Real estate related bills waiting for the Governor’s signature are:

·        AB 2259 (Mullin) Ownership Rights in a Common Interest Development (CID) – A trend developed over the last few years by some homeowner associations to adopt restrictions that limit the ability of unit owners to rent their dwellings in CIDs.  The imposition of rental restrictions diminishes an owner’s property rights. Property owners should enjoy the right to rent or lease their unit as it existed at the time the CID unit was purchased.  AB 2259 will protect this right, if it existed at the time the owner purchased the unit.

·        SB 1737 (Machado) Mortgage Loan Broker Disclosures – grants the DRE commissioner the authority to suspend or revoke a real estate license if the licensee generates an inaccurate broker price opinion for a short sale with the intent of manipulating the lienholder into rejecting the proposed sale so that the licensee may acquire a business advantage.  SB 1737 will require a prominent disclosure to all parties whenever a licensee represents a buyer and originates a loan in a “1-4” transaction.

Some economists are comparing the current real estate cycle to the 1990s but the origin of this cycle is different from that of the last decade.  During the 1990s, a higher rate of unemployment and many other economic factors triggered the downturn, contributing to weak sales for a five-year period.  The current real estate market is different in that sales declined at a quicker pace during 2006 and 2007, but have shown marked improvement in 2008.  In July home sales remained above the 400,000 level for the third consecutive month.

Although homes prices in California appear to be high compared with incomes, the current cycle has allowed home prices in California to become realigned with incomes.  Affordability increased dramatically in the second quarter of this year, and is currently at 48 percent, meaning that nearly half of the state’s households can afford to purchase an entry-level home in California.

The U.S. Treasury submitted its proposal to promote stability in the U.S. Financial markets.  The key components of the Treasury’s proposal include:

·        The authority to issue up to $700 billion of Treasury securities to finance the purchase of troubled residential and commercial mortgage-related assets, including mortgage-backed securities and loans.

·        This authority would expire in two years, and assets must have been originated or issued on or before September 17, 2008, to qualify.

·        Assets will be managed by private asset managers at the direction of the Treasury.

·        Cash received from liquidating the assets will be returned to the Treasury’s general fund for the benefit of taxpayers.

·        Funding for the program will be provided directly by the Treasury from its general fund by increasing its debt limit by $700 billion.

·        Once the program is up and running, Treasury will provide updates to Congress semi-annually.

The National Flood Insurance Program (NFIP) expires on September 30, 2008. Even though both the House and the Senate have passed bills for action on H.R. 3121, they have never come to conference to finalize the bill for the President’s signature. Representative Barney Frank, Chairman of the House Financial Services Committee, introduced legislation to allow for a seven-month extension of NFIP so that it doesn’t expire.  If passed, the legislation will allow the House and Senate to continue to work together for a re-authorization and also assess the implications of the 2008 hurricane season.

Highlights of H.R. 3121: 1) extends the NFIP for five years to September 30, 2013; 2) increases coverage limits to $335,000 for residential and $670,000 for commercial properties, 3) adds coverage for business interruption, 4) raises the cap on annual premium increases from 15% from 10%; 5) phases out subsidies for non-primary residences and non-residential properties beginning 2011; and 6) allows for the purchase of wind insurance through the NFIP.

Highlights of the Senate bill: 1) extends the NFIP for five years to September 30, 2013; 2) raises the cap on annual premium increases to 15% from 10%; 3) phases out subsidies for non-primary residences and non-residential properties immediately by raising premiums by 25% per year until an actuarial rate is achieves.  Unlike the House bill, S. 2284 does NOT: 1) increase coverage limits; 2) add coverage for business interruption; or 3) allow for the purchase of wind insurance through the NFIP.