Federal Guidelines on Specialty Mortgages

The Federal Reserve Board, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency and Office of Thrift Supervision issued the proposed guidelines on non-traditional mortgages, such as interest-only mortgage loans where borrowers pay no principal for the first few years of the loan and payment-option adjustable-rate mortgages where borrowers are given flexible payment options, including the potential for negative amortization.

While the agencies recognize that innovative mortgage products can benefit some consumers, they are concerned that non-traditional mortgages are being offered to sub-prime and other borrowers who may not fully understand the risks that come with these products. The five federal agencies also expressed concerns that these mortgage products present important risks that must be managed. During the public comment period, NAR will carefully assess the proposed guidelines to determine whether they are so strict that they could unduly restrict the availability of non-traditional mortgages that are good options for some borrowers, especially in high-cost areas.

REALTORS® share the agencies’ concerns about the need for consumer education. NAR teamed with the Center for Responsible Lending last summer to issue a brochure that informs homebuyers about the risks and advantages of specialty mortgage products. The “Shopping for a Mortgage? Do Your Homework First” brochure, which is available at www.realtor.org and www.realtor.com, is part of a NAR’s consumer education campaign addressing specialty loans and abusive lending practices.

FHA Loan Limit Increase - The Department of Housing and Urban Development made it official last week, raising the limit on government-insured mortgages in 2006 to $362,790 in 27 high-cost counties in California. The 2005 maximum was $312,895.

Fannie Mae/Freddie Mac Increase - $417,000 is the new limit on Freddie Mac loans, which are reserved for only those borrowers who have the best credit profiles and represent the least risk to lenders. In most of the country's 3,000-plus jurisdictions, 95% of the median house price is less than 48% of the Freddie Mac limit, so the new FHA figure — known as the "floor" — is $200,160. In 2005, the floor was $172,632.
 
STATE:

New Laws for 2006

Cellphones — Starting July 1, customers can return cellphones to retailers for recycling, reuse or proper disposal. (AB 2901 from 2004 by Assemblywoman Fran Pavley, D-Agoura Hills)

Domestic partners — Allows registered domestic partners to transfer property from one to the other without triggering a reassessment that could increase property taxes. (SB 565 by Sen. Carole Migden, D-San Francisco)

Elder Financial Abuse-  All officers and employees of certain financial institutions are required to report suspected financial abuse of seniors.

Fair Employment and Housing Act Violations - AB 1669 extends the one-year statute of limitations for filing a claim for violation of the California Fair Employment and Housing act ("FEHA") with the Department of Fair Employment and Housing ("DFEH") if the violation was committed when the employee was under the age of 18.  Under the new law, the statute of limitations for such a complaint will be one year after the employee's 18th birthday

Homeowners associations — Requires the state's more than 41,000 homeowners associations, which collect maintenance fees from residents in many condominium, mobile home and gated subdivision developments, to use secret ballots for elections, starting in July. (SB 61 by Sen. Jim Battin, R-La Quinta) Bans such associations from foreclosing on a home for unpaid assessments of less than $1,800 or 12 months' delinquency. (SB 137 by Sen. Denise Ducheny, D-San Diego) Requires the associations to make accounting records and minutes of proceedings available to members. (AB 1098 by Assemblyman Dave Jones, D-Sacramento)

Junk faxes — Outlaws the sending of unsolicited advertising faxes to or from a California fax machine. Violators can be sued for at least $500 per "junk" fax. The law was set to take effect today, but a federal judge has suspended it for a month while he hears a lawsuit brought by business interests. (SB 833 by Sen. Debra Bowen, D-Marina del Rey).

Megans Law - The Data Base Disclosure has been revised to reference the new Megan's Law Website which provides online information about registered sex offenders.  For the time being, you may use either the existing or revised disclosure language.  However, starting April 1, 2006, the revised disclosure language will be mandatory for residential sellers up to four units, as well as for residential landlords.  C.A.R. will be updating its standard-form Data Base Disclosure (DBD) and its purchase and lease agreements to reflect this change in the law.  The updated forms are expected to be release in January 2006.  Source: Assembly Bill 1323.

Methamphetamine Contaminated Properties - Starting January 1, 2006 a property owner must disclose in writing to a prospective buyer or tenant if local health officials have issued an order prohibiting the use or occupancy of a property contaminated by meth lab activity.  The owner must also give a copy of the pending order to the buyer or tenant to acknowledge receipt in writing.  Failure to comply with these requirements may subject an owner to, among other things, a civil penalty up to $5,000.  Aside from disclosure requirements may subject an owner to, this new law also sets forth procedures for local authorities to deal with meth-contaminated properties, including the filing of a lien against a property unitl the owner cleans up the contamination or pays for the cleanup costs.  Source: Assembly Bill 1078.

Notice to Terminate Tenancy – Starting January 1, 2006, landlords may give a 30-day notice to terminate their month-to-month tenants (unless rent control or subsidized housing rules apply).  Existing law requiring a 60 day notice of termination under certain circumstances will sunset at the end of this year.  C.A.R. will soon release a revised standard-form Notice of Termination of Tenancy (NTT) to reflect this change in the law.  Source: Senate Bill 51 defeated.

Sexual harassment — Requires employers of 50 or more workers to train supervisors about sexual harassment rules at least once every two years. State agencies also must provide training. (AB 1825 of 2004 by former Assemblywoman Sarah Reyes, D-Fresno).

Small Claims Court - Starting January 1, 2006, the maximum monetary claim an individual person may bring into small claims court has been increased from $5,000 to $7,500.  Legal entities other than natural persons (e.g., corporations, partnerships, or governmental entities) do not qualify for this jurisdictional increase.  Source: Assembly Bill 1459 and Senate Bill 422.

Supplemental Property Tax Disclosure - Although change of ownership triggers reassessment of property taxes, buyers may not realize that they may have to pay supplemental tax bills.  Hence, starting January 1, 2006, sellers of most residential properties up to four units, or their agents, must disclose to prospective buyers that hey may owe supplemental taxes.  C.A.R. will soon release a new standard form titled Notice of Your Supplemental Property Tax Bill (SPT) to satisfy this requirement.  Source: Assembly Bill 459.

Thermostats — Bans the sale or distribution of certain types of mercury thermostats used in heating and air-conditioning equipment. Mercury is linked to developmental problems in people and wildlife. (AB 1369 from 2004 by Assemblywoman Fran Pavley, D-Agoura Hills) Bans the sale or distribution of products with mercury-containing switches, relays and measuring devices starting July 1, with certain exceptions. (AB 1415 by Pavley)

Workplace Violence Safety Act - AB 429 adds to the requirements under the Workplace Violence Safety Act, which generally provides a means for employers to seek a temporary restraining order or injunction against anyone who poses a threat to the workplace, such as a disgruntled former employee or client, or the spouse of an employee who is a victim of domestic violence.  A workplace protective order protects not only the victim of the threat or violence, but also the victim's co-workers.  Under current law, after the protective order is obtained, the employer must serve the order on the perpetrator to ensure he or she has notice and therefore is subject to enforcement for violations of the order.  Workplace protective orders often are difficult for employers to serve, as the location of the perpetrator can be difficult to ascertain.  AB 429 is intended to make the process easier.  The new law requires law enforcement officers responding to the scene of reported unlawful violence or a credible threat of violence to provide the perpetrator with verbal notice of the protective order.

Congratulations to:

Assemblymember Bill Emmerson – R- Rancho Cucamonga for being named “Outstanding Assemblymember for 2005” by the California State Sheriff’s Association. 

LOCAL: 

Claremont: The Council has adopted an ordinance which prohibits transients from seeking shelter on city streets, building shelters and leaving belongings in public areas, and sleeping in the open during the daytime.  The Council has requested a full report assessing the impact of the ordinance in six months to determine whether the ordinance has been successful.  The Council is also seeking a financial mechanism to acquire Johnson’s Pasture, the 186-acre hillside north of Claraboya.  City staff will prepare a resolution to place parcel tax measure on the ballot in April to purchase the pasture.  Staff will also prepare a contract proposal to commission a park and recreation assessment engineer’s report with MuniFinancial.  The report will examine potential benefits property owners would like to receive through public park improvements projects, such as the pasture acquisition.  The city estimates the report may take at least three months to complete. 

Irwindale:  City officials are set to pay $2.3 million for a 2.52 acre plot at 15744 E. Arrow Highway, the former site of Shannon Casket Co.  The parcel is the last vacant site in the downtown civic center area.  Officials are working with Grubb and Ellis to determine potential commercial/retail uses for the site. 

La  Verne: The City has re-established the Old Town La Verne Parking Commission.  The decision came as an effort to alleviate concerns from merchants about the lack of parking.  Local merchants cited concerns that the 2 hour parking restrictions from 7:00 am-8:00 pm were not being observed.  City officials said that stricter enforcement will begin through increased patrols. 

Ontario:  The City Council unanimously voted to give council members a 25% raise.  Effective after the 2006 election, council members will be paid $1,406.25 per month.  The Mayor will receive $1,791.25.  An increase for the City Clerk and Treasurer was also approved increasing the pay from $745 to $931.25 monthly.  The 25% increase is the maximum permitted under state law. 

Pomona:                The Council agreed to enter into development agreements with two separate firms, leading up to the construction of multistory structures in the downtown area.  The retail space and for-sale housing along Mission Blvd are expected to increase property values in the city.  The three floor development is proposed to have ground floor retail and restaurant space along with 80-85 for-sale condominium units above.  A small number of units will be made available to moderate income buyers for 45 years.