Hyatt Regency Hotel

Sacramento, California

Wednesday, June 4, 2008

2:30 p.m. - 4:30 p.m.

Presiding:

LeFrancis Arnold, Chair

Sandy Kaplan, Vice Chair

Randall Traw, Vice Chair

Steve White, Committee Liaison
 

C.A.R. Staff:

Dave Milton

Matthew Roberts

I. Opening Comments
 

III. State Legislation
 

A. C.A.R-Sponsored Bill

AB 1366 (Portantino) Regional Housing Decisions and Annual Housing Element Report - This bill proposes to strengthen the annual housing element reporting process that governs local housing actions and provide a reporting structure that will better assist local governments' focus on the regional impact of their housing decisions. The measure also encourages local agencies to include more specific planning descriptions in an order to meet the localities share of its regional housing need. The additional information will assist in identifying those jurisdictions that meet or exceed their regional housing goals, which will in turn enhance the Department of Housing and Community Development's (HCD) ability to evaluate regional housing production. C.A.R. is working with HCD to identify financial rewards that might be amended into AB 1366 to encourage local jurisdictions to be more aggressive in meeting their regional housing goals.

Status: Senate Transportation and Housing Committee

B. Bills of Interest

AB 239 (DeSaulnier) Recording Fees- Contra Costa and San Mateo Counties - Originally a re-introduction of SB 521 from 2006, AB 239 would have authorized Contra Costa County to impose a document recording fee surcharge of $1 per page after the first page on the recordation of real estate related documents. As amended, AB 239 would have authorized Contra Costa County, as well as San Mateo County, to impose a flat $25 document recording fee on all real estate related documents that are longer than one page. The revenue collected would have been used for the development of affordable housing for extremely low, very low, lower and moderate income households. C.A.R. has historically viewed document recording fees as "transfer taxes" if they apply to the recording of documents facilitating the transfer of property. C.A.R. opposed AB 239 because it imposed a document recording fee without exempting documents already subject to the documentary transfer tax, and because the funds generated by the document recording fee would have been used for purposes which bear no relation to document recording. In April 2008, AB 239 was amended to address a non-real estate related matter.

Position: Dropped
Status: Senate Business, Professions and Economic Development Committee

AB 1875 (Huff) Mitigation of Residential Care Facilities Over-concentration - Current law requires new residential care facilities submit an application with the Director of Social Services that will be denied if the director finds that there is an "overconcentration" of residential care facilities. "Overconcentration" exists when the new facility is located within 300 feet of an existing facility. However, the director may obtain the local government's approval to allow the placement of a new facility within the 300 foot limitation. AB 1875 would change the definition of "overconcentration" to mean1,000 feet or less.

Position: Favor
Status: Assembly Human Services Committee

AB 2069 (Jones) Clarification of "No Net Loss" Zoning Law - This bill clarifies the definition of "lower residential density" under the no-net-loss zoning law. Specifically, this bill clarifies the no-net-loss zoning law to specify that the law's provisions are triggered: 1) In cities and counties with compliant housing elements when the approval of a project on a site on which the zoning permits residential use results in fewer housing units on the site than were projected in the housing element. 2) In cities and counties with non-compliant housing elements when a project is approved on a residentially zoned site at a density that is lower than 80% of the maximum allowable residential density for that site or when a project is approved on a site that allows both residential and nonresidential uses that would result in the development of fewer than 80% of the number of residential units that would be allowed under the maximum residential density for the site.

Position: Favor
Status: Senate Rules Committee

AB 2280 (Saldana) Density Bonus Law Reform -  Density bonus law was originally enacted in 1979, but was changed numerous times since. Most recently, C.A.R. sponsored SB 1818 in 2004 and SB 435 in 2005 which, taken together, made significant changes to this body of law. Due to the substantial revisions made to this law over the years, local agencies and developers alike have found the density bonus law confusing to interpret and implement. Sponsored by the California League of Cities, AB 2280 is intended to clarify many of the density bonus procedures and streamline the approval process. Unfortunately, mixed in with positive procedural changes are substantive negative changes to areas of the law that C.A.R. fought vigorously to establish. Three specific areas of change are being opposed by C.A.R until they are deleted from the bill:

1)    Modifying the re-sale provisions governing properties subject to density bonus treatment when constructed to the detriment of the homeowners.

2)   Modifying the number of senior units required to qualify for the senior housing density bonus, requiring 100% of the units to be senior in order to qualify for the senior density bonus, thus essentially eliminating the possibility of mixed use construction.

3)    Increasing by 10% "across-the-board" the number of very low, low and moderate-income units that had to be built within a development to qualify for density bonus concessions or incentives.

The sponsors and Author have agreed to modify AB 2280 to address C.A.R. concerns. When such amendments have been made to the bill, C.A.R. will remove its opposition.

Position: Oppose Unless Amended
Status: Assembly Floor

AB 2451 (Davis) Workforce Housing -  This bill identifies the growing disparity between the amounts earned by low-wage and moderate-wage workers and the amounts necessary to purchase or rent a dwelling in many areas within the state. Additionally, AB 2451 defines the term "workforce housing" to include those families who earn too much to qualify for affordable housing subsidies, but not enough to purchase or rent a dwelling in today's housing market.

Position: Watch as Amended
Status: Pending Committee Assignment

AB 2594 (Mullin) Using Redevelopment Funds to Boost Affordable Housing - This bill will provide redevelopment agencies with the authority to utilize some of their funds to assist local low or moderate income homeowners to mitigate sub-prime loan difficulties they are experiencing, and to purchase vacant foreclosed homes for purchase by low- or moderate-income families. The provisions of this bill would sunset January 1, 2013. C.A.R. supports AB 2594 because any step taken to remove foreclosed homes from the marketplace is a step towards re-invigorating local home ownership opportunities.

Position: Support
Status: Assembly Floor

AB 2604 (Torrico) Developer Fees Postponement - AB 2604 proposes to delay the collection of local government impact fees from housing developments until the occupancy permits are issued, or the close of escrow, whichever occurs later. The bill would sunset January 1, 2014. C.A.R. supports AB 2604 because it will help encourage the construction of new affordable housing.

Position: Favor
Status: Assembly Floor
 

III. Federal Issues

1. Stimulus Package and Temporary FHA and GSE Loan Limit Increase

C.A.R. Position: C.A.R. is supporting the House proposed Housing Stimulus Package that includes:

  - Permanent extension of the temporary increase in the GSE and FHA loan limits from Stimulus I,
 -   Reforming the GSE and FHA programs,
 - Creating a tax credit for first-time homebuyers,
  - A FIRPTA fix, and
 - Expanding FHA so it may insure troubled mortgages from lenders.

In April, the Senate passed their second Economic Stimulus Package of 2008.  The intent of the package is to help homeowners avoid foreclosure.  In actuality, the bill passed by the Senate would do little to help individuals avoid foreclosure.  The final bill was full of tax incentives directed towards lenders and homebuilders, along with a version of FHA Reform that would severely cut the current higher loan limits implemented under Stimulus I. 

As expected, the House started from scratch on its own Housing Stimulus Plan; which it passed on May 8, 2008.  The House bill will:

 - Permanently extend the temporary increase in the GSE and FHA loan limits from Stimulus I,

•  - Reform the GSE and FHA program,
•  - Create a tax credit for first-time homebuyers,
•  - Include a FIRPTA fix, and
•  - Expand FHA so it may insure troubled mortgages from lenders.
  
  It is unclear if the Senate and the House will be able to workout the differences between the two bills.  Additionally, the Administration is not supporting the House bill and has threatened a veto.
  
  On May 20, the Senate Banking, Housing and Urban Affairs Committee marked up the Federal Housing Finance Regulatory Reform Act.  This bill was introduced by Senator Dodd, (D-CT), who chairs the Committee, and was a product of intense negotiations with the ranking member, Senator Shelby (R-AL).  The bill will reform regulatory oversight of the GSE and permanently cap the GSE loan limit in high-cost areas to 132 percent of the conforming loan limits ($550,440).  The bill also includes a version of the FHA Rescue Program, but would divert GSE contributions from the proposed affordable housing fund to offset the cost of the FHA Rescue program.
  
  It is still not yet known if the Senate will bring Dodd?s GSE Reform bill to the floor of the Senate for a vote or move to negotiate a Stimulus Package that includes GSE Reform and an FHA Rescue Program since they are already included in the House Stimulus Package.
  
  

2. FHA Rescue Program (Please see IBP)

C.A.R. Position: C.A.R. supports allowing the government housing programs to purchase mortgages from lenders that are at risk of defaulting.  C.A.R. believes that the government housing programs should not be utilized as a taxpayer funded bailout; but, that lenders and homeowners should share in the responsibility and cost.

While there are a number of proposals from Congressmen, Senators and federal regulators that would address the current housing downturn, the two bills that have the best opportunity of passage are those by Representative Barney Frank and Senator Christopher Dodd.  Frank and Dodd jointly announced their bills on March 13, and while there are some differences the primary intention of the two proposals is to utilize the FHA to insure troubled mortgages. 

3. Neighborhood Stabilization Act

C.A.R. Position: C.A.R. has no position on this issue.

Introduced in April of 2008 by Maxine Waters, the Neighborhood Stabilization Act, H.R. 5818, was passed by the House on May 8, 2008, by a vote of 239 - 188.

The bill would provide grants and loans to states to purchase foreclosed housing for resale to families having incomes up to 140% of the area's median income, rental of such housing by low- and moderate-income families, and the rehabilitation of such homes for the purpose of reselling them.   While this bill was passed separate from the Housing Stimulus package, there will be efforts by Democrats to include it in any final version.

4. Mortgage Reform

C.A.R. Position: C.A.R. opposes federal preemption of state laws.  Additionally, C.A.R. supports strong consumer protection laws, but those laws must not be so stifling as to hinder the flow of capital to the markets.

The continued crisis in the subprime market has caused both the Senate and the House to introduce subprime and mortgage reform bills to address what many politicians and consumer groups perceive as predatory practices.  The hope of the legislation is to protect consumers while not crippling the subprime market; which, when properly utilized by home buyers serves as a valuable resource for home ownership opportunities to those not able to procure prime rate financing.

The House bill, H.R. 3915, was passed on November 15, 2007, by a vote of 291 - 127. The House bill primarily proposes the following:

 - Create minimum standards for state licensing of ?mortgage loan originators? and create a federal registration for them.  This would not include real estate agents; and is intended for mortgage brokers and bank employees who originate mortgages.

 - Require creditors to ensure the borrower has a reasonable ability to repay the loan, and for refinancing there must be a net tangible benefit to the consumer.

 - Tighten Home Owners Equity Protection Act (HEOPA) requirements so the APR and fee triggers are reduced.

 - Prohibit the financing of points and fees, balloon payments, or excessive fees for payoff information, modifications, and/or late payments.
 

The Senate bill, S. 2542, which was introduced at the end of 2007 by Senator Dodd is waiting to be heard in the Senate Banking, Housing, and Urban Affairs Committee.  While both Democrats and Republicans will make recommendations and amendments to Dodd's bill, as introduced it would:

 - Redefine a HOEPA loan to 8% above Treasury on the first, 10% for the second, or 5% of fees (including YSP),

 - Define a "subprime mortgage" as 3% above Treasury on the first, 5% for the second,

 - Prohibit any Yield Spread Premium (YSP) and prepayment penalties on HOEPA, subprime, and nontraditional mortgages,

 - Give borrowers the ability to "unwind" or rescind a loan that violates provisions laid out in the legislation (it would actually be up to the note holder to help make the home buyer whole; we will have to see the actual text of the legislation to better understand this provision),

 - Require mortgage brokers to have a fiduciary duty to their customers and hold them accountable under the Truth in Lending Act (TILA),

 - Prohibit Steering,

 - Allow "YSPs only in the case of no-cost loans"  that are prime (Where YSPs are paid, brokers may not receive any other compensation from any other source and prepayment penalties are prohibited), and

 - Address appraisals, loan servicers, and foreclosure prevention.

Dodd's bill was drafted and introduced with little to no consultation from many within the industry and appears to be more of a wish list for consumer groups.  If Dodd is serious about moving his bill there will be many amendments made.

5. Home Ownership Opportunities for Veterans

C.A.R. Position: C.A.R. supports increasing homeownership opportunities for California and the nation's veterans.

The House Veterans Affairs Committee has favorably reported H.R. 4884, the "Helping Our Veterans to Keep Their Homes Act of 2008". This bill, sponsored by Rep. Filner (D-CA), will reform the VA loan program so that it is able to adequately serve the many deserving veterans who could use its benefits. The bill does 3 major things:

 -   Permanently increase the VA loan limits to 175% of the Freddie/Fannie limits (currently that would be equal to $729,750);
 - Streamline refinances for veterans by eliminating the equity requirement and raising the refinancing loan limits to the same level as the purchase loan limits; and
 - Extend the authority of VA to offer Adjustable Rate Mortgages (ARMs).

This bill is expected on the House Floor in the next few weeks. Similar legislation has not yet been introduced in the Senate.

An additional piece of proposed legislation to help veterans with their homeownership opportunities is the Qualified Veterans' Mortgage Bonds (QVMB) program.  As home prices have risen in California, only a few select veterans in California and four other states have benefited from low-interest rate mortgages secured by Qualified Veterans? Mortgage Bonds (QVMB).  The bonds are tax exempt government obligations and are backed by the full faith and credit of the issuing state.  Veterans who finance their homes through QVMBs can receive an interest rate of .50-.75 percentage points less than that of a conventional loan. 

Under current law, to qualify for a QVMB a veteran must have served on active duty prior to January 1, 1977 and applied for financing before their thirty-year anniversary of leaving the service.  This prohibits veterans of more recent or ongoing military conflicts such as Operation Iraqi Freedom, Operation Enduring Freedom, Kosovo, Somalia, and the 1991 Persian Gulf War from being able to benefit from these loans.

H.R. 551, the "Home Ownership for America's Veterans Act of 2007", was introduced on January 18, 2007 by Rep. Davis (D-CA).  Most of the provisions in H.R. 551 were rolled in H.R. 3997, the "Heroes" Earnings Assistance and Relief Tax (HEART) Act of 2007?.  While it did not address every issue found in H.R. 551, it did include language that would make permanent the exception that allows QVMBs to be eligible for any housing, not just a first-time homebuyer, and included the change that instead of having to serve prior to January 1, 1977, you now would just have to apply for the QVMB within 25-years of your last date of active duty service. 

When the House returned for the 2nd session of the 110th Congress, they introduced an updated version and passed H.R. 6081, the "Heroes Earnings Assistance and Relief Tax Act of 2008" on May 20, 2008 by a vote of 403-0.  Included in H.R. 6081 are the same QVMB provisions that were found in H.R. 3997.

IV. Affordable Housing Definition - A Report from the - Affordable Home Ownership - Working Group*

V. Other Business

A.  L.A. County Assessor Review of Home Values- Randall Traw; a Discussion

B. Other

VI. Adjournment