Thursday June 4, 2009
1:10 p.m. - 5:00 p.m.
Sheraton Grand Hotel
Sacramento CA

Presiding:
Heath Hilgenberg, Chair
Liz Anderson Fitzgerald, Vice Chair
Pat "Ziggy" Zicarelli, Vice Chair

Bill Jansen, Executive Committee Liaison
Terry Wunderlich, Executive Committee Liaison
Allen Chaing, NAR Liaison

Staff:
Alex Creel
Stan Wieg

I. Welcome and Opening Remarks - Heath Hilgenberg, Chair

II. Legislative Overview

a. Member mobilization report - DeAnn Kerr

b. Review of Legislative Day

c. Ballot propositions, Budget issues and special sessions* Please see included Issues Briefing Paper regarding the special election ballot of May 19, 2009. Additional oral update on general legislative activity.

III. Point of Sale

a. Report of the Point of Sale Alternatives Working Group* Please see included report of the Working Group. In January the Chair accepted volunteers from the committee to discuss alternative approaches that might be used in implementing C.A.R.'s opposition to Point of Sale (or time of sale) mandates that governmental entities might try and impose.

b. Legislation of others

1. SB 407 (Padilla), Toilet retrofit-C.A.R. is opposing SB 407, a bill that would require that ALL residential and commercial properties be retrofitted at point-of-sale with low-flow toilets, shower heads and faucets. The bill applies to any residential or commercial property transaction completed after January 1, 2014, and exempts short sales (but not REOs), hardship cases and properties in which a licensed plumber certifies that the water efficiency upgrades are not feasible. SB 407 also requires that real estate licensees representing either the buyer, or the seller, in the transaction disclose the retrofit requirement to both the seller and the buyer. While C.A.R. appreciates the goal of conserving water, C.A.R. opposes SB 407 because it will not achieve the objective of significantly reducing water consumption and because it will burden escrows and could further destabilize the already weak housing market. C.A.R. will oppose SB 407 until it is amended to utilize an approach that does not use point-of-sale as an enforcement tool and instead employs a comprehensive broad-based approach by either creating a mandatory compliance date for all homes, or developing a partnership between state and local government with the appropriate utilities.

2. SB 183 (Lowenthal), Disclosures and carbon monoxide detectors - SB 183, which is 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 effectively 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 January 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, which eliminates the need for separate certifications. In addition, C.A.R.'s amendments will eliminate the existing need for separate forms to certify compliance with water heater strapping and the smoke detector requirement in existing law. C.A.R is currently working with the author to make some additional technical amendments to the bill.

3. AB 758 (Skinner), Comprehensive home energy conservation program - AB 758 is a reintroduction of AB 2678 (Nunez), the home energy audit and retrofit bill from 2008. This bill includes language that ensures that the home energy audits or improvements do not impair the sale or transaction. C.A.R. supports AB 758 because it will create a comprehensive statewide campaign of flexible cost-effective energy efficiency improvements for existing buildings.

4. HR 2454 (Waxman), Pending federal mandate for energy rating disclosure - This legislation attempts to create a mandate for states to require an energy rating label disclosing the energy efficiency of a building be attached to the building prior to sale. Amendments proposed will prevent requiring the process during the course of an escrow, but any label would likely be a material fact required to be disclosed. The proposed law may be less stringent than California law that will soon be effective. NAR is opposing.

IV. Unconstitutional Property Restrictions; AB 985 (De La Torre) This bill is a re-introduction of AB 2204 from 2008. Existing law voids any provision in a deed of real property that restricts the right of a person to sell, lease, rent, use, or occupy the property based on race, color, religion, sex, marital status, national origin, ancestry, familial status, disability, source of income, or sexual orientation. This bill would create a new point-of-sale requirement that title insurance companies review any documents containing covenants and restrictions during the transfer of real property, and to strike any evidence of the aforementioned property restrictions from the deed or other instrument before the close of escrow. C.A.R. opposes AB 985 because it burdens transactions with inappropriate costs and imposes impossible tasks on title and escrow providers. C.A.R. is seeking amendments to instead utilize an existing electronic "scrubbing" mechanism that will remove the offensive language without burdening transactions with inappropriate costs.

V. C.A.R. Sponsored Legislation

a. SB 206 (Dutton) - First time homebuyer tax credit - C.A.R. is sponsoring SB 206 which would create a first-time homebuyer's tax credit, equal to 10% of the sale price of a home, not to exceed $8,000, for homes purchased as the principal residence of the taxpayer. This credit will only be available to individual purchasers whose income does not exceed $95,000, and married couples whose combined income does not exceed $170,000. SB 206 also provides this tax credit to anyone purchasing an REO property for a principal residence and makes the bill effective for one year from the date of its enactment.

b. Bill Number Pending (Author Pending) - Local REO property maintenance ordinances - C.A.R. Leadership has directed staff to seek introduction of C.A.R.-sponsored legislation to address local property maintenance ordinances. A bill has been identified, and amendments are in process to make the existing statewide rule for maintenance of post-foreclosure properties pre-emptive of local ordinances, and will provide an REO owner notice and opportunity to repair before fines for violation can attach. The amendments will also ensure that liability for maintenance of pre-foreclosure property follows the legal owner, and is not inherited by the foreclosing beneficiary or its agent. Finally, the amendments will modify the statutory Notice of Default or Notice of Sale recording to include contact information for the foreclosing entity’s designated property manager. C.A.R. will attempt to create a consensus with lenders, trustees, and local government on the proposal.

VI. Reports of Committees and Task Forces

a. Common Interest Development - Mike Riley
b. Equal Opportunity and Cultural Diversity - Cathlyne Scharetg
c. Housing Opportunity - Steve White
d. Land Use and Environmental - Lisa Meutterties
e. Local Governmental Relations - Tim Brigham
f. Manufactured Housing - Carl San Miguel
g. Property Management - Don Readinger
h. Real Estate Finance - Skip Zeleny
i. Taxation - Cnythia Carley

VII. Department of Real Estate

a. AB 33 (Nava) consolidation into new Department of Financial Services super-agency - This bill would abolish the Department of Real Estate, the Department of Corporations, the Department of Financial Institutions, and the Office of Real Estate Appraisers. AB 33 proposes to transfer the powers, duties, purposes, jurisdiction and responsibilities of those departments to a new "Super Department" of Financial Services, which would be a newly created overarching department. C.A.R. opposes AB 33 because the function of a real estate licensee is not just to provide financial services, but also to list and show houses for sale, sell or manage investment properties and raw land, and manage and oversee residential rental properties. Real estate licensees, regulated by the DRE, should not be blended in with the banks, credit unions, consumer finance lenders, residential mortgage lenders and pawnbrokers because, unlike these other licensees, real estate licensees are individually licensed agents that have a fiduciary agency relationship with their clients.

The Administration has begun to signal that it will alter the bill to remove C.A.R. opposition by preserving DRE, but with the transfer all loan originator regulation (see SAFE Act below) to the new department.

b. Foreclosure loan modification emergency regulations - As the result of the passage of AB 7xx and SB 7xx of last session, loan regulators are required to impose regulations on lenders to ensure that they have a robust "work out" program to help troubled borrowers avoid foreclosure. These regulations are emergency regulation and take effect June of 2009.

c. License numbers on first contact materials - Update on final regulations. DRE is responding to public comment on the rules implementing the requirement that licensees show their DRE license number on consumer "first contact" solicitation materials.

d. SB 498 (Maldonado), license disqualification for sex offenders - Legislation to bar listed sex offenders from the ability to hold or renew a license. Existing law gives the DRE commissioner authority to deny a license to offenders in most, but not all, circumstances.

e. LAO report "DRE: Opportunities to Improve Consumer Protection"- A report from the Legislative Analyst's office recommending improvements, or at least changes, in DRE programs.

f. License fee increase - Update. DRE fee increase regulations roughly doubling the cost of licenses or renewals are effective in June of 2009. DRE has imposed the increases within the limits agreed to by C.A.R. many years ago, and has done so to make sure that DRE remains solvent in a slowing market. Note: DRE is a so-called "special fund" agency, meaning it is supported solely by licensee fees, and is legally insulated from a money grab by the general fund of the state. However, those prohibitions on transfers to the state have been ignored in other budget crises.

g. Advance fee contract issues - Update on DRE regulation and legislation (see AB 764, SB 94) that affect the ability to contract for or collect a fee for loan modification work prior to the new loan being completed.

h. SAFE Act compliance; separately licensing loan originators - AB 34, SB 36, SB 491 - At least three bills attempting to implement the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE ACT) that requires states to set up a mortgage loan originator law that complies with new federal requirements. They would require an additional mortgage loan originator endorsement (license) that would be renewed annually. Real estate licensees that act as mortgage loan originators would continue to be regulated by the Department of Real Estate (DRE). These licensees would be required to complete continuing education courses related to mortgage lending and would be required to submit an annual business activities report to the DRE. C.A.R. supports the DRE endorsement approach because it will result in the least disruption of existing systems and minimize compliance costs to both the state and individual licensees. However, see AB 33 (Nava) which will move all loan origination regulation into a single new regulator. C.A.R. is negotiating a compromise with the administration that would transfer only the new license, and not other existing DRE functions to a new regulator.

i. DRE task force review of examination questions - Update on the progress of the DRE task force attempting to bring better relevancy to the license exam.

VIII. Expanding Anti-Deficiency Protections*  Please see included Issues Briefing Paper. Should C.A.R. sponsor legislation to expand the anti-deficiency rules that currently apply only purchase money loans to re-finances of those loans?

IX. Bills of Others

[Note: For a complete listing of pending legislation and C.A.R. positions, please see the Legislative Program Report, which is updated every other month and available on-line through the Government Affairs section of car.org]

- AB 764 (Nava), SB 94 (Calderon); Mortgage loan modification - Existing law prohibits the taking of an advance fee by a broker unless the licensee's contract has been reviewed and pre-approved by the Department of Real Estate. SB 94 and AB 764would prohibit any loan originators, including real estate licenses, from charging an advance fees to borrowers when modifying or arranging a loan. C.A.R. will oppose the bills until they are amended to include an exception for Department of Real Estate approved fee contracts.

- AB 255 (Anderson) Prohibiting Google Earth street views - C.A.R. opposes AB 255, which prohibits Google Earth© and similar internet resources from showing high resolution street views and aerial views of churches, schools and public buildings.  The author has indicated willingness to exempt driving direction software and other "legitimate" uses, however, it remains unclear how the author will reconcile his announced intent to protect legitimate uses with his goal of restricting strategic information to possible terrorists. C.A.R. opposes AB 255 which would prohibit the legitimate use of internet mapping services that not only provide driving directions, but property profiles and MLS links that REALTORS® use to facilitate transactions.

- AB 260 (Lieu) High cost loan originator restrictions - AB 260 is a re-introduction of AB 1830, which was vetoed by the Governor, and opposed by C.A.R. last year. Like its predecessor, AB 260 would create a new one-sided attorney fee rule that would only allow successful plaintiffs to collect attorney fees. This bill would create 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. C.A.R. opposes AB 260 because it will make home loans more difficult to obtain for legitimate, qualified, borrowers. Additionally, because AB 260 provides attorney fees to prevailing plaintiffs, but not prevailing defendants, it will encourage litigation.

- AB 329 (Feuer), SB 660 (Wolk); Reverse mortgage restrictions - This bill would enact a reverse mortgage elder protection act. Under AB 329, any person who offers, sells, or arranges the sale of a reverse mortgage to an elder owes a fiduciary duty to that elder. Should any person sell an inappropriate reverse mortgage, they would be subject to damages caused by that breach to the borrower. Lenders would be required to provide prospective borrowers with a list of nonprofit counseling agencies and to disclose any payment arrangements or business affiliations between the lender and a counseling agency. The author removed the provision of the bill that would have permitted borrowers rescind a reverse mortgage within 30 days of the contracts execution, which satisfied C.A.R.'s concerns. Similar amendments were inserted in SB 660. C.A.R. is now neutral.

- AB 457 (Monning); Notice to owners of lien actions - Existing law permits a lienholder to record a mechanic's lien without providing notice to the homeowner that a lien has actually been filed and does not require the lien holder to file a lis pendens prior to foreclosing on a lien. AB 457 requires such a recording. The bill also requires the person filing an action to foreclose upon a mechanic's lien to also record a notice of pendency with the county recorder within 20 days of the filing of the mechanic's lien foreclosure action. C.A.R. supports AB 457 because it requires an improved notice to property owners about their rights in regard to mechanics' liens.

- AB 957 (Galgiani); "Buyer's choice" in selection of escrow - As introduced, AB 957 permitted buyers of foreclosed property to completely control the choice of the title and escrow providers used in any REO transaction. The bill is in response to overreaching tactics by REO sellers that refuse to negotiate on choice of service providers. C.A.R. has  longstanding policy of supporting the negotiability of all terms of a sale, including the choice of title and escrow providers. C.A.R. opposed AB 957 because it would have given control of the transaction to one side of the transaction over the other, and suggested instead a rule requiring good faith negotiation. C.A.R. achieved a compromise with the author of AB 957 in early May. As amended, C.A.R. supports AB 957 which will require fair treatment for real estate owned (REO) buyers in the choice of title and escrow providers and protects fair negotiation over settlement services. AB 957 codifies in California law the federal RESPA rules for selection of title insurance, and extends the same rules to protect buyers in the selection of escrow services.  Under the new language, if an REO seller wants to try and direct choice of escrow, the seller will have to pay for the selection. AB 957 will also impose new penalties on REO sellers that violate the law, and will empower state regulators to go after both RESPA and "steering" violations.

- AB 1118 (Hayashi); Licensing home inspectors - This bill is an attempt to bring higher standards of practice to home inspectors through a licensing or certification process.  C.A.R. has been collaborating with the author's office, but the bill was slowed to a "two-year" track while various inspector groups negotiate.

- AB 1160 (Fong); Translation of contract disclosures - Existing law requires any party that facilitates the negotiation of a contract to provide translated copies of that agreement if the negotiations were conducted in Spanish, Chinese, Tagalog, Vietnamese, or Korean. This bill requires anyone that negotiates designated types of consumer contracts or agreements in any language other than English, to provide a translation of that contract or translated summary produced by a regulator, to the buyer or seller in the contract's primary language. AB 1160 applies to loans, extensions of credit secured by real property and all rental agreements and leases. The bill would also impose civil penalties against any person who fails to deliver the translation. The bill has a delayed effective date of January 1, 2010. C.A.R. is concerned that AB 1160's expanding this requirement to all languages would place an undue burden on real estate licensees in California, where there are hundreds of languages and dialects spoken. C.A.R. is currently working with the author to reach an equitable solution involving use of standardized state produced disclosure translations modeled after DRE forms.

- SB 109 (Calderon); Real estate auctions - This bill requires that basic consumer protections such as notice of reserve bidding, auctioneer charges, disclosures and bid premiums apply to real estate auctions.

- SB 237 (Calderon); Appraisal management company regulation - This bill is sponsored by appraisers to, among other things, requires appraisal management companies to be subject to regulation by the Office of Real Estate Appraisers (OREA).  These companies have proliferated in year since the agreement by GSEs to utilize the so-called HVCC or Home Valuation Code of Conduct. The agreement came as the result of a settlement with the Attorney General of New York, and requires a separation between lenders (or brokers) and the appraiser.

- SB 306 (Calderon); short pay beneficiary statement request - This legislation includes a provision creating a mechanism by which a prospective buyer can request a statement from a beneficiary (lender) as to what a short sale offer must yield in order to be sufficient. The process is voluntary on the part of the beneficiary.

- SB 318 (Calderon); Dogfighting forfeitures - This bill creates a forfeiture statute modeled after drug forfeiture laws that is designed to punish those promoting dogfighting.  The bill has been amended at C.A.R. request to ensure that innocent purchasers or encumbrancers (lenders) are not at risk of loss.
 
X. Other Business

XI. Adjournment