SACRAMENTO SUMMARY By Michael J. Arnold & Michael Belote, Esq. Legislative Advocates Points of Interest Summer 2019 Page 5 A swewritethisarticle,theLegislature is in full swing. Almost 3,000 legislative proposals have been introduced this year on issues from A to Z! Your legislative advocates and the CMA Legislative Committee have reviewed all of the legislative proposals and have identified 65 bills which could impact the members of the CMA. Note that the number of bills we follow closely will change throughout the year duetoamendmentswhichcancauseabill being followed to no longer be of interest or a bill we were initially not following to suddenly be something of key concern to the Association. We will review all amendments to all legislative proposals throughout the legislative session. Key Legislative Deadlines Thedeadlineforbillstobeoutofthe“house of origin” is June 1. The budget must be adopted by June 15 and must be signed into law by the Governor by July 1st . Any bill which remains alive after the June 1st deadline is then considered by the second house. The Legislature will adjourn on September 13th andtheGovernorhasuntil October13th tosignorvetolegislation. New bills will take effect on January 1st unless the terms of the bill call for a different effective date. Governor’s Budget OnMay9th ,GovernorNewsomreleasedhis May Revision of the budget he published in January. The “May Revise” focuses on a numberofbig-ticketitemssuchashousing/ homelessness; a new “Parents Agenda” that includes additional money for child care and full-day kindergarten programs; extendedpaidfamilyleavefornewparents; a tax exemption for menstrual products and diapers; and education, including enhanced funding on a permanent basis for special education and teacher training along with one-time cash infusions for universities and community colleges. The proposed budget for the 2019-2020 fiscal year totals $213 Billion! The state is flush this year, with a sizeable budget surplus anticipated. Governor Newsom’s MayRevisealsoproposestoputadditional emphasis on California’s housing crisis by addinganadditional$500milliontoafund designed to remove barriers to building mixed-income housing. CMA Sponsored Bill AB 1384 (O’Donnell) Increases the dollar limit on loans for construction or rehabilitation projects -- where the completedvalueoftheprojectwillbeused to meet the loan-to-value ratios of current law -- from $2.5 million to $4.5 million. Rising construction costs and property values have dramatically driven up the costs of construction and rehabilitation projects since the $2.5 million cap was placed into law back in 2003. When this issue was raised at a CMA seminar on construction/rehabilitation lending pursuant to Article 5 and Article 6 of the Business and Professions Code, the CMA BoardheardthemembershipandAB1384 was introduced. The bill has passed the Assembly and is awaiting a hearing in the Senate policy committee. Financial Code 4970 Issue During a routine audit of one of our members, a DRE auditor determined that a clear business purposes loan on an owner-occupied property was a “covered loan” under Financial Code section 4970. Following an administrative appeal, the DRE confirmed the auditor’s determination,findingthat4970appliedto businesspurposeloansonowner-occupied properties. Since the enactment of Section 4970, the CMAanditsmembershaveinterpretedthe statute as only applying to non-business purposeowneroccupiedloans. Asaresult, many members have originated, and continue to originate, business purpose loans on owner occupied properties that wouldotherwiseviolatetheAPRandpoint limits of 4970. The DRE’s ruling, if allowed to stand, will put those loans and their originating lenders in jeopardy of being found in violation of 4970. The CMA Board is considering this new development re Section 4970 and will be acting on behalf of the CMA membership by taking one or more of the following actions: meeting with the DRE to convince the Department that their interpretation should be changed; pursuing a court challenge; and securing corrective language via legislative enactment. We shallkeepthemembershipapprisedofour progress on this very important matter of mutual concern.