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New borrower, buyer protections in '08

Greater disclosure about mortgage products and transfer fees are among laws about to take effect.

December 30, 2007|Dinah Eng | Special to The Times

When the calendar turns to Jan. 1, several new real estate-related laws will come into effect, the most notable of which include state measures requiring greater disclosure of nontraditional mortgage products and of private transfer fees to home buyers.

In the wake of the sub-prime loan debacle, borrowers will get additional information under Senate Bill 385, which requires new disclosure statements for anyone using nontraditional mortgage products, as well as disclosure statements in the advertising of such loans.

Tom Pool, spokesman for the California Department of Real Estate, said, "We require the mortgage broker to explain not only initial payments, but how much they'll adjust in the first five years."

Mortgage brokers also will be required to explain what other products are available and how they work. "This is the first of many bills we'll no doubt be seeing with some sort of mortgage reform involved," Pool said.

Another new law is Assembly Bill 980, which affects homeowners who have to pay a private transfer fee when they sell their property, a requirement that often goes unnoticed until a resale occurs.

Properties affected by this fee are generally new homes in common-interest developments, where the existence of the fee is buried in the fine print of the covenants, conditions and restrictions.

"More and more developers are building subdivisions with private transfer fees," Pool said. "Typically, the fees are used to fund the acquisition or maintenance of open spaces. A developer who wants to avoid lawsuits by environmentalists stopping a project, for example, might set up a private transfer fee to buy the open space for a nonprofit. Every time the house is sold, a percentage of the sales price goes to the fee."

After Tuesday, if a deed provision allows for a transfer fee, it must be disclosed. Transfer fees, Pool said, can generally run from a quarter of a percent to 2%.

"Since the average price of a home in California is $500,000, paying $5,000 every time a house turns over is significant," he said.

Homeowners living in common-interest developments will also get added protection through Senate Bill 528, which requires that an agenda be posted at least four days prior to board meetings, except in case of emergencies. Actions taken are limited to the items on the agenda, unless two-thirds of the board votes otherwise.

"In the past, you could discuss whatever you wanted at the meetings," said June Barlow, vice president and general counsel for the California Assn. of Realtors.

"This requires that boards now only discuss what's on the agenda . . . so that you can't hide the items from the agenda. It opens up the decision-making process of HOA boards."

Some other noteworthy housing-related bills:

* Senate Bill 559 retroactively applies the exemption from reassessment for transfers of real property between registered domestic partners back to Jan. 1, 2001, if the transferee submits an application for reversal of the reassessment by June 30, 2009. No refunds on property taxes already paid would be provided based on the reassessment reversal.

* Assembly Bill 976 prohibits a city, county or landlord from discriminating against a tenant or prospective tenant based on the person's immigration or citizenship status.

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