IRS TO EXPEDITE TAX LIEN RELIEF FOR HOMEOWNERS

IRS TO EXPEDITE TAX LIEN RELIEF FOR HOMEOWNERS

The Internal Revenue Service (IRS) recently announced it will expedite its process of providing relief from federal tax liens for distressed homeowners. With over one million current federal tax liens against real and personal property, the IRS announcement should help REALTORS® and their clients resolve federal tax lien issues in their sale and loan transactions.

As background, a homeowner seeking to sell or refinance a property must generally pay off an existing federal tax lien. However, during the current economic downturn, many homeowners don't have the cash or equity to do so. Hence, for a refinance, the homeowner may request that the IRS makes its tax lien subordinate or secondary to the lien of the refinancing lender. For a sale, the homeowner may, under certain circumstances, request that the IRS discharge its claim. The IRS's processing time for subordination or discharge requests has been about 30 days. The IRS is currently working to expedite that time frame to help distressed homeowners.

For IRS instructions on requesting relief from federal tax liens, go to the IRS Publication 783 for discharges and Publication 784 for subordinations at www.irs.gov.

Hope For Homeowners Initiative H4H

The Hope For Homeowners (H4H) initiative that was part of the July stimulus package began to be implemented Oct. 1. The H4H program allows troubled homeowners to keep their home, while enabling lenders to receive a Federal Housing Administration (FHA) guarantee on the loans.

Under terms of the voluntary program, lenders agree to refinance the existing mortgage at 90 percent of the current appraised value and assume the loss on the remaining balance; the new loan is an FHA guaranteed 30 year, fixed-rate, fully amortized, fully documented loan; and the homeowner must forego a portion of the home’s future appreciation to the FHA when it is sold.The FHA has posted a list of lenders participating in the HOPE for Homeowners program.

When contacting the lenders, the FHA is strongly encouraging consumers to also contact their servicing lender and any subordinate lien holders as their participation is vital in order to refinance into a H4H mortgage. The program is voluntary and servicing lenders may offer different solutions for avoiding foreclosure.

The FHA plans to update the list weekly on Fridays. The list is available at http://portal.hud.gov/portal/page?_pageid=73,7605762&_dad=portal&_schema=PORTAL.

Housing and Economic Recovery Act of 2008

President Bush signed the "Housing and Economic Recovery Act of 2008." For the past several years, C.A.R. and the NATIONAL ASSOCIATION OF REALTORS® have aggressively lobbied for Congress to pass numerous provisions found in this historic bill.

This federal housing bill is a significant move in the right direction for California homeowners. It will aid in stabilizing our economy and help stem foreclosures, while also providing support to first-time homeowners.

The legislation will assist an estimated 400,000 homeowners facing foreclosure, many of whom reside in California, by allowing them to refinance their current mortgages with a Federal Housing Administration (FHA)-backed loan. The bill also will permanently increase FHA, Fannie Mae, and Freddie Mac loan limits in high-cost areas.

The bill permanently increases the conforming loan limit to $625,500. C.A.R. has long advocated for higher conforming loan limits. In February, the Economic Stimulus Act of 2008 was signed, temporarily raising the conforming loan limit in high-cost areas to $729,750 from $417,000 until December 31, 2008.

Although we would have liked Congress to make permanent the current $729,750 loan limit, C.A.R. is pleased with the new permanent loan limit of $625,500. It will allow California homeowners to refinance their loans into safe affordable loan products and allow first-time home buyers to enter the market.

The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area’s median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area’s median home price, up to $625,500. Both new loan limits will be effective at the expiration of the economic stimulus limits on December 31, 2008.

C.A.R. also supports the following bill provisions:
A temporary increase in mortgage revenue bonds to refinance subprime mortgages.
New regulator for Government Sponsored Enterprises to restore investor confidence in GSE loans and help the market and economy stabilize.
First-time home buyer tax credit, which allows first-time home buyers to receive a tax refund worth up to 10 percent of a home’s purchase price, up to a maximum of $7,500. The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.
Temporary raise in the loan limit for the Veterans Affairs home loan guarantee program to the same level as the economic stimulus limits until the end of 2008.
Adjustment to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA), allowing sellers to provide the non-foreign affidavit to a qualified closing entity and not just the buyer.
The setting of minimum requirements for mortgage originators, which mandates fingerprinting of loan originators and establishes a nationwide loan originator licensing and registration system. The requirements do not apply to those only performing real estate brokerage activities unless they are compensated by a lender, mortgage broker, or other loan originator. States will have the ability to implement more stringent laws.
The creation of a National Affordable Housing Trust Fund to help cover the cost of the FHA rescue plan for the first five years and develop affordable housing in subsequent years.

Other provisions in the legislation:
The Treasury Department’s proposal to create a federal backstop program to insure the financial well-being of Fannie Mae and Freddie Mac.
The FHA’s inability to insure loans that utilize a seller-funded down-payment assistance program. Down-payment assistance from family, employers and other nonprofits is still allowed.
The Community Development Block Grant Programs’ $4 billion allotment for communities to purchase and refurbish foreclosed homes.

BASELINE MANSIONIZATION ORDINANCE UPDATE

The City Council unanimously approved the Baseline Mansionization Ordinance which went into effect June 29th. The basic provisions of the ordinance are as follows:

Basic maximum house size: The basic maximum house size is a percent of the lot in each zone.

• R1: 50% of lot size if under 7500 sf; the greater of 3750 sf or 45% of lot size if over that.
• RS: 45% of lot size under 9000 sf; the greater of 4050 sf or 40% of lot size if over that.
• RE9, RE11: 40% of lot size under 15,000 sf; the greater of 6000 sf or 35% of lot size if over that.
• RE15, RE20, RE40: 35% of lot size.
• RA: 25% of lot size under 20,000 sf; the greater of 5000 sf or 20% of lot size if over that.

These numbers exclude up to 400 sf for a garage, 400 sf of detached accessory buildings, and 250 sf of porches, patios and breeze-ways with a solid roof open on at least 2 sides.

FORECLOSURE RELIEF BILL BECOMES LAW

FORECLOSURE RELIEF BILL BECOMES LAW

This week, the State Legislature enacted foreclosure reform law to address the adverse effects of high foreclosure rates in California. The new law requires lenders to contact homeowners to explore options for avoiding foreclosure at least 30days before filing a notice of default. It also requires owners acquiring property through foreclosure to maintain the exterior of vacant residential properties. The new law also extends from 30 to 60 days the time for residential tenants to move out of properties that have been foreclosed upon, unless other laws apply. These requirements will remain in effect until January 1, 2013. The full text of Senate Bill 1137 (Perata) is available at www.leginfo.ca.gov.

Highlights of the new law are as follows:

- Contact Between Lender and Borrower: Effective on or about September 8, 2008, a lender, trustee, or authorized agent may not file a notice of default until 30 days after contacting a borrower to assess the borrower's financial situation and explore options for avoiding foreclosure. A lender must generally contact the borrower in person or by telephone, or satisfy due diligence requirements for contacting a borrower. During the initial contact, the lender must inform the borrower of the right to request a meeting with the lender within 14 days. The lender must also give the borrower the toll-free number for finding a HUD-certified housing counseling agency. A subsequent notice of default must include the lender's declaration that it has contacted the borrower, tried with due diligence to contact the borrower, or the borrower has surrendered the property. A lender who had already filed a notice of default before the enactment of this law must include a similar declaration in the notice of sale. This requirement to contact borrowers applies to loans secured by owner-occupied residences made from 2003 to 2007. Certain exemptions apply if the borrower has filed for bankruptcy, surrendered the property, or contracted with a person or entity whose primary business is advising people, who have decided to leave their homes, on how to extend the foreclosure process and avoid their contractual obligations.

- Maintenance of Vacant Properties: Effective July 8, 2008, anyone who acquires property through foreclosure must maintain the exterior of vacant residential property. Violations of this law include permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action against trespassers or squatters, failing to take action to prevent mosquitoes from breeding in standing water, or other public nuisances. This law authorizes a governmental entity to impose a civil fine up to $1,000 per day for any violation, as long as the owner has been given notice and an opportunity to remedy the violation. A violator must be given at least 14 days to begin, and 30 days to complete, such remediation before a fine can be assessed.

- 60-Day Notice to Terminate Tenants: Effective July 8, 2008, a tenant or subtenant in possession of a rental housing unit that has been sold through foreclosure is generally entitled to a 60-day written notice to quit, not just 30 days. However, a borrower who remains on the property after foreclosure may be served a three-day notice to terminate. This law does not affect, among other things, rent-controlled properties with just-cause evictions. Effective on or about September 8, 2008, the lender, trustee, or authorized agent posting a notice of sale must also post and mail a specified notice of a tenant's right to a 60-day eviction notice from the new owner, unless other laws apply. This requirement to notify tenants of their rights applies to loans secured by residential real property where the borrower has a different billing address than the property address.

C.A.R. supports “Yes” vote on Prop. 98

C.A.R. supports “Yes” vote on Prop. 98 to protect homeowners from unjust eminent domain takings

LOS ANGELES (May 13) – Imagine someone from your city or community knocking on the door of your home and telling you to move because they have found someone else who will contribute more in taxes than you do. Sound far-fetched? Not if you’re one of the thousands of people throughout California currently living under the very real threat of being kicked out of their homes by local governments to make room for more expensive stores and homes. To prevent this egregious use of eminent domain, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today announced its support of Proposition 98 on the June 3 ballot. Prop. 98 will impose an outright ban on the use of eminent domain to take any private property – including homes, business and farms – for another private use.

“Proposition 98 on the June ballot will restore fundamental property rights by prohibiting governments from using eminent domain to take private property for another private use,” said C.A.R. President William E. Brown. “Cash-strapped local governments have resorted to abusing the concept of eminent domain to make land grabs they hope will bring in more tax revenue,” he said. “What once was a legitimate means for governments to invest in public infrastructure like roads, schools and parks is now a hammer used to destroy the rights of homeowners."

“While nobody may be knocking on your door today, a “Yes” vote on Prop. 98 will ensure you aren’t the next victim tomorrow,” Brown said. “We are urging all to vote “Yes” on Prop. 98 on June 4.”

C.A.R. also has taken an “Against” position on Proposition 99, which, if passed, would cancel the provisions protecting homeowners in Proposition 98.Proposition 98:

• Limits Eminent Domain to Public Use – Proposition 98 limits the use of eminent domain to public use projects, such as freeways, schools, or parks.
• Prohibits Price Controls on Private Property – Proposition 98 prohibits government from imposing rent control or inclusionary zoning ordinances on private property. As units are vacated, price controls will be “lifted.” Furthermore, Proposition 98 will prohibit future land use restrictions that act as a “taking” for the benefit of another private interest.
• Limits Government Taking for Similar Use – Proposition 98 prohibits government from taking private property to be used for the same purpose, such as taking property with residential housing to be used for government housing.
• Limits Government Seizures to Exploit Natural Resources – Proposition 98 will protect family farms and open space from seizures of their land by government in order to take the property’s natural resources.
• Provides Full Compensation – Proposition 98 is the only measure that requires full compensation to business owners, even when the property is seized for public projects. Owners will be entitled to compensation for temporary business losses, relocation expenses, business reestablishment cost, and other reasonable expenses.

The Baseline Mansionization Ordinance Passed

New McMansion Law: Everybody had a Say
Perspective By Ken Draper

The McMansion craze flatlined this week. On Tuesday, the City Council passed the anti-McMansion ordinance … technically the Baseline Mansionization Ordinance … making it difficult for property owners to build houses seriously out of proportion to the rest of the neighborhood. Most, but not all, of LA’s affected citizens were happy.

In looking back over the tons of testimony, it appeared that support for the new bill was about 60%. At one mid-city neighborhood council meeting … when they addressed the McMansion issue … the 150 or so stakeholders present were about evenly divided.

The idea behind the Mansionization ordinance is to stop the proliferation of oversized and out-of-context building in LA’s residential neighborhoods. Property owners putting up three story houses, built to the property lines on all sides, for example … and, altering the look, feel, comfort and property values of the community.

Among the bill’s supporters were residents who felt the historic feel and ambiance of their neighborhood were being destroyed. At the least jeopardized. And, those who simply live by the principle that any change is bad.

The opposition came from folks who wanted to increase the size of their living space by building up and out on their current property instead of moving to larger homes. The remodel was cheaper to accomplish than the purchase of another house. And, those who simply believe that an owner has the right to do with his/her property what he/she wishes. Beauty is in the eye of the beholder.

The point of this column, however, is not about who celebrated and who didn’t over the passage of the Mansionization law. It’s about the numbers of individual LA citizens, businesses and organizations that participated in the process.

Often with policy issues at City Hall, the loudest protest is not over agreement or disagreement with the outcome, but over the lack of public participation. This appears to be a case where everybody had a say in the process.

Councilman Tom LaBonge’s motion to create the Baseline Mansionization Ordinance was approved by the Council almost two years ago. The record since … plug Council File #06-1293 into the Council File Index search box … shows an exceptional history of public input. Public comment at numerous Council and PLUM meetings. Community Impact Statements and letters form neighborhood councils, homeowner groups and other community organizations … all across the city. Sixty or more people had their say last Tuesday in Council Chambers. At last count, a third of the city’s neighborhood councils had agendized mansionization at some point along the way. Media provided coverage. More than 20 related stories or opinion pieces in CityWatch alone. City Council members held hearings and input opportunities.

In contrast to City Hall business as usual, this was not a law constructed in a vacuum or behind closed doors. In one six-month stretch, it was heard in Council’s Planning and Land Use Committee four times.

And someone appeared to be listening. This, for example, from the Background section of the ordinance cover pages: When the first mansionization ordinance was proposed in May of 2007 it attempted to find one FAR (Floor Area Ratio) that could be applied to all single-family zones. That approach was resoundingly rejected by the general public and the City Planning Commission.”

There’s a difference between being listened to and being agreed with. While some who opposed the new ordinance are not happy that they were not agreed with … it appears that everyone was listened to.

Maybe this time City Hall got it right. The making of a new policy and LA’s empowered advisors had a say.

)Read ordinance and testimony at www.lacity.org – enter #06-1293 into the File Index search box.