C.A.R. calls for swift passage of SB 1178 extending anti-deficiency protection for consumers

Measure would protect consumers from unscrupulous lenders

LOS ANGELES (May 20) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) is calling on California state senators to vote “yes” and approve SB 1178 (D-Corbett), which will extend anti-deficiency protection for consumers who have refinanced their original mortgage loans and now are facing foreclosure. C.A.R. is the sponsor of the legislation.

“Most homeowners don’t know that when they refinanced their original loan they lost critical legal protections and now may be personally liable for the difference between the value of their foreclosed property and the amount they owe the lender,” said C.A.R. President Steve Goddard. “If a foreclosed home’s market value is $250,000 and the balance on the refinanced loan is $350,000, the homeowner is personally liable for the $100,000 difference under existing law.”

Currently, if a homeowner defaults on a mortgage used to purchase his or her home — known as a “purchase money mortgage” — the homeowner’s liability on the mortgage is limited to the property itself. The law has worked well since the 1930s to protect borrowers, ensure the quality of loan underwriting, and allow borrowers brought down by financial crisis to get back on their feet. Unfortunately, the original law did not extend the purchase money protection to loans that refinance the original purchase debt, even if the refinance only was to obtain a lower interest rate.

Although California has protected borrowers from so-called “deficiency” liability on their home mortgages since the 1930s, the evolution of mortgage finance requires that the statute be updated.

“Current events demonstrate there has been no shortage of inadequate underwriting by mortgage lenders, the banking industry, and others preying on unsuspecting and uninformed consumers,” Goddard said. “Passage of SB 1178 will force lenders to underwrite refinance loans at least as carefully as purchase money mortgages.

“If lenders are allowed to look beyond the property actually being taken as security, and make the decision to lend based upon the borrower’s other assets, it erodes their incentive to make certain that the loan “pencils out” and has adequate security,” he said. “If a lender only can look to the value of the home being financed, the underwriter will be more careful about the value of the asset. The same reasoning should apply to refinanced loans. Without SB 1178’s protections in place, if the borrower has any other assets, the lender can go after the borrower and demand a deficiency.

“Cash out refinances deserve more limited protections,” Goddard said. “C.A.R.’s bill will extend these critical protections only to loans that refinance the existing debt as well as additional debt used to improve the property — not for loan amounts used for other consumer expenses.”

C.A.R. has rejected proposed amendments to the bill by the lending industry that would restrict the legislation from applying to loans originated prior to 2011.
“The people that really need protection are the folks who refinanced in 2005 and didn’t know its effect, not the folks who will get loans next year,” Goddard said. “Lenders also tried to limit the legislation so that it applied to only the paid down balance of the loan that was refinanced, which C.A.R. staunchly opposed. That wouldn’t take into account “cash out” loans where the proceeds went to improve the property, and therefore increase the property value.”

View a video of C.A.R.’s Vice President of Government Affairs Alex Creel discussing SB 1178.

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]]> http://armaniniproperties.wordpress.com/2010/05/09/open-house-today-1-4-first-open-house-for-this-4-year-young-townhome/feed/ 0 armaniniproperties powered by postlets http://armaniniproperties.wordpress.com/2010/05/08/home-renovation-rebate-bill-approved/ http://armaniniproperties.wordpress.com/2010/05/08/home-renovation-rebate-bill-approved/#comments Sat, 08 May 2010 01:18:33 +0000 armaniniproperties http://armaniniproperties.wordpress.com/?p=123 ]]> WASHINGTON — Homeowners could collect thousands of dollars in Cash for Caulkers rebates for renovating their homes with better insulation and energy-saving windows and doors under a new economic stimulus bill the House passed Thursday.

The Home Star bill, passed 246-161, would authorize $5.7 billion over two years for a program that supporters — mostly Democrats — said would have the added benefits of invigorating the slumping construction industry and making the Earth a little cleaner.

“Home Star is that solid investment that’s going to achieve that hat trick of energy savings for the homeowner, of moving toward a cleaner environment and of creating jobs here at home,” said bill sponsor Peter Welch, D-Vt.
Republicans overwhelmingly opposed the bill, and they were able to attach a condition that it would be terminated if Democrats do not come up with a way to pay for it.

The measure has come to be dubbed Cash for Caulkers, a takeoff on the popular 2009 Cash for Clunkers initiative that rewarded people for replacing gas-guzzlers with more fuel-efficient models.

President Barack Obama praised the House action, saying the bill “will help jump-start job growth and demand for new products created right here in America” as well as saving consumers money on energy bills.

The initiative is separate from an energy tax credit of up to $1,500 that was included in last year’s economic stimulus act. That credit for energy efficiency improvements runs through the end of this year.

Supporters estimate that 3 million households would make use of the new program, saving $9.2 billion in energy costs over a 10-year period. They said it would create 168,000 jobs, mainly in the recession-hit construction industry.

“Nearly one in four workers in the home construction and services industry has been laid off,” said Energy and Commerce Committee chairman Henry Waxman, D-Calif. “Passing Home Star says, ‘Help is on the way.’ ”

Republicans were more skeptical, saying the price tag was too high at a time of mounting federal debts.

“We are going to authorize $6.6 billion of money we don’t have so we can caulk homes?” asked House Republican leader John Boehner of Ohio.

“This is not a terribly bad bill, but it has one fatal flaw: It is not paid for,” said Rep. Joe Barton of Texas, top Republican on the energy committee.

Republicans succeeded at the end of the debate in altering the bill to say it will be terminated if it is found to drive up the federal deficit, a provision that will force Democrats to come up with an offset. The Republicans also were able to alter the legislation so that the rebates would go directly to homeowners.

By Jim Abrams The Associated Press

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The following information is from the National Association of Realtors:

You’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Here’s what you have to do to get your benefit:

1. Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract in place by April 30, 2010 with a closing date no later than June 30, 2010.
2.  Decide whether to: 
   • apply the credit to your 2009 tax return, filed on or before April 15, 2010;
   •  file an amended 2009 return; or, 
   • apply the credit on your 2010 return, filed on or before April 15, 2011.
3. Attach documentation of purchase to your return.

Documentation of Purchase

Details concerning the precise documents required to confirm your purchase have not yet been released. When this information becomes available, we will include instructions and links to the appropriate forms.

When to Apply the Credit

Buyers purchasing homes on or before December 31, 2009 may claim the credit on their 2009 tax returns.

Buyers purchasing in 2010 will have the option to:

•  Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009;
•  File an amended return for 2009 if their purchase is completed after April 15, 2010; or,
•  Claim the credit on their 2010 tax returns.

If you, or your client, purchased a home between January 1, 2009 and November 6, 2009, please see: How to Get the 2009 First-Time Home Buyer Tax Credit.

Applying the Credit to Your 2009 Taxes

You will need to do three things to claim the credit on your 2009 tax return:

1. Fill out Form 5405 to determine the amount of your available credit;
2. Apply the credit when you file your 2009 tax return or file an amended return;
3. Attach documentation of purchase to your return or amended return.

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From California Association of Realtors

For release:
Thursday, March 25, 2010

C.A.R. applauds Gov. Schwarzenegger’s signing Homebuyer Tax Credit legislation into law

LOS ANGELES (March 25) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today praised California Governor Arnold Schwarzenegger for his leadership in signing the Homebuyer Tax Credit legislation into law.

“We are pleased that Governor Schwarzenegger recognized the positive impact the tax credit will have for families hoping to buy their first home,” said C.A.R. President Steve Goddard. “Successful passage of this legislation was the result of our efforts in Sacramento over the last several weeks as REALTORS® and our team in the capital worked for the bill’s passage before it landed on the governor’s desk earlier this week.”

California’s previous home buyer tax credit program was so successful that it ran out of tax credits by the end of June 2009, eight months before it was set to expire and just as housing markets appeared to be turning a corner. Unlike last year’s legislation, the Homebuyer Tax Credit signed into law today adds a tax credit for the purchase of an existing home by a first-time home buyer.

“The positive impact of the home buyer tax credit at the federal level is clear,” Goddard said. “Nearly 40 percent of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to C.A.R. research conducted last year. We expect the state tax credit for home buyers to have the same impact.”

AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

“AB 183 also will significantly contribute to efforts to stimulate jobs creation within California’s housing market by helping to incentivize first-time home buyers to purchase homes that have been abandoned, foreclosed upon, and returned to the lender; or have been sitting on the market for extended periods of time,” Goddard said. “It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities.”

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