BUSINESS ALERT
Current Legal Issues for the Financial Services Community
Spring 2010 Vol. 5, No.
WHAT’S NEW IN CALIFORNIA REAL ESTATE LAW
By: Harriet B. Alexson
(949.250-9664)
©2010. All Rights Reserved.
Please note the following recent developments in California Real Estate Law.
1. Brokers. Brokers may now be disciplined under B & P Code §10177 for violating specified federal lending laws or regulations or failing to comply with state law & from (a) receiving greater compensation for arranging “higher-priced mortgage loans” (as defined in Part 226 of Title 12 of the Code of Fed. Regs) with a prepayment penalty than for such loans without one, (b) making a “higher-priced mortgage loan” containing a negative amortization provision, (c) steering, counseling, or directing a borrower to accept a loan at a higher cost than that offered by the persons with whom the broker regularly does business, and (d) receiving higher compensation based on its source, e.g., lender, borrower, or 3rd party. Brokers may not receive pre-performance compensation redefined now also to include (a) security as collateral or (b) obtaining a power of attorney from a borrower. If a broker is to perform loan modification services for compensation, he may not exact an advance fee unless at least 10 calendar days beforehand he has submitted to the Real Estate Commissioner the materials used in obtaining the advance fee. A broker is now subjected to a $2,500 fine if he uses an advance fee form the Commissioner orders not be used.
2. Contractors. Fines for engaging in construction work without a license are increased from $1,000 to $5,000 for the first offense.
3. Foreclosure. Pre-foreclosure 30-day period for parties to explore options to avoid foreclosure on 1-1-03 to 12-31-07 loans is now limited from any “residential property” to “owner-occupied (homes) of no more than 4-dwelling units.”
Also, within 21 days after notice to a beneficiary to approve a “short-pay request,” the beneficiary shall prepare & deliver to the borrower a “short-pay demand statement” or a written statement that it elects not to proceed with the transaction.
Further, if the terms of the short-pay transaction require the beneficiary’s approval of a closing statement, the beneficiary has 4 days after receipt of the statement to approve or disapprove it; otherwise it shall be deemed approved provided that the statement is not clearly contrary to the short-pay agreement or demand statement.
The “California Foreclosure Prevention Act” until 1-1-11 prohibits lenders for 90 days (a moratorium) from giving the 20-day notice of sale to 1st trust deed loan borrowers on their owner-occupied home after the 3-month notice of default period has run unless lender is exempt by having implemented a specified loan modification program.
For such loans recorded between 1-1-03 to 1-1-08, S.B. No. 7 adds CC §2924 and repeals §§2923.52, 2953.53, 2923.54, & 2933.55. The home must have been owner-occupied by the borrower when he/she became delinquent on the loan for him/her to be entitled to the 90-day moratorium on noticing a trustee’s sale.
The new “Buyer’s Choice Act” prohibits an escrowee or title insurer from requiring the seller of foreclosed property to use a particular escrowee or title insurer as a condition of sale. This is in keeping with the existing law that makes such prohibition only if the mortgage loan foreclosed upon was federally related.
4. Homesteads. Exemption amounts of $50,000, $75,000, and $150,000, have each been increased by $25,000.
The exemption amount H & W or individual without resident minor child is now $75,000, with minor child or children is $100,000, and if resident is 65 or older, or 55 or older with reduced annual income, it is now $150,000.
5. Impound Accounts. “Higher priced mortgage Reg Z loans” (defined in Part 226 of Title 12 of Code of Fed Regs) are now exempt from the prohibition against forcing a borrower to pay into an impound account.
Existing law prohibits requiring borrower to open an impound account (to collect taxes or insurance premiums) for a single-family, owner-occupied home except (a) where required by a state or federal regulatory authority, (b) the loan is state or federally guaranteed, (c) the borrower misses 2 consecutive tax installments, (d) the loan is 90% or more of the purchase price or its appraised value, or (e) the combined amount of all loans against the property exceeds 80% of its appraised value.
S.B. No. 633 amends CC §2954 to allow a lender or insurer to require an impound account for such Reg Z “higher priced mortgage loans.”
6. Landlord-tenant. Storer of commercial tenant’s abandoned customer records now has “safe harbor” from tenant and customer to dispose of such personal property files.
Existing law requires a landlord to dispose of its commercial tenant’s abandoned customer files by shredding, erasing, or otherwise modifying the personal information to make it unreadable. A.B. No. 1094 now expressly says that “no cause of action shall lie” against a business for so disposing of such information, and it is “the intent of the Legislature . . . to create a safe harbor (against the tenant and its business customer) for the record custodian who so properly disposes of the records” after 15 days’ notice to the tenant alone, – the presumed owner of the records.
7. Mechanic’s Lien. Mechanic’s lien must be served with an extensive, statutorily worded “Notice of Mechanic’s Lien” to be valid. The lien, its notice, and a “proof of service affidavit” (first-class mail still sufficient), are thereafter to be recorded.
Upon suit to foreclose mechanic’s lien being filed, a notice of pendency of action now must (no longer “may”) be recorded thereafter within 20 days.
8. Mobile Homes. Mobile home park may not prohibit a homeowner from replacing a mobile home or manufactured home on a park space unless he uses a specific broker, dealer, or other person as agent in the purchase or installation.
S.B No. 804 so amends CC §798.71 to comport to existing law similarly prohibiting forced use of a park’s agent in the sale of the home.
This article is only a brief summary of certain recent statutory developments of law in California. Other statutes and case law may have legal implications for your business.
Actual resolution of legal issues depends upon many factors including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects but rather to offer insight into legal developments and issues. Consult with legal counsel before taking action on matters covered in this article. Copyright 2008 Harriet B. Alexson. All rights reserved.