BILL NUMBER: AB 1224 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 25, 2012
AMENDED IN SENATE MAY 1, 2012
AMENDED IN SENATE APRIL 9, 2012
INTRODUCED BY Committee on Veterans Affairs (Cook (Chair), Pan
(Vice Chair), Block, Gorell, Nielsen, V. Manuel Pérez, Williams, and
Yamada)
FEBRUARY 18, 2011
An act to amend Sections 987.60, 987.67, 987.69,
987.71, 987.74, 987.75, 987.785, 987.79, and 987.84 of,
and to add Section 987.93 to, the Military and Veterans Code,
relating to veterans, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 1224, as amended, Committee on Veterans Affairs. Veterans:
veterans' farm and home purchases.
The Veterans' Farm and Home Purchase Act of 1974 authorizes the
Department of Veterans Affairs to assist veterans in acquiring homes
and farms, including cooperative dwelling units, by generally
providing that the department may purchase a farm or home that the
department then sells to a purchaser, as defined.
This bill would authorize the Department of Veterans Affairs to
adopt regulations necessary to implement the act described
above for cooperative dwelling units in accordance with the
Administrative Procedure Act. The bill would also revise provisions
relating to forfeiture and the calculation of net gain in connection
with the sale of a cooperative dwelling units
unit .
The Veterans' Farm and Home Purchase Act of 1974 requires the
purchaser to make an initial payment of at least 2% of the selling
price of the property or a higher amount as determined by the
Department of Veterans Affairs based on the creditworthiness of the
purchaser.
This bill would eliminate the requirement that the higher amount
determined by the department to be paid by the purchaser be based on
the creditworthiness of the purchaser and instead provide that
the higher amount be determined based upon military record,
employment record, financial condition, and other similar factors as
determined by the Department of Veterans Affairs .
This bill would declare that it is to take effect immediately as
an urgency statute.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 987.60 of the Military and Veterans Code is
amended to read:
987.60. (a) The department may acquire the farm or home from its
owner or may contract with a veteran for the construction of a
dwelling and other improvements for a farm or home, upon the terms
agreed under all of the following terms and conditions:
(1) The department is satisfied of the desirability of the
property submitted.
(2) The veteran has agreed with the department that he or she, or
members of his or her immediate family, will actually reside on the
property within 60 days from the date of purchase by the department,
or, if the residence on the property is not complete on the date of
purchase, within 60 days after the residence is completed, and will
continue to reside on the property until all payments due the
department have been paid or the farm or home is sold, except where
the occupancy requirement is waived pursuant to Section 987.62.
(3) If the department is to contract with a veteran for the
construction of a dwelling and other buildings, or for the purchase
of a mobilehome, all of the following are required:
(A) The veteran shall be the owner of the real property on which
the dwelling and other buildings are to be constructed, or shall be
the owner of the real property or shall be the owner of an undivided
interest in common in a portion of a parcel of real property on which
a mobilehome or cooperative dwelling unit is to be situated, and
agrees to convey that property to the department without cost.
(B) The veteran has paid a reasonable fee set by the department to
cover the cost of any preliminary service of the department that may
be necessary to process the application.
(C) The veteran has filed with the department adequate plans and
specifications for the improvements to be constructed upon the real
property, together with a contract, executed by a contractor licensed
by the State of California for the construction of the improvements
in accordance with the plans and specifications within 12 months
after the acquisition of the property by the department. The
department may require a bond or other security instrument executed
by the contractor in an amount determined by the department providing
for compliance with the terms of the contract and for the payment of
persons furnishing material or labor on the job, executed by a
surety company, or other financial institution, authorized to do
business in the State of California. The department may also require
course-of-construction insurance for public liability, property
damage, and workers' compensation.
(D) The plans, specifications, contract, and other required
documents or security instruments are approved by the department.
(E) The veteran has placed in escrow all sums of money to be
advanced by him or her, where the cost is in excess of the maximum
that may be expended by the department.
(b) As used in this section, "immediate family" includes only the
veteran's spouse, natural or adoptive dependent children, and parents
only if the parents are dependent upon the veteran for 50 percent or
more of their support.
SEC. 2. Section 987.67 of the Military and Veterans Code is
amended to read:
987.67. (a) Before Except as set forth in
regulations adopted by the department pursuant to Section 987.93
with respect to cooperative dwelling units in lieu of, or in addition
to, the provisions of this section, before the purchase of any
property by the department there shall be filed with the department
(1) an appraisement of the market value of the property by an
employee or an authorized agent of the department, (2) an
appraisement of the market value of the property by either the
Federal Housing Administration or the Veteran's Administration, and
in addition there may be filed with the department an appraisement of
the market value of the property by an authorized appraiser of a
banking corporation formed under the laws of this state or of a
national banking association having a place of business in this
state, or (3) an appraisement of the market value of the property by
an appraiser licensed or certified in this state. Each appraisement
shall be certified by the maker thereof. The certification shall
state that it is made in good faith, and that the valuation is
honestly determined and represents the bona fide opinion of the
maker.
(b) The department shall establish guidelines to ensure greater
participation of state-licensed or state-certified real estate
appraisers and shall establish an outreach program to effectively
disseminate information concerning the participation to professional
appraisal associations or trade groups.
SEC. 3. Section 987.69 of the Military
and Veterans Code is amended to read:
987.69. The department shall then enter into a contract with the
veteran for the sale of the property to the veteran. The department
shall fix the selling price of the property as the purchase price
thereof, as the total cost of improvements constructed, or as the
value of the property, as determined by the department when the
property is acquired by the department in a manner other than by
purchase, to which the department may add all expenses incurred and
estimated to be incurred by the department in relation thereto,
inclusive of interest, administration, appraisals, examination of
title, insurance premiums, mortgage guaranty fees, origination fees,
incidental expenses, and the sum deemed necessary to meet unforeseen
contingencies. In the case of real property acquired for the purpose
of constructing improvements thereon, the department shall forthwith
after acquiring that real property enter into the contract with the
veteran authorized by this section at a selling price that does not
exceed the department's appraised value of the land, if the loan is
to include the value of the land, and the amount of the department's
appraised value of the improvements to be constructed thereon and any
of the other additions herein authorized. After the execution of the
contract between the veteran and the department and the making of
the initial payment thereon the department shall be authorized to pay
the cost of the improvements contracted to be constructed on the
real property, making progress payments thereon in the amounts and at
those times that the department approves. The department shall, upon
written request of the veteran and his or her contractor, have
authority to approve additions to or deletions from the improvements
contracted to be constructed and any savings affected or added cost
incurred shall be deducted from or added to the amount due the
department by the veteran under the terms of his or her contract.
The department may establish provisions under regulations adopted
by the department pursuant to Section 987.93 with respect to
cooperative dwelling units in lieu of, or in addition to, those set
forth in this section.
Where the department enters into a contract for the sale of
property on trust to an Indian veteran, the contract shall include
the following conditions:
(a) The dwelling house or other improvements contracted to be
constructed on trust land shall be completed in compliance with the
standards of the building code applicable on the trust land. If there
is no building code in force on the trust land, the applicable
standards shall be those of the building code of the county in which
the trust land is located.
(b) On the completion of construction, the Indian veteran shall
provide to the department an inspection certificate from a qualified
building inspector certifying that the dwelling house or other
improvements comply with the standards of the building code as
required by subdivision (a).
SEC. 3. SEC. 4. Section 987.71 of
the Military and Veterans Code is amended to read:
987.71. (a) The purchaser shall make an initial payment of at
least 2 percent of the selling price of the property or a higher
amount that shall be determined based upon military record,
employment record, financial condition, and other similar factors as
determined by the department. The department may waive the
initial payment in any case where the value of the property as
determined by the department from an appraisal equals the amount to
be paid by the department plus at least 5 percent. In the case of a
purchase requiring a loan guaranty by the United States Department of
Veterans Affairs, the department may waive the initial payment and
the purchaser shall pay the loan guaranty fee, which may be added to
the loan amount. The department may require the purchaser to pay a
loan origination fee, not to exceed 1 percent of the loan amount,
which may be added to the loan amount.
(b) The balance of the loan amount may be amortized over a period
fixed by the department, not exceeding 40 years for farms or homes,
not including cooperative housing stock related to mobilehomes, and
not exceeding 30 years for mobilehomes, including cooperative housing
stock related to mobilehomes, located in mobilehome parks, as
defined in Section 18214 of the Health and Safety Code, together with
interest thereon at the rate determined by the department pursuant
to Section 987.87 for these amortization purposes.
(c) The department may, in order to allow the veteran to purchase
the home selected without incurring excessive monthly payments, at
the time of initial purchase, postpone the commencement of payment of
the principal balance for a period not to exceed five years if the
veteran's current income meets the standards for purchase on these
terms and if the department determines, in accordance with previously
established criteria for these determinations, that the veteran's
income can reasonably be expected to increase sufficiently within the
five-year period to make the transition to fully amortized principal
and interest payments, so long as the total term of the contract of
purchase does not exceed 40 years, or 30 years where the contract
relates to a mobilehome located in a mobilehome park, as defined in
Section 18214 of the Health and Safety Code.
(d) The purchaser on any installment date may pay any or all
installments still remaining unpaid.
(e) In any individual case, the department may for good cause
postpone, from time to time, upon terms the department determines to
be proper, the payment of the whole or any part of any installment of
the purchase price or interest thereon.
(f) Each installment shall include an amount sufficient to pay the
principal and interest on the participation contract to which the
interest of the department is subject, and any amount as may be
required by a covenant or provision contained in any resolution of
issuance.
(g) When a purchaser makes an initial payment of less than 20
percent of the selling price of the property, the department shall do
all of the following:
(1) Take prudent measures to minimize losses from loan defaults
and loan delinquencies.
(2) (A) Ensure the continued financial solvency of the loan
program by charging fees to cover the costs, as determined by the
department, of any loan guaranty, primary mortgage insurance, or
other similar arrangement.
(B) Fees charged under this paragraph may be included in the
amount of the loan, collected in advance, or collected as part of the
monthly payment.
(h) (1) Subject to paragraph (2), the department may provide
initial payment assistance to lower income first-time purchasers by
providing a deferred-payment second loan, upon which simple interest
shall be charged at a rate established by the department.
(2) A deferred-payment second loan described in paragraph (1) is
subject to all of the following conditions:
(A) The loan may not exceed 3 percent of the selling price of the
farm or home.
(B) The loan shall be secured by a deed of trust or, if authorized
by the department, another form of security.
(C) The loan shall be due and payable upon the payment in full of
the contract or upon the sale or transfer of the farm or home.
SEC. 5. Section 987.74 of the Military
and Veterans Code is amended to read:
987.74. (a) All properties purchased by the department shall be
covered by insurance. Insurance Except as set
forth in regulations adopted by the department pursuant to Section
987.93 in lieu of, or in addition to, the provisions of this
subdivision, with respect to cooperative dwelling units, insurance
purchased by the department shall be guaranteed replacement
cost coverage as described in subdivisions (e) and (f) of Section
10102 of the Insurance Code against fire and other hazards for the
full replacement cost of the improvements or structures, shall
include limited building code upgrade as described in Section 10103
of the Insurance Code, and shall be placed with a company or
companies as the department may determine from time to time.
The department may charge purchasers a premium to cover the cost
to the department for insurance obtained pursuant to this
subdivision. The premium shall not exceed the actual cost to the
department for the coverage provided.
(b) The contract made between the department and the purchaser
shall provide that the purchaser maintain the farm or home as his or
her place of residence and keep in good order and repair all
buildings, fences, and other permanent improvements situated thereon.
Insurance policies purchased by the department shall be obtained to
insure and keep insured against fire and other hazards, all
buildings, fences, and other permanent improvements on the property.
All policies shall be written with any loss payable to the department
and the purchaser as their interests may appear. Insurance shall be
in the amount, with the insurance companies, and under the terms and
conditions as may be specified by the department.
(c) Upon renewal, the department shall assist the purchaser in
determining the insurance level necessary to repair or replace the
damaged or destroyed dwelling with like or equivalent construction
and in determining how best to purchase additional coverage, if
desired. The purchaser shall be solely responsible for requesting in
writing and maintaining any additional amounts of insurance necessary
to protect his or her interest in the property, and shall bear the
risk of any loss in excess of the amount of insurance in force at the
time of the loss.
(d) The department shall annually send a disclosure notice to all
purchasers who have residential property insurance provided through
the department. The notice shall identify the type of coverage, and
shall disclose all of the following in a clear and reasonable manner:
(1) The limits of liability for the structure and improvements.
(2) The amount of any deductibles.
(3) Whether the policy covers the increased costs due to changes
in building ordinances or laws regulating construction or repair.
(4) A statement explaining the importance of having guaranteed
replacement cost coverage.
(5) A statement that the policy provided by the department
provides limited building code upgrade coverage and the applicable
limits and restrictions to that coverage.
SEC. 6. Section 987.75 of the Military
and Veterans Code is amended to read:
987.75. (a) If the purchaser or, if
applicable, the related stock corporation, fails or neglects to pay,
satisfy, and discharge at maturity all taxes and assessments, and all
other charges and encumbrances which are a lien upon the property
being purchased from the department, or any part thereof, and also
all taxes and assessments levied or assessed upon the interest
created by the contract of purchase of such property; or to keep the
buildings, fences, other permanent improvements upon such property
insured and in good order and repair, or to keep the crops upon such
property insured; or to keep in good order and repair all buildings,
fences, and other permanent improvements situated upon such property;
then, in such event, the department may pay, satisfy, discharge,
settle, or compromise the taxes, assessments, charges, or
encumbrances, or insure the buildings, fences, permanent
improvements, or crops, or do the work and supply the materials
necessary to keep the buildings, fences, and other improvements in
good order and repair. All moneys so expended by the department shall
be added to the selling price of the property and bear interest at
the rate of interest designated in Section 987.71 from the date of
expending the same, and shall be repaid by the purchaser to the
department on demand. The department may amortize the repayment of
such expenditures or permit repayment in installments upon the terms
and conditions which it deems proper.
(b) The department may establish provisions under regulations
adopted by the department pursuant to Section 987.93 with respect to
cooperative dwelling units in lieu of, or in addition to, the
provisions of this section.
SEC. 4. SEC. 7. Section 987.785 of
the Military and Veterans Code is amended to read:
987.785. Except as otherwise may be provided
set forth in regulations adopted by the department
pursuant to regulations promulgated by the department with
respect to a cooperative dwelling unit owned by a limited equity
housing cooperative Section 987.93 with respect to a
cooperative dwelling unit , whenever the department cancels a
contract and takes possession of a property pursuant to Section
987.77 and elects to sell the property covered by a forfeited
contract, the department may, at its option, establish a procedure
for listing the property for sale, together with similarly located
properties, with a licensed real estate broker. The department may,
in this connection, prepare schedules of properties available for
sale by geographic areas and may offer a schedule from time to time
to any licensed real estate broker within the geographic area covered
by the schedule for a fee which shall be sufficient to cover the
costs to the department in compiling the schedules and making them
available. If the department enters into a real estate listing
agreement, exclusive or otherwise, with a licensed real estate
broker, the department shall cooperate with the broker in all
customary respects and make the property available at reasonable
times for inspections by prospective purchasers.
SEC. 5. SEC. 8. Section 987.79 of
the Military and Veterans Code is amended to read:
987.79. (a) Except as otherwise provided in subdivision (b), the
department may, in the contract of purchase with a veteran, provide
that, in the event of default by the veteran and forfeiture of his or
her rights under the contract and subsequent sale of the property by
the department, it may pay to the veteran any net gain realized by
the department upon the sale. The department is the sole judge of the
net gain.
(b) The net gain realized by the department upon the sale of a
cooperative dwelling unit owned by a limited equity housing
cooperative shall be determined in accordance with regulations
established adopted by the department
pursuant to Section 987.93 .
SEC. 6. SEC. 9. Section 987.84 of
the Military and Veterans Code is amended to read:
987.84. Except as may otherwise be permitted by the department
pursuant to regulations established adopted
by the department pursuant to Section 987.93 , the
right to declare a forfeiture for breach of a condition contained in
any deed to real property or in any cooperative dwelling unit
ownership documents may not be enforced as against the interest of
the department in said property or any portion thereof.
SEC. 7. SEC. 10. Section 987.93 is
added to the Military and Veterans Code, to read:
987.93. The department may adopt regulations necessary
to implement this article for cooperative dwelling units that
are consistent with the objectives and purposes of this article and
in a manner in accordance with the Administrative Procedure Act
(Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3
of Title 2 of the Government Code).
SEC. 8. SEC. 11. This act is an
urgency statute necessary for the immediate preservation of the
public peace, health, or safety within the meaning of Article IV of
the Constitution and shall go into immediate effect. The facts
constituting the necessity are:
In order for the Department of Veterans Affairs to offer housing
finance opportunities to veterans, including cooperative dwelling
loans, as soon as possible, it is necessary that this act go into
immediate effect.