Opinion: Bad bill for home ownership

kammifoote

Inyo County Clerk-Recorder Kammi Foote

SB 391 – Huge Tax Increase Weakens the Integrity of California Property Records by Kammi Foote, Inyo County Clerk-Recorder

SB 391 (DeSaulnier) hurts families struggling to maintain homeownership, places a significant financial burden on the backs of ordinary Californians and weakens the integrity of the land records system – one of the mainstays of our free enterprise economy.

Since 1850, California’s County Recorders have managed and protected the integrity of land records while preserving and defending public access to the information in their care. County Recorders collect a nominal fee on every document recorded to cover the direct cost of providing this valuable service.

SB 391 would require that a $75 tax be placed on every document recorded in California. Currently, base recording fees ranges from $6 to $10 depending on where you live in the state. This bill would increase that fee to anywhere between $81 and $85 per document; amounting to a tax increase of up to 1,250% on the necessary act of refinancing a home, recording loan modifications or recording other documents necessary to prove homeownership.

According to the bills author, SB 391 intends to provide safe and affordable homes for Californians at a time when foreclosures are at an all time high. Yet, this bill would impose an additional tax burden on those vulnerable homeowners that are already struggling to pay their mortgages. This is because families experiencing financial difficulties only have two options when it comes to the inability to pay their mortgage – refinance or default on the loan. Both the typical refinance and the process of defaulting and curing a loan require recording an average of four separate documents. This bill would place an additional $300 tax burden on families in either of these predicaments.

While it is important for working families to have affordable housing opportunities, the funding mechanism of this bill is flawed. The bill contains an exemption for recording documents in connection with a home purchase. This means that a person buying a million dollar home would be exempt from paying the tax, however the family attempting to refinance their high interest mortgage, the widow filing the affidavit of her husbands death, the contractor filing a mechanics lien for unpaid work or the senior citizen on a fixed income unable to pay his mortgage would all be required to pay. In essence, the majority of the people required to pay the tax would be the least financially capable of doing so.

This bill is particularly troublesome for families in rural communities because funding for statewide low-income housing programs have historically subsidized developments in dense urbanized areas. SB 391 has no provision to guarantee that any percentage of the funds collected would be distributed to rural districts. Californians who choose to live and work in small neighborhoods would be required to pay the increased tax, although they will most likely never benefit from any positive economic impact that the program might provide.

In addition, California owes much of its development to its rich mineral production beginning with its formation to the modern day. In order to locate and hold a mining claim in California, notices must be filed annually by prescribed deadlines. Mines are often held and worked by small independent prospectors who are trying to earn a meager living. If a miner cannot afford to file his annual notice in the time period prescribed by law, he will lose his rights to access and work his claim. Requiring resource related industries to pay an additional $75.00 per document, per year, would create an unreasonable burden on this valuable industry.

Any deterrent to record documents is contrary to the very purpose for which the land records system was designed. Congress and legislatures developed our system of recording documents to provide a way for Californians to prove ownership to their property. What would happen if Californians were unable to pay to have their documents recorded? Not recording essential documents could lead to deception and confusion in the housing market. Weakening the integrity of the land records system in an already depressed economy will perpetuate the state’s chronic housing crisis.

The California legislature must recognize the profound and unjust impact that this tax will have on families who have already achieved homeownership. They must ask themselves if requiring ordinary Californians to bear the burden of financing this special project is worth putting them at further economic risk. Finally, they must recognize that this bill will harm all Californians by critically undermining and eroding the public’s confidence in the reliability of the records.

 

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One Response to Opinion: Bad bill for home ownership

  1. Mary Roper April 8, 2013 at 1:26 pm #

    Thank you Kammi for all your hard work on this issue.

     

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