New Laws in 2008 Affect Realtors and Consumers

As 2008 roles in, several new laws are taking effect that are significant to real estate professionals and the general public. Here is a brief summary of a number of these new laws.

Mortgage Forgiveness Debt Relief Act: This new federal act will help some taxpayers caught in the sub-prime mortgage calamity. Under this act, taxpayers may exclude up to $2 million in income of qualified principal residence indebtedness for discharges sustained during a three-year window (January 1, 2007 through January 1, 2010). This includes obligations incurred from acquisition, construction or substantial improvement of an individual’s principle residence. Refinancing is also encompassed so long as the amount refinanced does not exceed the amount of the indebtedness. California, however, does not automatically observe the provisions of this bill. Therefore, income from forgiveness of debt still must be reported as earnings for state tax purposes. Still the act does free homeowners from a staggering and depressive federal tax obligation possibility, provides a way to sell their homes for less than what is owed on them and avoids having a foreclosure placed on their records.

Cell Phone Usage: This new state law affects every driver. As of July 1, 2008, all motorists will be required to use hands-free devices when using a cell phone while driving. Violators will face a $20 fine for the first offense and a $50 fine for each subsequent breach. The only exception is when contacting a law enforcement agency or public safety entity for emergency purposes.

Anti-Discrimination: Landlords and their agents, as of January 1, may no longer legally inquire into the immigration or citizenship status of an existing or prospective tenant.

Real Estate Appraisers: A licensed appraiser’s compensation can no longer be dependent upon or affected by the value conclusion generated by an appraisal for a real property purchase, transfer, sale, financing or development. In addition, any party with an interest in a real estate transaction is barred from influencing or attempting to influence the appraisal process for a mortgage loan.

New Disclosure for Private Transfer Fees: Beginning January 1, a seller who must provide a Transfer Disclosure Statement is required to concurrently furnish a disclosure statement of private transfer fees, if applicable. Transfer fees include any payment that must be paid upon transfer of real property as imposed by a deed, CC &Rs or other documents. The statement must include a notice that payment is required, the amount of the fee and name of the entity that is to receive payment.

Recording Private Transfer Fees: As a condition of payment of the fee, any person or entity imposing a private transfer fee must record the instrument creating the fee and a separate notice of Payment of Transfer Fee Required. Both must be simultaneously recorded at the county recorder’s office for which the property is located.

Loan Regulations: As of January 1, each of the agencies governing residential loans (all under the purview of the California Secretary of Business, Transportation and Housing) will have the authority to adopt guidelines that provide more stringent provisions on residential loans on one-to-four unit family residences for interest-only, negatively amortized and adjustable mortgage loans. We expect these new guidelines will require lenders to verify that consumers can repay their loans and will demand clearer statements concerning the likelihood that future payments will be made. Criminal penalties for failing to do so are likely to be considered. This new law also brings certain private lenders under the influence of the Department of Real Estate.

Property Tax Reassessment: As of January 1, any transfer of real property made from January 1, 2001 through January 1, 2006 between registered domestic partners is retroactively exempt from property tax reassessment. The recipient of the real property transfer must submit an application by June 30, 2009 to reverse the reassessment.