. The Legislative Committee will consider in 2007 whether to sponsor legislation to impose such a requirement in either continuing education or pre-license education or both.
4. Oversight of mortgage originators
(a) Update/report on proposed legislation by mortgage broker groups (CAMB – California Association of Mortgage Brokers) and mortgage bankers (CMBA – California Mortgage Bankers Association). The CAMB legislation will reportedly attempt to impose an individual license requirement on in-house employees of RMLs –(Residential Mortgage Lenders -mortgage banker - employees) similar to a real estate license. The proposal would overturn the compromise reached by C.A.R. and CAMB over a corporate license for RMLs. The compromise was reached in the 1990s after a lengthy struggle with mortgage bankers over the creation of a new mortgage lending within the Corporations Code instead of the Real Estate Law. The compromise that was reached required mortgage banker employees to comply with standards (fiduciary duty, written agency contract, education and ethics) based upon the real estate law for loan officers that broker notes. The compromise left the real estate license law intact. The proposed CAMB legislation may precipitate a retaliatory response by mortgage bankers that includes burdensome restrictions on real estate licensees engaged in lendingactivities.
(b) Reports have come from practitioners that there is an emerging pattern, or at least a perception, of mortgage brokers attempting to insert themselves in a sales transaction without the necessary expertise, or customer relationship, or familiarity with the geographic area of the sale. Does the existing law’s prohibition on acting outside one’s area of competence, or which prohibit any sort misrepresentation, provide a sufficient sanction against such offensiveactivities? Is the perception really based upon the mortgage broker’s incompetence in a transaction, or upon on perceived unethical behavior in trying to “hijack” a client relationship during the pre-qualification process? Isregulatory clarification needed, or are such disputes simply a symptom of a tightening market?
VI. Reports of Standing Committees and Task Forces
1. Commercial Investment – David Weinstein
2. Common Interest Development – Steve Delmartini
3. Housing Opportunity – Heidi Rickerd-Rizzo
4. Land Use and Environmental – Carol Banner
5. Local Governmental Relations – David Gillingham
6. ManufacturedHousing – Norma Scantlin
7. Property Management – Cynthia Wood
8. Real Estate Finance – Mike Donohoe
9. Taxation – Robert Kevane
10. Standard Forms Transaction Task Force – Ann ThrockmortonVII. Bills of Others – Update on legislation introduced, to the extent that it is known. Because 2007 is the beginning of a two-year legislative session, most legislation will not have been introduced in time to be reported at the January meetings.VIII. OtherIX. Adjournment