Convention Center
San Jose, CA
Thursday October 8, 2009
2:00 pm - 5:00 pm

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
* Special Announcements*

II. Legislative Overview

A. Member mobilization report - DeAnn Kerr
B. Ballot propositions, Budget issues and special sessions
C. Considerations in sponsoring legislation* Please see an updated included Issues Briefing Paper regarding strategic considerations to take into account in deciding whether to sponsor legislation

III. 2010 Sponsored Legislation

A. SB 206 (Dutton) Homebuyer tax credit - C.A.R. is sponsoring SB 206, which as introduced, would have emulated federal law by creating 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. Due to the state's fiscal crisis, C.A.R.'s Board of Directors at its June 2009 meetings decided to limit this proposed tax credit to REO properties purchased as a principal residence by homebuyers whose individual income does not exceed $95,000, and married couples whose combined income does not exceed $170,000. The bill will be effective for one year from the date of its enactment. SB 206 was amended to utilize a funding source from federal stimulus funds instead of the state general fund. Unfortunately, this source proved to be unavailable for tax credit purposes. Efforts are continuing to locate a funding source for this tax credit that does not burden the state's general fund during these tight fiscal times. The bill is eligible to be considered in January 2010.

B. Extending Anti-deficiency protections to refinanced purchase money mortgages - Many mortgages have lost their characterization as "purchase money" because of a refinance, or because the purchase financing was divided into two loans and one or more of them were structured as a recourse or personal note that is really secured by the property. C.A.R.'s Board of Directors has approved sponsoring legislation to expand borrowers’ anti-deficiency protections to cover refinanced purchase monies, and “recourse” junior notes created as part of a purchase, or loans which increase the basis of the property

C. CID Right to rent - Over the last few years, C.A.R. members noticed a trend among some homeowner associations to adopt restrictions that limit the ability of unit owners to rent their dwellings in common interest developments (CID), which diminishes an owner’s property rights. C.A.R. sponsored AB 2259 (Mullin) in 2008 which was approved, almost unanimously, by the legislature. Unfortunately, the Governor vetoed AB 2259 because it did not leave this decision up to a vote of HOA members. C.A.R.'s Board of Directors has approved the sponsoring of legislation in 2010 to require two-thirds of the unit owners in a CID to approve, by written ballot, any amendment of the governing documents that would prohibit owners from renting or leasing their unit.

D. Local vacant property maintenance ordinances - C.A.R.'s Board of Directors has approved the sponsoring of legislation to address local property maintenance ordinances. This bill will 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 work to achieve a consensus with lenders, trustees, and local government on this proposal.

IV. 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 - Cynthia Carley

V. Appraisal Issues

A. HVCC update - Update on the activities related to the Home Valuation Code of Conduct.(HVCC) including conversations with the Attorney General and pending federal legislation.

B. Portable appraisals* Please see the included Issues Briefing Paper for a discussion of "portability" - the ability to take an appraisal prepared for one lender to a second lender so that a new appraisal does not have to be ordered. The second lender is now allowed to use the first lender's appraisal, the issue is whether it should be required to do so. Lead committee is Real Estate Finance Committee.

C. Appraisal management company regulation.* Please see included Issues Briefing Paper on SB 237 (Calderon) which subjects Appraisal Management Companies (AMCs) to Office of Real Estate Appraisals (OREA), and whether C.A.R. should consider additional regulatory authority based upon OREA reactions to the new bill. Real Estate Finance Committee is lead committee.

D. SB 237 (Calderon); Appraisal management company regulation. The legislation subjects Appraisal Management Committees to registration and review by the OREA. The bill has passed and is awaiting action by the Governor.

VI. Unconstitutional Property Restrictions; Electronic Redaction* Please see the included Issues Briefing Paper.

The question presented is whether C.A.R. should sponsor its own legislation to set up an electronic scanning and redaction of property records similar to that currently required for social security numbers. Existing law already voids any provision in a deed of real property that restricts the use of the property based on race, color, religion, sex, marital status, national origin, ancestry, familial status, disability, source of income, or sexual orientation. AB 985 (De La Torre) is awaiting action by the Governor, but does NOT set up an electronic redaction system. C.A.R. opposed AB 985 when it would have imposed a point-of-sale requirement for title companies to review and strike unenforceable historic property restrictions from all documents in a transaction before the close of escrow. C.A.R. offered to support a procedure for electronic "scrubbing" of property records, like that currently used for removing social security numbers. C.A.R. also organized support for the approach from other real estate organizations.

AB 985 been amended to instead provide an enhanced procedure for non-owners to request the county recorder to remove an illegal restriction from the property record. The amendments also set up an expensive program to cover the costs related to the removal of the already illegal and unenforceable covenants by surcharging every recorded real estate document an additional fee to cover the costs "related to" the program. While county recorders are encouraged to periodically review and re-calculate this fee based on "reasonable" program costs, the existing bill has no limit on fees and will allow overcharging and potential diversion of the fund. C.A.R. opposes AB 985 because it does not include a numerical limitation on charges to actual program costs . Again, the bill is awaiting action by the Governor.

VII. Loan Modification Restrictions

A. SB 94 (Calderon) The bill prohibits "cash up front" loan modification contracts. Based upon the authors addition of C.A.R. requested language to clarify the definition of an advance fee, the inclusion of the flexibility to engage in fee for service contracts and a 2013 sunset date, C.A.R. supports the bill. The bill is awaiting action by the Governor.

B. AB 764 (Nava) Like SB 94, the bill prohibits any advance payment for loan modifications, but contains no flexibility to allow fee for services contracts and prohibits any compensation until the borrower is bound in a new loan. C.A.R. opposes; the bill is awaiting action by the Governor.

VIII. Point of Sale Updates

A. SB 407 (Padilla), Toilet retrofit - C.A.R. has 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. appreciates 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 disclosure forms from SB 407 in order to avoid any conflict with another bill (see SB 183) which adds C.A.R. language to the TDS.

B. SB 183 (Lowenthal), Disclosures and carbon monoxide detectors - SB 183 began as a reintroduction of SB 1386 from 2008, which 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. These dates will be put back by at least a year because the bill will not pass until 2010. 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. Finally, 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. The bill has been stalled in the assembly and is on track to pass in 2010.

C. 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, 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. This year, AB 758 does not include point-of-sale and instead ensures that any home energy audit or improvement will not unreasonably or unnecessarily affect the home purchasing process and must be cost effective. C.A.R. supports 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. The bill is awaiting action by the Governor.

D. AB 985 (De La Torre), Illegal restrictive covenants - See discussion above at IV "Unconstitutional Covenants."

IX. Department of Real Estate

A. "Poison Pill" statute changes* - Please see the included Issues Briefing Paper. The issue is whether C.A.R. should sponsor legislation to change the so-called "poison pill" statute that is designed to protect against budget raids on the operating reserve funds of the DRE.

B. Advance fee contract issues* - Please see the included Issues Briefing Paper. C.A.R was able to insert urgent clarification language in SB 94 (Calderon) to ensure that the advance fee rule (which triggers a requirement to submit the language to DRE for approval) did not apply to every listing agreement. The issue is whether C.A.R. should sponsor legislation to actually re-write the statute so that it is less confusing. SB 94 is also still awaiting action by the Governor; if it is vetoed, the question may become more acute.

C. AB 33 (Nava) consolidation into new Department of Financial Services super-agency - 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.

D. SAFE Act compliance; separately licensing loan originators - SB 36 (Calderon), AB 34 (Nava) License Endorsement. Both bills utilize a license endorsement approach to implement the S.A.F.E. Act requirements regarding real estate licensees. C.A.R. has supported both bills and both are awaiting action by the Governor.

E. LAO report "DRE: Opportunities to Improve Consumer Protection" - Update on the status of DRE response to the Legislative Analyst's Report on DRE effectiveness.

F. DRE task force review of examination questions - Update on the status of the DRE license exam revision project.

G. SB 496 (Maldonado) Barring licenses to 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. supports SB 496. The author has decided not to pursue the passage of SB 496 in 2009.

X. Formaldehyde and Proposition 65 Update - Update on the threatened action to require real estate licensees to warn prospective purchasers of the risk of formaldehyde exposure by visiting open houses.

XI. 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 255 (Anderson) Prohibiting Google Earth street views - AB 255 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 a 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. The bill has not moved, but has until January 2010 to pass the Assembly.
- AB 260 (Lieu) Higher cost loan originator restrictions - AB 260 is 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 would also 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. 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. opposed AB 260 and sought amendments that would have created a uniform standard for loan origination. In its current form, AB 260 would create unlevel playing field for loan origination by not applying to all mortgage loan "originators." The bill is awaiting action by the Governor.
- AB 329 (Feuer), SB 660 (Wolk); Reverse mortgage restrictions - These bills would both enact reverse mortgage regulation that would have adversely affected legitimate credit. In both cases the author removed objectionable provisions that would have swept up legitimate transactions and exposed transactions to new liability.
- AB 350 (Lieu), Debt payment services - The bill legitimizes bill payment services by creating a statutory regulatory scheme. C.A.R. amendments were accepted that exempt real estate licensees.
- AB 457 (Monning); Notice to owners of lien actions - Existing law requires a lien holder to notify a homeowner that they "might" record a mechanic's lien, but permits that lien holder to record the mechanic's lien itself without providing notice to the homeowner that a lien has actually been filed. AB 457 requires that proof of a Notice of Mechanic's Lien be served upon the property owner as a condition of recording a mechanic's lien with a county recorder. The bill also requires the person filing an action to foreclose upon a mechanic's lien to also record a lis pendens (notice of pendency of an action) with the county recorder within 20 days of the filing of the mechanic's lien foreclosure action. C.A.R. supported AB 457 because it requires an improved notice to property owners about their rights in regard to mechanics' liens.
- AB 919 (Nava) Mortgage information and records retention - AB 919 would have voided any residential real property transaction that did not include a rider that identified the name and license number of the appraiser, lender, loan originator, and real estate broker involved in the transaction. C.A.R. opposed AB 919 because it would have invalidated transactions with technical non-essential document defects, increased administrative burdens and created unnecessary delays in a transaction. In light of opposition, AB 919 was amended to prohibit country recorders from recording a deed of trust without a rider that includes the name and license number of the appraiser, lender, loan originator, and real estate broker involved in the transaction. C.A.R. continues to oppose AB 919 because it imposes unworkable requirements on real estate transactions and creates new liability for licensees. The bill will be eligible to move in 2010.
- AB 957 (Galgiani); "Buyer's choice" in selection of escrow - C.A.R. supports AB 957, which enacts buyer protections in California law that are modeled after the federal RESPA rules for selection of title insurance and escrow services. RESPA prohibits a lender from forcing a buyer to purchase title coverage from a particular title company. However, many complaints have come from agents in the field that the rule was being ignored, and that buyers have also been forced to purchase escrow services at inflated prices from out of area providers. C.A.R. strongly supports fair negotiation of all terms of a transaction, and has opposed earlier versions of the bill that ran afoul of that policy, and helped the author draft compromise language. AB 957 will now allow state enforcement of buyer protections, and buyers can seek a civil penalty of up to $5000 for violations. AB 957 has twice been the subject of misleading lobbying campaigns directed to REALTORS® that mischaracterized or omitted C.A.R.'s position. For example, C.A.R. opposed amendments that tried to change the rules for Natural Hazard Disclosure (NHD) reports and reduce REALOR® liability protections. The bill was eventually returned to its previous version and included evenhanded language. Local REALTORS® and C.A.R. both worked closely with the author. If AB 957 is signed by the Governor it will take affect immediately.
- AB 1118 (Hayashi); Licensing home inspectors - The bill is designed to create a regulatory scheme to license home inspectors, a concept that C.A.R. has supported in the past. The author is attempting create a consensus among home inspection providers, and has not yet moved the bill. The bill will be eligible to move in January 2010.
- AB 1160 (Fong); Translation of contract disclosures - Existing law requires parties negotiating selected contracts in a foreign language to provide translated copies of that agreement if the negotiations were conducted in Spanish, Chinese, Tagalog, Vietnamese, or Korean. This bill requires a supervised financial institution that negotiates loans in these languages to provide a translation of that contract or translated summary produced by a regulator, to the borrower in the contract's primary language. The bill would also impose civil penalties against any person who fails to deliver the translation. The bill has a delayed effective date of July 1, 2010, or 90 days after the regulators produce the required translated notices. The bill now applies only to "supervised financial institutions."
- SB 109 (Calderon); Real estate auctions - This bill will apply the consumer protections of the auction law (refunds of deposits, notices of reserve requirements) to real estate auctions. C.A.R. favors the bill, it is awaiting action by the Governor
- SB 306 (Calderon); short pay beneficiary statement request - This bill makes technical changes in the pre-foreclosure workout process required in connection with a notice of default. It sets up a process for a prospective short sale purchaser to request a short payout statement modeled after the beneficiary payout demand statement currently used in conventional sales. Compliance with the process is voluntary on the part of the lender. The bill has been chaptered into law.
- SB 318 (Calderon); Dogfighting 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 receive amendments that protect innocent landlords or owners, similar to the protections in the drug law. The bill is awaiting action by the Governor.

X. Introduction of 2010 Committee Leadership

XI. Adjournment