REAL ESTATE LEGISLATION Category
Know An FHA Borrower Struggling With Mortgage Payments?
FHA LOANS, REAL ESTATE LEGISLATION, TIPS FOR SELLERS
President Obama signed into law a program to assist FHA borrowers experiencing financial hardship before they fall behind in payments. The Helping Families Save Their Home ACT of 2009 grants FHA broader authority to hopefully prevent FHA borrowers from slipping into foreclosure. Prior to this law taking effect, borrowers had to be behind in payments before seeking loss mitigation assistance. Late payments usually cause an immediate drop in credit scores which then can trigger credit card issuers to raise interest rates.
FHA sees this new program as a win-win for borrowers who get to keep their home and FHA protects their insurance fund from unnecessary losses. Here are some additional details:
- A borrower considered “facing imminent default” is one that is current on payments or less than 30 days late but has experienced a significant reduction in income or some other hardship that will prevent making future payments in a timely fashion
- Allows for a forbearance agreement to be created that allows the loan servicer to postpone, reduce or suspend payments due on a loan for a specific amount of time
- Allows qualified borrowers to reduce their payments permanently through an interest rate reduction or loan reamortization to an affordable level by using a portion of their insurance with a loan modification. Principal deferred becomes an interest free subordinate loan which is repaid once the first loan is paid off
The hardship must be documented by the borrower to the loan servicers satisfaction. The cause of hardship may include one or more of the following:
- Unemployment, reduced job hours, reduced pay, or a decline in business for self-employed would all be considered as reasons for loan modification. A scheduled temporary shutdown of the employer would not be reason enough to qualify for a loan modification
- Death in the family, permanent or short term disability or serious illness qualify as hardships
The loan servicer makes the final decision. If you know someone struggling to make house payments, ask them if they have an FHA loan. If so, direct them to HUD’s website or contact me for further information.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Fine Points Of Homebuyer Tax Credit Discussed
INDUSTRY NEWS, REAL ESTATE LEGISLATION, TIPS FOR BUYERS, TIPS FOR SELLERS
An enrolled agent from Southern California once again spoke with local Realtors about the extension and expansion of the federal tax credit for homebuyers. Earl M. Salter, said this tax free credit not only applies to first-time buyers but homeowners who have owned and lived in their personal residence for 5 consecutive years during the last 8 years (Long-time Residents). First-time buyers and long-time homeowners must have a home under contract by June 1, 2010 and close escrow before August.
Additionally, the new law raises the income limits (Adjusted Gross Income or AGI) from $125,000 to $145,000 and for married couples filing jointly from $225,000 to $245,000. To qualify for the tax credit, long-time residents can buy the replacement property now and sell their current principal residence or keep it as a rental property. The credit is up to $8,000 for first-time buyers and $6,500 for married long-time residents or $3,250 for married filing separately.
Other important details include having to repay the credit if you sell within 3 years. The tax credit can be used immediately for closing costs if the loan is a government-backed loan such as FHA. Otherwise, the buyer can wait until filing their 2009 tax return for the credit. Ammending the 2008 return is another option but due to processing time, Earl said it’s better to wait and file for the credit with the 2009 return.
The bill, H.R. 3548, is called the Workers Homeownership and Business Assistance Act of 2009. More details of the bill will be released once the technical details are worked out and published by the federal government.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
California Real Estate Law Changes Highlighted
INDUSTRY NEWS, REAL ESTATE LEGISLATION, TIPS FOR BUYERS, TIPS FOR SELLERS
The first half of the 2-year legislative session is in the books and here is a summary of new laws that impact those
involved with real estate transactions:
- Buyers of REO’s (foreclosures) can choose the escrow or title company. Prior to October 11, 2009 REO lenders routinely dictated where the escrow would be handled. Breaking this new law can result in a fine equal to triple the charges the buyer incurred and if the real estate agent insisted on a particular company he or she shall be subject to disciplinary action against their real estate license. This law expires January 1, 2015.
- Agents or attorneys can no longer charge any upfront fees for loan modification services. The Department of Real Estate and State Bar Association have received numerous complaints from borrowers that have paid for assistance and received little if any help. This law is an attempt to put scam artists out of business. This law sunsets January 1, 2013.
- Real estate agents that originate mortgage loans must obtain a license endorsement beginning December 2010. To obtain an endorsement, agents must complete education, testing and reporting requirements.
- Mortgage Broker Activities redefined-Starting January 1, 2010, mortgage brokers will be deemed a fiduciary meaning they must put the interest of their client’s economic interest above their own. Real estate agents have had this fiduciary requirement for decades, now mortgage brokers will have the same duty.
- Appraisal Industry Oversight-The Home Valuation Code of Conduct (HVCC) prompted the requirement that someone oversee the appraisal management companies that have sprung up this year in response to this new code. The Office of Real Estate Appraisers will have regulatory oversight including registration, fingerprinting, and background checks. This law also better defines what conduct constitutes improper influence of the appraiser including threats to withhold compensation or deny future business or promise future referrals if the appraiser does what is asked.
- Mortgage fraud is now a state crime under California law. Violators are subject to 1-year prison term. Federal law adds a $1 million fine. Fraud is defined as making a material misrepresentation or omission during the loan process.
- Increase in Homestead Exemptions- Beginning in 2010, judgement creditors will be faced with additional protection of home owner’s equity to the tune of $75,000 for individuals and $100,000 for married couples and $175,000 for persons over 75 years of age. Homeowners must formerly file a Homestead Declaration to protect their equity from creditors.
- Landlords must give 60-day notice to terminate a month-to-month tenancy with a term greater than one year. 30-day notice will suffice for tenants that have rented for less than one year. The law was scheduled to sunset January 1,2010 but has been extended indefinitely.
Other new laws impact tenants of properties where the landlord has past due utility accounts, who can sell a mobile home in a park, swimming pool anti-entrapment devices, Mechanic’s Lien laws, low water-using plants, reverse mortgages, disposal of abandoned records that include personal information and plumbing fixture retrofits. Call me if you have any questions on these new laws.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Upfront Loan Mod Fees Banned
INDUSTRY NEWS, REAL ESTATE LEGISLATION
Governor Schwarzenegger signed SB 94 into law a couple days ago which, among other things, prohibits anyone from taking an advance fee for promised loan modification services. Prior to this bill’s enactment, attorneys and some real estate agents could charge borrowers an upfront fee typically ranging from several hundred dollars to several thousand dollars for promised loan modification services.
The problem that unfolded when these individuals or companies offering assistance to distressed borrowers would collect a fee and do little or nothing leaving the client in a deeper financial hole than before. Rather than hire someone to negotiate a loan modification, borrowers should work directly with their lender to seek a rewrite of their loan terms. The modification typically involves converting an adjustable rate loan to a fixed rate, reducing the interest rate and/or extending the term which lowers the monthly payment. Borrowers should seek a reduction in principal if the property is worth less than what is owed. More lenders are willing to consider a reduction in principal in light of the fact many loan modifications are failing because borrowers still can not afford the revised payment.
In the event borrowers need assistance with a loan modification, they should seek out non-profit credit counselors or governement organizations set up to assist homeowners. HOPE NOW is one such organization. The bank bail out package includes incentives for lenders assisting borrowers seeking loan modifications. Now that banks have shored up their balance sheets, they should be more cooperative with borrowers seeking loan modifications involving loan balance reductions.
Call law enforcement if anyone asks for a fee upfront to assist you in a loan modification. The Department of Real estate is currently investigating more than 1300 complaints regarding loan modification fraud. Don’t pay anyone anything, it’s the law!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Short Sellers Dealt A Blow
HOME LOANS, REAL ESTATE LEGISLATION
Senate Bill 306 will not require lenders to review or respond to short sale requests from sellers and their agents. This bill was allegedly mischaracterized by practitioners as much needed legislation requiring a 21-day turnaround for short sales approvals. This bill actually requires lenders to respond within 21 days with a payoff demand when requested.
What this law really does is require lenders to provide the loan payoff within 21 days on an approved short sale. My experience has been lenders ususally provide the demand within a day or two of short sale approval. Apparently there was no law specifying when a payoff must be provided. Non-short sale lenders are required to provide a payoff to an escrow company within 21 days of a request. This law extends that to short sales.
Practitioners such as myself would love a law requiring mortgage holders respond within a 3-week time period. Currently, 3 weeks is the quickest one can expect a bank to respond but 3 months is the more likely time frame. I’ve been told that asset management companies that handle negotiations on short sales for the bank are paid by the hour, so it is in their best interest to prolong the process to enhance their profits. Others speculate that banks may benefit more by foreclosing and writing off the loss than working in good faith with homeowners underwater on their mortgage.
Another provision of this bill allows escrow companies to close escrow even if the bank has not approved the final closing statement (Hud-1) as long as it is “not clearly contrary to the terms of a short sale agreement.” Typically, banks provide a payoff demand that signifies the short sale approval and a specified amount of time to close the transaction. The escrow holder is required to submit a closing statement a few days before closing for bank approval. Some banks apparently are slow to return the approved HUD-1 delaying the closing even if the net proceeds to the bank are in agreement with the original estimated closing statement. The new law takes effect January 1, 2010.
530-224-6767 or 530-941-7492
Not Sure You Are A First Time Homebuyer?
REAL ESTATE LEGISLATION, TIPS FOR BUYERS
Just Do It ..Now
Of course if you’ve never owned a home the answer is obvious …yes you are…
Haven’t owned a home in 3 years? ….yes you are
Renting with a good income? …yes you should …
In reality there is less than a week to be able to grab onto the Federal Credit….has to close escrow by Nov 30th to qualify …not be in escrow
Don’t wait too long ….
Coastal Commission Bills Squashed
The California Coastal Commission had two bills pending that would have greatly expanded their powers over development including projects far from the coastal environment. The California Association of Realtors (CAR) have fought these bills and won, for now.
AB 226 proposed to expand the Coastal Commission’s authority to levy its own civil penalties instead of pursuing fines and penalties through courts. This bill, according to our lobbyists, “would give the Commission the power to be judge, jury and executioner” avoiding the due process allowed by existing laws. The bill failed passage in this first year of a two-year legislative session.
AB 291 would have allowed the Coastal Commission to halt permit application processing for “violations that have no relationship between the application and the existing violation on the parcel in question”. Both bills have been placed by their authors in the “inactive file” but can be revived next year.
Other bills which CAR opposed include:
- AB 827-a bill that would have allowed county recorders to charge a $3 per property-related document to fund archival services. What this bill really does is open the door for bill sponsors to circumvent local voters by calling this a fee instead of what it really is-a new tax. Without opposition, this could develop into a trend to tax property-related services to secure funding for a wide range of local government expenditures.
- SB 407-a point-of-sale mandate that would have required sellers retrofit their property with low-flush toilets, shower heads and faucets. The bill was amended dropping the point-of-sale mandate. CAR removed its opposition and the bill passed and now sits on the governor’s desk awaiting signature. The bill now would apply to all properties in California-requiring water saving retrofits by 2017.
- AB 758-another point-of-sale mandate requiring energy audits of all property being sold. The bill was amended “ensuring home energy audits or improvements will not adversely affect real property transactions and offers programs for cost-effective energy efficiency improvements for existing buildings”.
- SB 183-Yet another point-of-sale retrofit bill requiring installation of carbon monoxide detectors. The bill has been amended eliminating the point-of-sale requirement, delaying the deadline for implementation and adding language to the Transfer Disclosure statement regarding these safety devices. A final vote on this bill will take place when legislators reconvene in January.
Nearly a decade ago the Coastal Commission pushed a ballot initiative that in part required the state to adopt statewide septic regulations. Those regulations met stiff opposition during public forums held across the state in recent months. The regulations are under review and time will tell what the final regulations will require.
Realtors are now focused on lobbying for the continuation and expansionof the federal Homebuyer Tax Credit which is scheduled to expire at the end of November.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Some Landlords Confused By New Lease Termination Rules
INDUSTRY NEWS, REAL ESTATE LEGISLATION, REAL ESTATE PRACTICE, TIPS FOR SELLERS
Owners of rental property must be familiar with notice requirements when terminating a lease. A new federal law, aimed at protecting tenants occupying properties that were foreclosed upon, requires 90-day notice prior to eviction. Only “bona fide” tenants on a month-to-month tenancy are protected by this law.
Otherwise, tenants on a month-to-month rental agreement living in a property not in foreclosure are only entitled to a 30-day notice. Those with a 1-year or longer lease must be given a 60-day notice. Landlords renting to Section 8 recipients must give a 90-day notice regardless of the length of tenancy.
The law contained within the Protecting Tenants at Foreclosure Act of 2009 became effective May 20 and expires in 2012. The definition of a “bona fide” tenancy excludes the mortgagor and family members of the debtor. Furthermore, the tenancy must be an arm’s-length transaction and the amount of rent must be close to fair market rates. Finally, the rent being paid by the tenant must not be reduced or subsidized due to a federal, state, or local program.
I recommend my clients contact a legal professional that specializes in real estate to handle any evictions or lease terminations if the tenant may be uncooperative. Failure to follow the letter of the law in an effort to vacate a rental property could require the process be started anew-costing you time and money.
Contact me if I can be of help!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Practitioners Must Adjust To New Appraisal Rules
HOME LOANS, INDUSTRY NEWS, REAL ESTATE LEGISLATION, TIPS FOR BUYERS, TIPS FOR SELLERS
Although not required by law, lenders hoping to sell mortgage loans to Fannie Mae or Freddie Mac must follow the recently implemented HVCC (Home Valuation Code of Conduct) rules. These rules are intended to “insulate the appraisal process from undue influences by placing tight controls and restrictions on the ordering of the appraiser, as well as guidelines for communicating with the appraiser during the process” according to a recent article in California Real Estate.
Impacts of these rules, which began May 1, include the following as reported by active Realtors:
- A significant increase in the cost of appraisals. The author refers to the cost increase as “inexplicable” but I’m guessing the extra cost, $100-$150, is going to the appraisal management company
- Values have differed significantly from “perceived” market values. In other words, appraisals are coming in above or below the price agreed upon by buyer and seller. I define fair market value as a knowledgeable buyer and seller agreeing on a specific price and terms at a certain point in time.
- An increase in factual errors in appraisal reports is alledged by those in the field
- Time delays in completion of appraisals from several days to several weeks
- Appraisers, which are assigned appraisal jobs through newly-formed appraisal management companies, sometimes are recruited from more than 40 miles away from the subject property.
Suggestions for lenders, buyers, sellers, and agents include the following:
- Allow more time in the purchase agreement for removing the appraisal contingency. Change the 17-day period that is standard to the appropriate time frame needed by the lender
- Ask the appraiser assigned to perform the appraisal a series of questions before an appointment is set to enter the property. How long have they appraised homes in this area, how many appraisals they do daily and what data sources they use? Don’t be afraid to send the appraiser down the road and ask for a new one if you’re uncomfortable with their answers.
- Assuming the appraiser has passed the test, supply the appraiser with comps understanding the appraiser may refuse, reject or ignore them. The rules do not prohibit such exchange of information as long as the appraiser independently verifies the accuracy of the information. One option suggested is to black out the sales price on the comps given to the appraiser so at least you have alerted the appraiser to potential comparable he or she may otherwise miss.
- Complain to Congress requesting the Independent Valuation Protection Institute (IVPI) as envisioned in the legislation be formed. This is the only way complaints about the code can be heard. The IVPI was suppose to have a hotline and e-mail address for reporting problems that have arisen because of the code.
California Realtors are encouraged to contact their state representative in support of H.R. 3044, a bill that would place an 18-month moratorium on the HVCC.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
California Voters Approve Higher Property Taxes
With all the complaining about being taxed to death, August elections saw voters approve property tax hikes in several California locales. The California Taxpayers’ Association reported tax measures in four different counties all passed despite the fact a 2/3rds majority “yes” vote is required for passage.
Here are the results:
- Residents of Pleasant Hill in Contra Costa County approved a $28 million bond primarily for a community center and senior center. Measure E won with 75.7% of the vote.
- Homestead Valley in Marin County narrowly passed a $125/parcel tax for community center improvements. 46% of registered voters turned out with 531 for and 254 against. Had 10 voters voted no, the measure would have failed.
- In Placer County, Rocklin approved a 10-year extension of a parcel tax earmarked for parks. It passed with a whopping 82.7% of the vote in a vote-by-mail election that saw a 45% turnout. The tax amounts to $10 for mobile homes, $20 for apartments and condos and $30 for single-family homes.
- Carmel Valley in Monterey County gave the nod to a $7.50/service unit tax increase or roughly $75/dwelling to support the Carmel Valley Fire District. Again, 85.5% of the voters approved the measure where 34% of voters participated in the vote-by-mail election.
I doubt the conservative majority here in Shasta County would approve tax hikes like those passed in these more liberal counties. Based on comments I’ve read at Redding.com, few think our tax dollars are being spent wisely or efficiently. Locally, school bond measures barely squeak through if we’re lucky!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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