Tuesday, October 26th, 2010
Legislatively, it’s looking to be a positive year for REALTORS® in California. The second year of the Legislature’s two-year session wrapped up in early September, and we have three sponsored bills sitting on the Governor’s desk as of this writing.
Senate Bill 1178 (Corbett) will extend anti-deficiency protections to homeowners who have refinanced “purchase money” loans and are now facing foreclosure. C.A.R. sponsored this critical piece of legislation to protect homeowners in foreclosure from attempts by lenders to sue the homeowners for the difference between the value of the foreclosed property and the outstanding balance on the mortgage loan. California has protected borrowers from so called “deficiency” liability on their home mortgages since the 1930s, but the evolution of mortgage finance requires that the statute be updated. Current law says if a homeowner defaults on a mortgage used to purchase their home, the homeowner’s liability on the mortgage is limited to the property itself. The 1930s law does not extend the protection for purchase money mortgages to loans that re-financed the original purchase debt – even if the refinance was only to gain a lower interest rate. Recent years of low interest rates have induced tens of thousands of homeowners to refinance their mortgages, yet almost no one realized that by re-financing their mortgage to obtain a lower rate, they were forfeiting their protections. These borrowers became personally liable for the balance of the loan. Should the Governor sign SB 1178 into law it would correct this deficiency, protecting people who refinanced their home for a lower interest rate, without taking any money out of their home.
Senate Bill 1427 (Price) would require local governments to provide the owner of a foreclosed property a notice of violation for overgrown weeds, broken windows, or other similar problems, and an opportunity to correct those violations before imposing a fine or penalty. Costs of nuisance abatement measures, if provided by local government, should the property owner not make those repairs themselves, must not exceed the actual and reasonable costs of nuisance abatement. Currently, some local governments are imposing civil fines and penalties up to $1,000 per day for failure to maintain a vacant property. Properties need to be maintained so as to not to cause blight, bringing down the value of an entire neighborhood. An extremely high rate of fines will deter buyers from purchasing, fixing and getting these homes occupied, which is the ultimate goal. Should Governor Schwarzenegger sign this bill, it will be a good compromise for all parties involved,
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