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REALTORS® are concerned about the recent announcement by the U.S. Department of Housing and Urban Development (HUD) that the Federal Housing Administration (FHA) will begin insuring mortgages on certain properties with Property Assessed Clean Energy (PACE) loans. REALTOR® officials say there ought to be more disclosures regarding the risks associated with PACE loans.
A PACE loan allows a homeowner to borrow money to finance energy upgrades. The loan is repaid as a surcharge on the property tax. The PACE loan takes primary position to the mortgage. If the cost of repaying the PACE loan and any mortgages on the property exceeds the home’s purchase price, the seller will be forced to make up the difference.
California Association of REALTORS® President Pat “Ziggy” Zicarelli said in a statement, “Although C.A.R. supports voluntary consumer-friendly energy improvement programs for homeowners, C.A.R. believes that HUD was ill advised to approve placing PACE loans in a senior position to FHA first mortgages. Doing so places FHA homebuyers and taxpayers at risk and does homeowners a disservice by approving a loan product without consumer protections and which is aggressively sold to homeowners who rely on FHA financing for safe and affordable mortgages.”
REALTORS® say PACE loans are unfairly expensive and carry higher interest rates than the first mortgage or a home equity loan. “This loan product has no minimum disclosures, no underwriting of the borrower, no proof that the borrower has the ability to repay, no three-day right to rescind, no marketing limitations, no interest rate or fee caps, no kickback prohibitions; nothing,” added Zicarelli.
The Federal Housing Finance Agency (FHFA) and conservator of Fannie Mae and Freddie Mac prohibits PACE loans to be placed in a senior position to the mortgage. Both the FHA and Fannie Mae currently offer mortgage financing that allows borrowers to finance energy efficiency improvements at lower rates than PACE liens. HUD’s announcement, which is contrary to FHFA’s current policy will only confuse homeowners, homebuyers, REALTORS®, lenders, escrow, title and the housing market overall.
The National Association of REALTORS® also expressed its concern, especially with regard to delinquent foreclosed properties. “A foreclosed property with a PACE loan in the primary position will likely remain on the market longer than it should, further increasing uncertainty in mortgage markets and placing unnecessary pressure on homeowners,” NAR President Tom Salomone said in a statement.
Karen Trolan, president of the Silicon Valley Association of REALTORS®, said, “Now, more than ever, the California legislature must pass AB 2693 (Dababneh), a C.A.R.-sponsored bill that would ensure consumers are aware of the consequences of PACE loans and have the opportunity to rescind after a three-day cooling off period. Current disclosures given to home buyers do not explain the potential consequences of using PACE loans. AB 2693 will require Truth in Lending type disclosures to borrowers.”
Recent news reports about burglaries of vacant homes for sale in the Bay Area are troubling and a good reminder for REALTORS® and their clients to take precautions to prevent this crime from happening to them. Majority of recent burglaries have occurred in homes with “For Sale” signs in the front yard, or homes that are easily identifiable as being vacant. These burglars are taking large appliances, like refrigerators and stoves.
The Silicon Valley Association of REALTORS® shares the following safety tips with homeowners who plan to sell their home or leave their home vacant for an extended time:
- Make your home look occupied. Use automatic timers on lights, a TV and/or radio, and set them to go on and off at different times to make your house appear occupied.
- Install motion detectors on the exterior of your home and garage or shed.
- Keep curtains/blinds closed and lock all doors and windows. Use wooden stakes inside patio door/window frames to prevent them from being opened from the outside.
- Keep your property maintained, grass mowed, and leaves raked. Trim trees and bushes so they can’t conceal burglars.
- Inform the police and trusted neighbors that your house will be vacant for an extended time. Police may be able to patrol your neighborhood periodically and keep an eye on your property. Ask neighbors to keep an eye on the property and call 9-1-1 immediately if they see or hear any suspicious activity.
- Ask a trusted neighbor to pick up flyers or newspapers that may be left on the front porch or driveway. Consider having a neighbor park their vehicle in your driveway while you are gone.
- Install an alarm system and/or security cameras.
- Consider renting your home or hiring a house sitter so the house won’t be vacant.
- Know the risks of putting “For Rent” or “For Sale” signs in front of your property.
- Never leave a spare house key under doormats, flowerpots, or other hiding places.
- Don’t place posts on social media informing others that your house is for sale or that you will be away on vacation.
The National Association of REALTORS® (NAR) is asking all REALTORS® across the country to TAKE ACTION NOW and urge your Senators to pass H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016.” This bill makes needed reforms to the Federal Housing Administration (FHA) condominium loan program, federal-assisted housing programs and Rural Housing Service loan programs. The reforms would make buying a condominium easier by expanding opportunities for first-time homebuyers and streamlining rural housing programs for low-income rental residents.
Early in February the U.S. House of Representatives voted unanimously to advance legislation that will expand opportunities for homeownership, especially for first-time home buyers. H.R.3700 takes aim at the difficulties in getting mortgages for condominiums. NAR has supported the inclusion of reforms to current FHA restrictions on condominium financing.
Condominiums are among the most affordable homeownership options for first-time home buyers, as well as lower income borrowers, but barriers to safe, affordable mortgage credit for condos still exist. H.R. 3700 takes a number of steps to address those concerns. These include efforts to make FHA’s recertification process “substantially less burdensome,” improving a process that is often costly and which condo developments must repeat every 24 months.
H.R. 3700 also lowers FHA’s current owner-occupancy requirement (the number of units in the development owned by the people living in them) from 50 percent to 35 percent and requires FHA to replace existing policy on transfer fees with the less restrictive model already in place at the Federal Housing Finance Agency.
Additionally, the bill streamlines the process for exemptions to FHA’s rule requiring that condominium projects have no more than 25 percent of the space dedicated to commercial use. This effort is in line with the Department of Housing and Urban Development’s initiative to promote neighborhoods with a mix of residential housing, businesses and access to public transportation, which has become a trend in housing development today.
Finally, H.R. 3700 includes further support for rural housing loans and multifamily housing initiatives.
H.R. 3700 removes a burdensome and expensive FHA condo approval process, reduces the FHA restrictions on the number of condos available to homebuyers, and permanently streamlines the Rural Housing Service loan program.
NAR is encouraging all members to take action even if they do not do business with condominiums or in rural areas. SILVAR members can take action by going to https://realtorparty.realtoractioncenter.com/site/Advocacy
Last chance to register or audit a class!
SILVAR’s 5th Certified International Property Specialist Institute (CIPS) is on June 20-24. If you would like to learn how to expand your global real estate business and earn the National Association of REALTORS® (NAR) CIPS designation, enroll in the CIPS Institute. Classes start next week, so you need to register right away. Cost for the entire CIPS Institute, which includes five courses, is $450 for the paperless option $500 for the paper version, which includes a manual for each of the five courses for both members and nonmembers. Regular price is $600.
Members may enroll online at ims.silvar.org. Non-members and those who want the paperless option may register by calling SILVAR at (408) 200-0100. Breakfast and lunch are provided and included in the cost, thanks to our generous sponsors Darrell Monda of TourFactory; Larry Tringali of Property Inspection Service; Anita Rodal, international liaison with AFEX (Associated Foreign Exchange) and president of SBPI Services, Inc.; Janet Case, CEO of Proxio; and Suzette Reboton of HSBC.
If you are a CIPS designee, you can audit a course for $20 for paperless and $30 for the paper option. Cost also includes breakfast and lunch. There are always new developments taking place in real estate markets around the world. Every two to three years CIPS courses are revised with updated statistics and relevant information. The most recent courses updated are Global Real Estate: Local Markets (May 2016) and Global Real Estate: Transactions Tools (May 2016). Instructor David Wyant, who will be teaching the courses again this year, also regularly furnishes students with information on the latest developments in international real estate.
If you would like to audit a CIPS course, please contact SILVAR Public Affairs and Communications Director Rose Meily at (408) 200-0109 or email rmeily@silvar.org.
The CIPS Institute provides training in international business issues, including currency conversion, cultural awareness, legal and tax requirements, ownership and transaction principles of international real estate, and specifics about the real estate markets in Europe, the Americas, and Asia. Members using Proxio, which is a SILVAR benefit, may find the CIPS courses very useful in advancing their global real estate business. See registration form and class schedule below.
CIPS SCHEDULE AND REGISTRATION FORM
The California Association of REALTORS® (C.A.R.) has asked all REALTORS® to contact their State Assembly Member and urge them to vote NO on AB 2502, which undermines existing Costa-Hawkins’ protections by allowing local governments to impose mandatory inclusionary zoning (i.e. rent control) on newly constructed rental housing. It is vitally important that you reach out to your elected representative today! Let your Assembly Members know that you say NO to Rent Control!
Please Call YOUR Assembly Member TODAY at (800) 798-6593 between 9-5 p.m.
About 50 SILVAR members joined over 2,000 California REALTORS® in Sacramento on Wednesday for the annual California Association of REALTORS® (C.A.R.) Legislative Day, the one day each year that the state’s REALTORS® meet with their legislators and discuss real estate-related policies and issues.
California Governor Jerry Brown spoke to California REALTORS® at the Sacramento Convention Center during the C.A.R. morning briefing. Brown said the economy has its cycles and at present the state’s economy is doing well, thanks to the business sector.
“California is the land of sunshine and smart people. That’s why people want to be here. Silicon Valley has the smartest people in the world,” declared the Governor.
Brown told REALTORS® to stay the course, stating, “REALTORS® are the backbone of what California looks like, of what California is.”
At a joint luncheon with members of the San Mateo County Association of REALTORS® and Santa Clara County Association of REALTORS®, Los Angeles Times Sacramento Bureau Chief John Myers analyzed the state’s political landscape. He indicated California has “places of great success and places of great struggle,” a dichotomy between urban versus rural, haves versus have nots, the highly employed places versus low employed.
Myers said it will be interesting to see how the state plans to implement the $15 minimum wage; how the state will expand the family leave law; and what arises from discussions on affordable housing. Other fundamental issues looming over California are education, transportation and water.
According to Myers, this year’s state elections may be the last chance to bring new blood to the state legislature, since new legislators will be serving 12-year terms due to the passage of Proposition 28. Myers also warned REALTORS® to expect a longer and confusing U.S. Senate ballot for the June 7 primary because of how the names of the 34 candidates seeking to replace retiring Senator Barbara Boxer are laid out on the ballot. Choose only one candidate. Selecting two or more candidates would disqualify your vote.
After the luncheon, SILVAR members met with Senators Jim Beall and Jerry Hill, and Assembly members Rich Gordon and Evan Low. Members asked their support on the following bills:
SUPPORT C.A.R.-sponsored bill AB 2693 (Dababneh) – PACE Loan Disclosure, which seeks to change the super-priority status of PACE loans and to require disclosures to consumers before they obtain such a loan. A PACE loan allows a homeowner to borrow money to finance energy upgrades. The loan is then repaid as a surcharge on the property tax. The PACE loan takes primary position to the mortgage. If a homeowner takes out a PACE loan they may have difficulty refinancing or selling their home if the new mortgage holder, like Federal Housing Finance Agency (FHFA), does not allow for PACE loans. If the cost of repaying the PACE loan and any mortgages on the property exceeds the purchase price of the home, the seller will be forced to make up the difference. This will prevent some homeowners from selling when they need or want to. Current disclosures given to homebuyers do not explain the potential consequences of using PACE loans. AB 2693 will require Truth in Lending type disclosures to borrowers.
SUPPORT C.A.R.-sponsored bill AB 2760 (Mathis) – Support Animal Regulations seeks to distinguish between a medically necessary companion or support animal and other animals kept as pets. C.A.R. wants to clarify current law to allow legitimate support animals to share rental housing and to allow landlords to avoid unnecessary litigation. Service animals, as defined under federal law, are animals individually trained to do work or perform tasks for the benefit of an individual, like guide dogs and signal dogs. Companion animals simply provide comfort to an individual. They are not afforded the same protections under the ADA or California State Law as service animals, even though they are kept as the result of a mental health professional’s prescription, causing confusion for housing providers. The vagueness in state law allows individuals without a legitimate need to claim a status for pets that is not deserved. AB 2760 will allow tenants to keep a support animal on the property provided that the tenant has a prescription validating the need for the support animal from a California-licensed mental health professional. They must also comply with all federal, state and local requirements, such as vaccination or sterilization mandates.
OPPOSE SB 1053 (Leno) – Sec. 8 Housing Mandate, which seeks to expand protected classes under the Fair Employment and Housing Act to include those who receive government rental subsidies. SB 1053 forces residential rental property owners to participate in the federal and local government’s voluntary Section 8 housing program. Section 8 was always intended to be a voluntary program. By forcing property owners to accept tenants with housing vouchers or other subsidies, SB 1053 forces landlords to participate in Section 8 without regard to the property owner’s specific circumstances. It forces landlords to endure administrative burdens and increased costs due to delays that result from understaffed housing authorities and requires landlords to accept objectionable and burdensome lease terms. Under HUD rules, housing authorities must use a HUD formula to determine an “acceptable” rental rate.
After intense pressure from REALTORS® and coalition partners, the Bay Area Air Quality Management District (BAAQMD) has withdrawn a controversial proposal to ban fireplaces at the point of sale.
The ordinance, if adopted by the BAAQMD Board of Directors, would have taken effect November 1, 2016. The original proposal would require anyone selling their home to upgrade all fireplaces to an EPA certified wood burning device, gas or electric, or remove the fireplace entirely. Projects like these can run in the tens of thousands of dollars depending on the nature of the fireplace. Additionally, finding contractors with the skills to do this work could have greatly delayed sales.
Members of the Silicon Valley Association of REALTORS® and staff joined forces with all of the Bay Area REALTOR® Associations, as well as coalition partners, to fight this ordinance. Members spoke out at public hearings; SILVAR President Christopher Isaacson submitted a detailed letter commenting on the onerous nature of the ordinance; and SILVAR members and staff met one-on-one with BAAQMD staff to explain how detrimental this ordinance would be to the housing industry.
BAAQMD recently released a revised proposal which eliminates the point-of-sale requirement. In its place, BAAQMD staff will ask the BAAQMD Board of Directors to approve a mandatory disclosure for all home sales on the dangers of wood-burning smoke. If this disclosure is adopted, it will be incorporated into the PRDS disclosure forms available to members.
The United States Supreme Court recently held that a private or public entity can be sued for discrimination even if there was no intent by that entity to discriminate, upholding the validity of disparate impact claims in fair housing issues.
The ruling touches on the concept of “disparate impact” which, under the Fair Housing Act, states that any policy or practice that creates a disproportionate “adverse impact” on any group based on race, national origin, color, religion, sex, familial status, or disability may be considered discriminatory or illegal. Opponents have maintained there needs to be intent for a discrimination suit to be valid, but all federal courts of appeal have interpreted the law to mean that an entity can get sued for housing discrimination if its actions have a disparate impact on a protected class, regardless of intent.
In its ruling, however, the Court clarified that just because an action has a disparate impact, it does not mean it is discriminatory. The plaintiff must point to a specific policy that the defendant had and show that the policy had a negative impact on the plaintiff’s protected class. The defendant can avoid liability if it can prove that the policy is necessary to achieve a legitimate business interest. The plaintiff also must be able to show there is an alternative business practice with a less discriminatory effect that would equally serve the defendant’s legitimate business interest in order for the plaintiff’s disparate impact claim to be valid.
As an example, a REALTOR® having a policy of only selling homes to members of their religious institution could face a disparate impact claim if a member of a different faith claims that this policy causes members of the another faith to miss the best homes. In the same light, when considering the adoption of any policy, real estate professionals operating as property managers or housing developers should make sure the policy will not have an unintended disparate impact on a protected class.
The Consumer Financial Protection Bureau (CFPB) announced a proposal to postpone the effective date of the new Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rule to October 1 instead of August 1. The CFPB cited an “administrative error” and consumers’ busy schedules at the start of the school year as reasons why it is proposing the two-month delay. The National Association of REALTORS® and nearly 300 members of Congress had pushed for the delay or a period of restrained enforcement of the new rule so all parties can become accustomed to the changes.
The new rule, which is also referred to as the Know Before You Owe rule, is intended to benefit consumers by creating more accountability and offering consumers more time to understand the mortgage process and their options, but industry experts anticipate complying with the new rule could add at least a week to closings. They are concerned the potential delays might even give all-cash buyers an edge over home buyers who are depending on financing, especially when closing quickly is critical in a hot market.
The Know Before You Owe rule is essentially a consolidation of several forms. The Good Faith Estimate (GFE) and the initial Truth-in-Lending disclosures will be combined into a new form called the Loan Estimate. The HUD-1 and the final Truth-in-Lending disclosures will be combined into another new form called the Closing Disclosure.
It is the timing requirements to deliver the Closing Disclosure that have real estate professionals concerned about potential delays in the closing process. If the Closing Disclosure is not actually received in person, the new rule requires an additional three-day period if it is delivered by mail or electronically. Sunday is not counted; then add a federal holiday to the mix the Closing Disclosure may have to be delivered seven days or more before consummation.
Also, since the responsibility for compliance with the new rule falls heavily on lenders, it is very likely that lenders will retain tight control over the process of issuing the Closing Disclosure. Any last minute changes to the contract, such as seller credits to buyers or removing a loan contingency, could trigger cause for reissuance of a new Closing Disclosure. This could create further delays in the transaction.
“Starting the loan approval process early will reduce the risk of delayed closings. It is imperative that buyers work with a REALTOR® who understands these new guidelines and can prepare the buyer for all possibilities,” advises Chis Isaacson, president of the Silicon Valley Association of REALTORS®.
The Consumer Financial Protection Bureau (CFPB) announced on Wednesday that it would be “sensitive” to companies that make a good-faith effort to comply with the new Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure (TRID) regulation that goes into effect on August 1, 2015. Although the announcement by the CFPB is less than what some members of Congress requested, which was a hard deadline five-month testing or “grace” period, it is a net win and a welcome development toward clarifying the changes coming to real estate closings on August 1.
The National Association of REALTORS® (NAR) has been leading the effort to ensure an effective implementation of the TRID regulation. NAR has advocated a period of restrained enforcement and liability for the TILA-RESPA Integrated Disclosure rule.
NAR will continue to have a dialogue with Congress and the CFPB to minimize possible market disruptions or uncertainty when the rule takes effect August 1. It was through member efforts during the 2015 REALTOR® Legislative Meetings and Trade Expo that more than 275 U.S. Senators and Representatives signed onto a letter to CFPB Director Richard Cordray to ask for clarification of the new rule.
For the latest information on this issue, visit www.realtor.org/respa.
Silicon Valley Association of REALTORS® says ... 