We’re off to a new year and so is title industry legislation. Home buyers and sellers, and real estate agents, will need to be aware of new laws affecting the title insurance industry. Here is a summary of some of the new laws for 2017.
Change in Re-Recordation of Documents - AB 1974
This law requires for each instrument, paper or notice that is re-recorded to be executed and acknowledged or verified as a new document, unless any of the following apply:
Acceptance of Identification - AB 2566
This bill allows a Notary to accept a consular identification card and a foreign passport without further qualification. It is no longer required that a foreign passport presented as identification be stamped by the United States Citizenship and Immigration Services (ISCIS). The law adds a valid, unexpired consular ID document issued by a consulate from the applicant’s country of citizenship to the list of acceptable documents used by a Notary as satisfactory evidence of identity.
Delinquent taxes/Partial Payment Fee - AB 2291
The county tax collector is authorized to charge a fee to recover the reasonable costs of instituting and maintaining a partial payment arrangement, and would require the fee to be subject to those existing requirements applicable to increasing or initially imposing a new fee or charge. This bill would also require the ordinance authorizing the tax collector to charge a fee to require the fee to be paid prior to the application of any partial payments to penalties, interest, costs, and taxes due.
Homeowner’s Bill of Rights
After Death of Borrower - SB 1150
This law extends provisions of the Homeowner’s Bill of Rights to a successor in interest after the borrower has died. Until January 1, 2020, it prohibits a mortgage servicer, upon notification that a borrower has died, from recording a notice of default until the mortgage servicer requests reasonable documentation of the death of the borrower from a claimant, among other things.
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Home prices likely to increase in 2017. There may be a higher percentage gain in the median price and below. The median price may increase 10%. Expect homes below the median price range in each area to move up even more, while homes above the median price will move up less. As we get to the higher priced homes in each area, expect prices to move up just slightly.
Up until now the higher price ranges have moved up more than the median priced and lower homes, but that's beginning to change. The only structural risk may be in the very high price ranges where there is an oversupply. For example, at the $20 to $40 million range there are 3-5 year supply of homes on the market and under construction. This is the case in the very high end price ranges in many parts of the market. These have been overbuilt, and while exciting to discuss, they really account for only a fraction of 1% of all sales.
Mortgage rates to increase slightly hitting 5%. There will likely be ongoing fluctuation above and below the current 4.5% range throughout the year. While 5% may seem high to many, it's a low rate if you look at historical rates over the last 40 years.
Number of sales although 2016 figures won't be available for a couple of weeks but expect total California resales to be in the 430,000 unit range. Sales should remain strong throughout 2017, increasing by about 5%.
Mortgage products will likely be based on stated income loans as the Trump administration and the republicans have promised to trim back the regulations in the Dodd Frank Bill passed after the mortgage market collapse.
A lender evaluates a loan with 3 main criteria: 1. Income 2. Credit 3. Loan to value.
Except for the disastrous subprime era from 2003-2007 Lenders have always required 2 out of 3.
For example: Strong credit and high income would be required for a low down payment. A large down payment and strong income would allow a lender to accept a lower credit score. Unfortunately, under Dodd Frank, great credit and a large down payment would not allow waiving the income requirement, as verifying income is required under Dodd Frank. The premise was that by not having high enough verifiable income borrowers either could not afford the loan or were cheating on their taxes. While the later may be the case the argument against it is that the law is to maintain the integrity of the mortgage market, not to enforce tax law. Stated income was allowed for decades with a large down payment and strong credit. Unfortunately, during the time of subprime mortgages lenders no longer required 2 out of the 3 criteria and gave loans to people without verifying income that also had poor credit and a low down payment.
Expect stated income to return this year for people that put down a large down payment and have great credit. There are many self employed people that are aggressive with their deductions and have not been able to get a loan since 2008 when this legislation took effect. Many of those people would buy if they could. Many feel stuck and would sell their home and buy another if they could.
Many of these buyers are in the higher than median price range. This could cause these homes to jump more than predicted above the median price range and could cause them to move up closer to the 10%. The super high end is mostly cash transactions so stated income won't effect those homes.
Wishing everyone a happy, health and very prosperous New Year in 2017!
Rodeo Realty believes all information to be deemed reliable, but assumes no legal responsibility for its accuracy.