Who May Run and Check Your Credit in California?

Homebuyers seeking a purchase or refinance mortgage, or people wanting to buy appliances on payment plans or using their credit cards, are among those who will have their credit reports checked.  The federal Fair Credit Reporting Act requirements state who can look at or order your credit report.

Such people may include landlords, credit card issuers, car loan lenders, student loan lenders and insurance companies and government agencies.   However, at least ten states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington) have passed laws prohibiting employers from pulling credit reports at all or restricting how and when employers may use them to make hiring or other job decisions.  According to the Fair Credit Reporting Act, access is restricted to businesses or government agencies that meet the permissible purpose requirements.

Concerning landlords:  If a landlord has a property managed or listed by a Realtor with a written contract in place giving the broker permission, the broker may be allowed to run the credit of a prospective tenant.  Or, the Realtor can also assist the property owner by helping the landlord find a source for running credit (about $25), with action performed and the report reviewed by the landlord.   The Realtor may be doing all other agreed functions for renting, but the credit report responsibility lies with the landlord if not otherwise expressly allowed for in the contract.  It would be a good idea for landlords and tenants alike to find out what should be of concern to a landlord.  Landlords can check rental history, accounts, debts, foreclosures and general credit worthiness.  For individuals who experienced getting a notice of default and foreclosure, even though they had other good credit, they found it was not easy moving to a good rental property, and some found that getting a co-signer was necessary.

To find out what can be included in your credit report and other resource material, Privacy Rights Clearinghouse and Nolo contain additional information.  For California information on accessing a free annual credit report, see the California Office of the Attorney General.

Rental Scams: Don't Fall For Them

One of the downsides of all the home listings on the internet is the abuse of them by hijackers.  They

go to sites such as Zillow and Trulia, choose a property and turn a legitimate listing into a so-called rental ad, with the listing agent not finding out until he/she receives a bunch of phone calls about a "rental".  In a very expensive and limited rental market, a renter is doubly frustrated when finding out that the seemingly good deal is too good to be true.  So not only is it a waste of time for those searching for a rental property, it's also an extreme annoyance to the listing agent whose listing is illegally used as a dupe and all the misdirected phone calls, as well as the time it takes to correct the situation on the listing site. 

The smarter people knew before they called me that $1200 per month rent for a 2800 sq. ft two-story house in a nice neighborhood of $500,000-$600,000 selling prices was suspicious, but they called me anyway after they drove by the property.  Some actually called the name given on the fake rental ad, which of course used my listing photos and information as if it were their own, and were told to send money before they would be given any more information.  This is the tipoff--a legitimate landlord or management company does not request money, i.e., security deposit or rent, up front for information. 

And another scenario may be that the rental does not exist at all.  Yet another is a rental sign in front of an actual advertised property that is for rent, or it may be a bank-owned property for sale.  In this situation the false advertiser is attempting to get business by re-directing prospective renters to actual rentals--one company has been complained about in California, yet they popped up again with their red and white rental signs on wooden stakes posted on properties that are not their rentals. 

For more information, contact the Federal Trade Commission.  Avoid sending money to people you don't know.

Have You Heard of PACE for Energy/Water Savings?

Keeping Cool

The Property Assessed Clean Energy Program, or PACE, makes it possible for an owner to finance certain improvements and pay for them via an assessment on the owner's property.
There are a wide range of conservation improvements allowed and which vary by program, but most PACE programs include  improvements such as solar panels, energy star rated core plumbing systems, duct replacement, electric vehicle plug-in stations, pool circulating pumps, water heaters, and furnace.  They work in conjunction with a local public agency, and are available for both residential and commercial properties.

To be eligible, the homeowner must be current on property taxes, with no judgment liens or federal or state tax liens, not in bankruptcy, can't be delinquent on any mortgages or late on property taxes (some exceptions), and there are limits based on the mortgage percentage value of the property.


Property tax liens associated with the homes underlying the security, which are meant to fund energy-savings measures, are senior to all other liens - including mortgages on the properties financed by Fannie Mae and Freddie Mac (which currently finance close to 90% of US mortgages).  Read more at Reuters.  Since they don't like not being in first lien position, the Federal Housing Finance Agency (FHFA) ordered Fannie and Freddie to avoid financing mortgages on homes with PACE liens already on them,  Generally, all loans following FHFA guidelines must obtain consent before being allowed to enter into a PACE program, or the lender may declare the loan in default if owner does not pay off the lien. These conditions also affect refinancing as well, especially if the loan was obtained after July, 2010.

Homeowners who may find that PACE works well for them are:

• Those who have sufficient equity or whose improvements are not that costly and therefore, would not have difficulty paying off the lien if they need to sell or refinance their home
•  Those who intend to remain in their homes for the duration of the assessment and do not plan to refinance 
•  Those whose PACE program will offer to subordinate the PACE lien in circumstances beneficial to the homeowner.

HERO

Certain PACE programs, such as the HERO PACE program are now offering to subordinate their liens in certain instances, generally for a fee.  If the PACE lien is subordinated the buyer may be able to enter into a PACE agreement and obtain consent from a conventional lender.  Homeowners in areas with HERO PACE programs should inquire with the entity. Not all cities have approved this program; according to their site, HERO programs are locally available in the cities of Carson, Bellflower, City of Industry, Hawthorne, Lomita, Garden Grove, Huntington Beach, Fountain Valley, Stanton, Westminster, Cypress, to name several.  Long Beach, Los Angeles, or Lakewood are not included at this time. 

California FIRST

This program  appears to cover Long Beach and other areas, but an address must be entered in order to find out. Their criteria and financing terms are available on the site.

FHA

Energy Efficient Mortgages have been around since the 1990s, and may work for the owner with an FHA loan. Contact an FHA lender for more information. 

Secondary Financing

Another alternative is a home equity line of credit, for people with enough home equity, which may provide some tax advantages, including lower interest rates than the PACE programs. This type of loan would automatically be paid off in sale of a home.

Similar to solar panels, any PACE lien must be disclosed to a prospective buyer and will most likely be found in the preliminary title report given to a buyer. The seller may be in the position of having to pay off the lien in order to sell, depending on the circumstances involved.

And, a property owner should always first consult with a tax advisor regarding their own circumstances before accepting any of these loans. Interest paid on PACE liens may not be tax deductible but there may be a capital gains benefit based on the improvements.