December 2009 LW

Before April 1, 2010, and continuing every three years, the dollar amount of homestead exemptions may be increased by the California Legislature, based on a change in the California Consumer Price Index for All Urban Consumers.

Editor’s Note — first Tuesday’s Form 465, the Declaration of Homestead, contains all the provisions required to record a declared homestead.

Restrictions on reverse mortgage loan originations: The Reverse Mortgage Elder Protection Act

Civil Code §1923.2
Amended by A.B. 329:
Effective: January 1, 2010

A party involved in the origination of a reverse mortgage may not:

require an applicant to purchase an annuity;
be associated with other financial or insurance institutions, unless the lender insures there is no incentive to provide an applicant with any financial or insurance product; or
refer an applicant to any financial institution for the purchase of any financial or insurance product prior to closing the reverse mortgage loan.

Lenders are not restricted from referring borrowers for title insurance, hazard, flood or other insurance customary in a loan transaction.

A lender must supply an applicant with a list of at least ten Housing and Urban Development (HUD) approved mortgage counseling agencies. The agencies cannot receive any sort of compensation from:

the lender;
any parties involved in the origination of the reverse mortgage;
any parties involved in the sale of annuities, investments or long-term care insurance; or
any parties involved in the sale of any other financial or insurance product.

Lenders are not restricted from providing charitable contributions to mortgage counseling agencies.

Reverse mortgage disclosures

Civil Code §1923.2
Amended by A.B. 329:
Effective: January 1, 2010

Prior to receiving mortgage counseling, an applicant must be given a notice which must include the following in no less than 16-point type:

SENIOR CITIZEN ADVOCACY GROUPS ADVISE AGAINST USING THE PROCEEDS OF A REVERSE MORTGAGE TO PURCHASE AN ANNUITY OR RELATED FINANCIAL PRODUCTS. IF YOU ARE CONSIDERING USING YOUR PROCEEDS FOR THIS PURPOSE, YOU SHOULD DISCUSS THE FINANCIAL IMPLICATIONS OF DOING SO WITH YOUR COUNSELOR AND FAMILY MEMBERS.

Prior to receiving mortgage counseling, an applicant must be given a checklist of items alerting the applicant of topics to be discussed with the mortgage counseling agency. These topics include:

how unexpected medical problems which force the applicant to move out of his home for more than one year will impact the cost of the mortgage;
the potential benefits of other financial options such as less costly home equity lines of credit, property tax deferral programs or government aid;
the consequences of using proceeds from the reverse mortgage to purchase an annuity or other insurance products;
the potential responsibility of other residents of the home for the loan after the borrower has died, or left the home;
whether the homeowner has the ability to finance standard or drastic home repairs, especially if maintenance is a determining factor in the beginning of mortgage payments;
how a reverse mortgage will impact the applicant’s future tax obligations, eligibility for government aid and the impact of lost equity on the applicant’s estate and heirs; and
the ability of the applicant to finance assisted living or nursing once the applicant’s equity is depleted.

If the counseling is done in person the checklist must be signed by a mortgage counselor and returned to the lender along with a certificate of mortgage counseling, with a copy returned to the applicant. The application cannot be approved until the checklist has been provided to the borrower.

Legislative Watches reported by Anthony Renaud

Mortgage fraud defined

Penal Code § 532f (a)
Added by S.B. 239
Effective: January 1, 2010

A person is guilty of mortgage fraud if he misstates, misrepresents or omits any information in order to:

deceive a mortgage lender, borrower or any party to the mortgage lending process;
originate a mortgage loan;
benefit financially or otherwise from a mortgage loan; or
file any document with a county recorder in connection with a fraudulent mortgage loan.

Other mortgage fraud

Penal Code § 532f (b)
Added by S.B. 239
Effective: January 1, 2010

A charge of mortgage fraud is not based solely on information disclosed under federal disclosure laws, regulations or interpretations related to the mortgage lending process.

Obtaining records to prove mortgage fraud

Penal Code § 532f (c)
Added by S.B. 239
Effective: January 1, 2010

Copies of any records evidencing mortgage fraud may be obtained through a judicial court order. The person requesting such records must:

state under penalty of perjury the records sought are evidence in an ongoing investigation of mortgage fraud; and
specify which records are sought and how they relate to the person suspected of mortgage fraud.

Records that may be requested when investigating mortgage fraud may include:

purchase contracts;
loan applications;
settlement statements;
closing statements;
escrow instructions;
payoff demands;
disbursement reports; or
checks.

Any records required for the investigation must be provided by the real estate broker, title insurer or lender in a timely manner.

Notification of mortgage fraud suspects

Penal Code § 532f (d)
Added by S.B. 239
Effective: January 1, 2010

A judge may order the real estate broker, title insurer or lender to withhold notification from any person being investigated for mortgage fraud that his records have been requested in connection with a mortgage fraud investigation.

If a real estate broker, title insurer or lender is ordered to withhold notification of a request for records, law enforcement must notify the person being investigated within 10 days after the close of the investigation.

The role of brokers, title insurers and lenders in mortgage fraud detection

Penal Code § 532f (e)
Added by S.B. 239
Effective: January 1, 2010

A real estate broker, title insurer or lender may:

voluntarily disclose evidence to law enforcement;
initiate contact with law enforcement; or
communicate with or disclose records to law enforcement concerning a suspected violation of any law.

Brokers, title insurers and lenders are held harmless

Penal Code § 532f (f)
Added by S.B. 239
Effective: January 1, 2010

No real estate broker, title insurer or lender may be held liable for:

disclosing court-requested information in a mortgage fraud investigation; or
complying with a court order to withhold notification of a person his records have been requested as part of a mortgage fraud investigation.

Method for producing requested records

Penal Code § 532f (g)
Added by S.B. 239
Effective: January 1, 2010

Records requested in a mortgage fraud investigation must be accompanied by an affidavit made by the real estate broker, title insurer or lender, stating:

the records were produced by the real estate broker, title insurer or lender;
the identity of the records;
a description of the methods used in reproducing the records;
which business produced the records and at what time they were originated; and
that all records are accurate copies.

Punishment for mortgage fraud

Penal Code § 532f (h)
Added by S.B. 239
Effective: January 1, 2010

Mortgage fraud is a felony and punishable by imprisonment for not more than one year.

Noncompliant plumbing fixtures defined
Civil Code § 1101.3
Added by S.B. 407
Effective: Jan 1, 2010

A noncompliant plumbing fixture is defined as any of the following:

any toilet using more than 1.6 gallons per flush;
any urinal using more than one gallon per flush;
any showerhead that emitting more than 2.5 gallons per minute; or
any interior faucet emitting more than 2.2 gallons of water per minute.

Owners of existing SFRs must replace noncompliant water fixtures by 2017

Civil Code § 1101.4
Added by S.B. 407
Effective: Jan 1, 2017

An owner of a single family residence (SFR) built on or before Jan. 1, 1994 must install water-conserving plumbing fixtures.

A seller of a SFR must disclose in writing to the prospective buyer:

water-conserving plumbing fixture replacement requirements; and
whether the SFR contains any noncompliant plumbing fixtures.

Owners of commercial and multifamily rental property must commence limited replacement of noncompliant water fixtures by 2014 and all noncompliant fixtures by 2019

Civil Code § 1101.5
Added by S.B. 407
Effective: Jan 1, 2019

An owner or landlord of a multifamily residence or commercial property built on or before Jan. 1, 1994 must:

replace noncompliant plumbing fixtures with water-conserving plumbing fixtures;
ensure all water-conserving plumbing fixtures are operating according to the manufacturer’s rated water consumption at the time a tenant takes possession;
repair or replace any malfunctioning water-conserving plumbing fixture upon notice from a tenant the fixture is not operating properly; and
notify a prospective buyer of:
- water-conserving plumbing fixture replacement requirements; and
- whether the property contains any noncompliant plumbing fixtures.

An owner or landlord may enter property to make repairs only after proper notice is given to the tenant. [See first tuesday Form 567]

Effective January 1, 2014, the owner of a multifamily residence or commercial property built on or before Jan. 1, 1994 must replace noncompliant plumbing fixtures with water-conserving plumbing fixtures whenever:

the square footage of the building is increased by more than 10%;
the total cost of alterations or improvements made to the building is more than $150,000; or
a building permit is required to make alterations or improvements to a single room and the room contains noncompliant water fixtures.

Replacement of all noncompliant plumbing fixtures is a condition for the issuance of:

a certificate of occupancy for a multifamily residence; or
a certificate of final completion for the construction of a commercial property.

Owners of property to be demolished exempt from water fixture requirements

Civil Code § 1101.6
Added by S.B. 407
Effective: Jan 1, 2014

If a property owner applies for a permit to demolish a building on the property, the water fixture replacement requirements may be postponed for up to one year.

If the building is demolished within the one-year postponement, the water fixture replacement requirements do not apply.

If the building is not demolished within the one-year postponement, the water fixture requirements still apply, even if the demolition permit is still in effect or an application for a new demolition permit has been made.

Types of property exempt from water fixture requirements

Civil Code § 1101.7
Added by S.B. 407
Effective: Jan 1, 2010

Water fixture replacement requirements do not apply to:

registered historical sites;
property certified by a licensed plumber to be incapable of receiving water-conserving plumbing fixture upgrades; or
a building permanently disconnected from receiving water service.

Local water conservation ordinances may be more restrictive

Civil Code § 1101.8
Added by S.B. 407
Effective: Jan 1, 2010

Any local government or water authority may enact local ordinances that:

promote compliance with water conserving plumbing requirements; or
establish more stringent water conserving guidelines.

Conditions for local ordinance exemption from state water fixture requirements

Civil Code § 1101.9
Added by S.B. 407
Effective: Jan 1, 2010

Any local government that adopted an ordinance requiring retrofit of noncompliant plumbing fixtures prior to July 1, 2009 is exempt from conforming to state law so long as the adopted ordinance remains in effect.

Sellers must disclose presence of noncompliant water fixtures

Civil Code § 1102.155
Added by S.B. 407
Effective: January 1, 2017

A seller of an SFR built on or before Jan. 1, 1994 must disclose in writing to a prospective buyer:

Calif. Civil Code § 1101.4 requires SFRs to be equipped with water-conserving plumbing fixtures before January 1, 2017; and
whether the SFR contains any noncompliant plumbing fixtures.

Legislative Watches reported by Giang Hoang

Damaged or destroyed property

Revenue and Taxation Code § 69
Amended by S.B. 824
Effective January 1, 2010

The base year value of real estate that is substantially damaged or destroyed by a disaster may be transferred to a newly acquired or constructed property in the same or a similar county within three years after the disaster.

A property is considered substantially damaged or destroyed if the land or improvements sustain physical damage amounting to more than 50% of its full cash value immediately prior to the disaster.

Preliminary Change of Ownership Report

Revenue and Taxation Code §§ 480.3, 480.4
Amended by S.B. 824
Effective January 1, 2010

The State Board of Equalization will specify the content of the preliminary change of ownership report instead of each county assessor and recorder.

This report must be signed by the new owner certifying that the information provided on the form is, to the best of his knowledge, true, correct and complete.

The Buyer’s Choice Act for selecting any escrow or title company on the sale of an REO

Civil Code §§ 1103.20, 1103.21, 1103.22, 1103.23
Added by A.B. 957
Effective October 11, 2009

The Buyer’s Choice Act prohibits a seller who acquired a one-to-four unit residential property at a foreclosure sale from requiring a subsequent buyer of the property to use a specific title insurer or escrow company. The seller may suggest a title insurer or escrow company, as long as the buyer is given a choice in the selection of the title insurer or escrow company.

A seller who violates these provisions is:

liable to the buyer for three times the amount paid to the title insurer and/or escrow company; and
in violation of and subject to discipline under the laws controlling his license.

No transactions will be invalidated solely due to violation of the Buyer’s Choice Act.

The Buyer’s Choice Act will sunset on January 1, 2015, unless otherwise extended.

Tentative subdivision maps expiration date extended by 24 months

Government Code § 65961
Amended by AB 333
Effective July 15, 2009

The expiration date of any tentative or vesting tentative subdivision map that had not expired by July 15, 2009 and will expire before January 1, 2012 is extended by 24 months.

This extension will be in addition to any other extension of the expiration date.

When issued as a final map, any map extended for the 24-month period may be subject to building permit fees and is only exempt from having additional conditions imposed on it for the issuance of a building permit for three years instead of the full five years for maps that have not been extended.

Legislative Watches reported by Bradley Markano

Mobilehome parks must have an emergency plan

Health and Safety Code §§18603 and 18871.8
Amended by S.B. 23
Effective: January 1, 2010

Every mobilehome park must have a telephone operator available to respond to park maintenance emergencies. If the park has over fifty mobilehome units, the operator must be located in the park and must be familiar with the park’s emergency preparedness plans.

Existing mobilehome park owners or operators must adopt an emergency preparedness plan by September 1, 2010.

In order to receive a permit to operate a mobilehome park constructed after September 1, 2010, the park owner or operator must adopt an emergency preparedness plan.

A valid plan must follow the emergency procedures and plans described in the “Emergency Plans for Mobilehome Parks” booklet approved by the Standardized Emergency Management System Advisory Board in 1997, or implement comparable procedures.

To be eligible for a permit to operate an existing park or a park constructed after September 1, 2010, the park owner or operator must:

post notice of the plan in a conspicuous area; and
notify park residents of how they may access the plan, and how to access information on individual emergency preparedness information from state and local agencies. This notification must be given to all current residents and all future residents upon approval of tenancy. A notice that explains how the plan may be accessed on the internet will fill this requirement.

An agency will assess park compliance. They may do this by receiving a copy of the plan during a park inspection.

Any failure to follow this section must be corrected by park management within 60 days.

First-time homebuyer tax credit extended and expanded

Internal Revenue Code §36
Amended by H.R. 3548

The federal government has extended the $8000 homebuyer tax credit through mid-2010, and has expanded the list of people who are eligible. Any first-time homebuyer (a buyer who has not owned a home in the preceding three years) who contracts to buy a home by April 30, 2010 and closes the sale by June 30, 2010 is now eligible to receive a tax credit of $8,000.

Also in this time period, a “long time resident” credit of $6,500 is available to current owners who replace a home they have lived in for a period of at least five consecutive years at some point in the preceding eight years prior to April 30, 2010.

First-time homebuyers who purchased homes before November 7, 2009 qualify for the homebuyer tax credit only if their modified adjusted gross income (MAGI) is under the former limit of $75,000 ($150,000 for joint returns). Pre-November 7, 2009 buyers with MAGI between $75,000 and $95,000 ($150,000 and $170,000 for joint returns) are eligible for the same credit, reduced by an amount equal to 2% of all income over $75,000.

For those who purchase their home on or after November 7, 2009, the maximum income to be eligible for the full credit is $125,000 ($225,000 for couples filing a joint return). Buyers with an income between $125,000 and $145,000 ($225,000 and $245,000 for joint returns) may claim a reduced credit.

Additional restrictions apply to purchases after November 6, 2009. These include:

dependents may not claim the credit;
no credit is available on the purchase of homes with a price greater than $800,000; and
the homebuyer must be at least 18 years old.

Members of the military, and some federal employees living outside of the United States, have an additional year take advantage of this tax credit.

This tax credit may be claimed on the buyer’s 2009 or 2010 tax return. However, this tax credit must be repaid if the purchased home ceases to be the owner’s principal residence within three years following the close of escrow on the purchase. Additionally, the 2009 credit cannot be claimed online, and must be claimed using IRS form 5405, which will be released in late December. [For more information on this form, see first tuesday’s news blog Wait for revised IRS form]