California has been impacted more than any other state by the housing slump and especially by the home foreclosures. In the aftermath of the housing crisis homeowners and homebuyers have been faced with a number of fraudulent mortgage practices. To combat this situation, legislation has been signed into law ensuring protection for consumers in the lending market and providing law enforcement with more tools to crack down on deceitful mortgage practices This legislation enhances California’s reverse mortgage laws by providing senior homeowners with greater consumer protections when considering reverse mortgage agreements, making it a felony to commit fraud in connection with a mortgage application and prompting responsibility and accountability in the real estate market. The following are the bills which were signed into law relative to the issue of mortgage protection: SB 36 (Calderon) establishing standardized licensing requirements for an individual loan originator who offer or negotiate residential mortgages; SB 204 (Benoit) enacting changes to the Escrow Law, relating to annual fees, audit frequency, and license surrender, and changes to the Residential Mortgage Lending Act, related to license surrender and branch office closures; SB 237 (Calderon) creating a registration program for appraisal management companies and prohibiting any person or entity from acting in the capacity of an appraisal management company without first obtaining a certificate for registration from the Office of Real Estate Appraisers; SB 239 (Pavley) creating a new alternate misdemeanor/felony for the offense of mortgage fraud and providing law enforcement with the necessary tools to make it easier to obtain a search warrant for real estate records and documents believed to contain evidence of mortgage fraud; SB 633 (Wright) creating two new exceptions to the law that prohibits persons from requiring an impound or trust account as a condition of a real property sales contract, or a mortgage or deed of trust on single-family, owner-occupied real property; AB 260 (Lieu) enacting duties, requirements and prohibitions relating to higher priced mortgage loans; AB 329 (Feuer) enacting the Reverse Mortgage Elder Protection Act of 2009 providing senior homeowners with greater consumer protections to ensure that they are fully informed about the consequences of entering into a reverse mortgage agreement; AB 957 (Galgiani) enacting the Buyer's Choice Act, to prohibit a seller of residential real property improved by four of fewer dwelling units from directly or indirectly requiring a specific title insurer or escrow agent as a condition to selling the property; and AB 1160 (Fong) requiring mortgage loan documents to be translated into Spanish, Chinese, Tagalog, Korean, and Vietnamese languages.
To help families at risk of losing their home, the Legislature passed and the Governor signed SB 7XX (Corbett) and AB 7XX (Lieu) which enacted the California Foreclosure Prevention Act by providing a 90-day foreclosure delay on owner-occupied homes where the first loan was recorded between January 1, 2003 and January 1, 2008, unless the loan is serviced by a financial institution that has a comprehensive loan modification program, as specified. The provisions of this law sunset on January 1, 2011.
As part of the February 2009 economic stimulus package, SB 15XX (Ashburn) was enacted providing a personal income tax credit for purchases of a qualifying principal residence. The purpose of the legislation was to provide an incentive for the individuals to purchase builders’ unsold stock of new homes. Specifically, the law allows taxpayers purchasing a new or previously unoccupied home between March 1, 2009 and March 1, 2010, a tax credit in the amount of the lesser of 5% of the purchase price or $10,000, spread over the three tax years following the taxable year in which the home was purchased. A taxpayer may only receive one tax credit, and the home must be purchased to be the principal residence for the taxpayer, and eligible for the homeowners' exemption from property tax. It allocates up to $100 million in tax credits to be allocated on a first-come, first-served basis by the Franchise Tax Board (FTB), and provides procedures for FTB to ensure efficient credit allocation and regulatory authority to implement the bill. The law sunsets on December 1, 2013. This program became immensely popular that within four month of the effective date of the credit, FTB received 11,925 applications representing an excess of $100 million in tax credits available for new home purchases. Even though FTB awarded the full amount allowable, many taxpayers will not have sufficient tax liability over the three-year claim period to offset the entire credit amount.
On October 14, 2009, the Senate passed SB 37XXX (Ashburn) which would have expanded usage of the credit by reducing the total amount of tax credit available for allocations by 70%, thereby allowing $30 million to be allocated to additional applicants. However, the Legislature recessed for the year before the Assembly took action on the bill and the Legislature adjourned the Third Extraordinary Session. On the federal level, the Congress passed and the President signed an extension to a similar federal law. Also in housing, California was awarded $42.7 million in American Recovery and Reinvestment Act funding from the federal Homeless Prevention Rapid-housing Program to be given to 31 agencies and local governments. The funding is federally designated to provide short and medium-term rental assistance to individuals and families who are currently in housing but at risk of becoming homeless, and to individuals and families who are homeless. The state also was awarded more than $68 million in American Recovery and Reinvestment Act (Recovery Act) weatherization funding to non-profit, local government and community action agencies throughout the state. This funding is federally designated to help low-income families weatherize their homes, which decreases utility bills and saves energy while stimulating local economies. Administered by the State Department of Community Services and Development, California ’s low-income Recovery Act weatherization program was one of the first 15 state plans federally approved by the United States Department of Energy (DOE). After demonstrating successful implementation of this phase of the weatherization program, California will receive an additional federal award of over $92 million, for a total of more than $185 million.
Other successful housing legislation included SB 23 (Padilla) requiring the owners of a mobile home park or a special occupancy park to adopt and post an emergency preparedness plan; SB 94 (Calderon) prohibiting persons from charging advance fees to borrowers in connection with a loan modification, and requires those who wish to charge a fee for loan modification services to provide a notice to borrowers regarding other options available to the borrower; SB 224 (Correa) clarifying that CalHome funds may be used for the rehabilitation of mobilehomes and accessory structures to meet new state building code requirements to install fire resistant exteriors in specified circumstances; SB 290 (Leno) deleting the sunset date on the law requiring a landlord to provide a 60-day prior notice to terminate a residential tenancy if the tenant has resided in the unit for a year or more, thereby extending the required 60-day notice requirement indefinitely; SB 407 (Padilla) requiring the replacement of all non-water conserving plumbing fixtures, as defined, in commercial and residential properties built prior to 1994 with water-conserving fixtures by either 2017 or 2019, depending on the type of property; SB 804 (Leno) prohibiting the management of a mobilehome park from requiring a homeowner to use a specific broker, dealer, or other person as an agent in the purchase or installation of a replacement home; AB 494 (Caballero) exempting, from the Subdivision Map Act, the lease of agricultural land to nonprofit organizations for the purpose of operating an agricultural labor housing project, if the property meets certain conditions; AB 767 (Ammiano) extending the set-aside of Proposition 1C funds for the Homeless Youth and Building Equity and Growth in Neighborhoods Programs by two years; AB 899 (Torres) creating an index of disclosures required of common interest developments; AB 927 (Calderon) extending for seven years the existing sunset on the special pre-litigation procedures applicable to construction defect disputes regarding common interest developments; AB 957 (Galgiani) prohibiting a seller of residential real property from requiring a buyer to purchase title insurance or escrow services, in connection with the sale of a property, from a company chosen by the seller, as specified; AB 1246 (Jones) revising the definition of "limited-equity housing cooperative" to include "workforce housing cooperative trust," defines and establishes "workforce housing cooperative trust," and establishes a process for both to dissolve; AB 1330 (Salas) authorizing the Department of Veterans Affairs to establish a pilot project for the purpose of operating a cooperative housing project, in which the department would prescribe the rules, regulations, and conditions necessary to implement the pilot project; and AB 1459 (Davis) allowing housing developers receiving funding under the Department of Housing and Community Development’s Supportive Housing Program to restrict occupancy based on veteran status, as specified.
Vetoed housing legislation included SB 109 (Calderon) which would have revised the definition of "auction" to include real estate sales, revises notification requirements, and requires the return of deposits and fees within certain timeframes, as specified; AB 473 (Blumenfield) which would have required an owner of a multifamily dwelling that consists of five or more living units, to arrange for recycling services that are appropriate for the multifamily dwelling; AB 566 (Nava) which would have allowed a local government to consider the level of support among current residents when deciding whether to approve or disapprove the conversion of a rental mobilehome park to resident ownership; AB 764 (Nava) which would have prohibited any person who performs loan modification services to claim, charge, receive, or collect a fee paid for by the borrower for loan modification agreements until the terms of the loan have been modified; AB 828 (Lieu) which would have required the California Building Standards Commission or any state agency proposing green building standards to seek the input of specified state agencies and other organizations, as prescribed; and AB 985 (De La Torre) which would have allowed a title insurance company, escrow company, real estate broker, real estate agent, or other person to record a Restrictive Covenant Modification, and requires the county recorder to notify the owner of the property of the request.