As of January 1, 2018, SB-2 Building Homes and Jobs Act mandates a fee on mortgage refinances and other real estate transactions. Here’s what you need to know about SB-2 and how it impacts recording of residential real estate documents.
California Senate is aiming to address the state’s homelessness through its recent passage of SB-2. Also known as the Building Homes and Jobs Act, SB-2 mandates a fee on mortgage refinances and other real estate transactions (source).
The goal of the bill is to help finance new and rehabilitated developments for low-income residents. SB-2 is expected to generate $250 million annually.
How Much Does SB-2 Cost?
The SB-2 statute reads as follows:
The bill would impose a fee, except as provided, of $75 to be paid at the time of the recording of every real estate instrument, paper, or notice required or permitted by law to be recorded, per each single transaction per single parcel of real property, not to exceed $225.
More simply, a seller may have a few documents at closing that are affected by SB-2. The total amount of the fees is capped at $225. For example, if you have separate documents –one for substitution of trustee and another for reconveyance—that’s two documents for an additional fee of $150.
Which transactions does SB-2 impact the most?
Refinances appear to be the main target of the bill.
With mortgage rates still at historic lows, current homeowners are actively refinancing. Many face expiration of their current low rates and want to lock-in a favorable mortgage before rates drift any higher.
Lien releases, lot line adjustment filings, and death of a spouse recording are also subject to the fee. The fee does not apply to transfers (i.e., sale) of residential properties to owner-occupiers.
Where does the money from SB-2 go?
The bill establishes a permanent and ongoing source of funding specifically for affordable housing developments.
How are the fees disclosed?
At closing, parties should expect to have a cover sheet that outlines qualifications or exemptions to the fee as part of the loan estimate and/or closing disclosure. The exact form of the sheet will vary by county.
Who is responsible for recording the fee?
The title company, escrow company, borrower or lender—whose role is it to record the fee? This is one of the current sticking points. It’s not stated in the legislation. And no one wants to increase their fees to accommodate the additional $75-plus. Title companies are taking different approaches on how to handle the fee. They may try to pass the fee to escrow company or directly to the consumer.
At Escrow of the West, we take pride in being up to date on California real estate trends and regulations. Our service and knowledge are what makes us one of the leading escrow providers for homeowners and real estate professionals across Southern California.
Meet our team of escrow officers or call 866-444-5560 to speak to a representative today.
