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REALTOR®: Can’t “unring the bell” of Subprime Loan Crisis, Simitian tells Realtors

Wednesday, January 16, 2008

Speaking to Silicon Valley Realtors last week, a Palo Alto State Senator said he believes much can be gained if legislators transcend party lines and work together. And while the housing market and the economy are feeling the effects of the subprime loan crisis, he does not believe future legislation will solve problems of financially troubled homeowners.

State Senator Joe Simitian described 2007 as "a very tough year" for California Governor Arnold Schwarzenegger and the state legislature. He said 2007 was "contentious, difficult, not as productive as 2006, with modest achievements for most in government." He dubbed the year as the "era of post partisanship," as the Governor struggled to transcend party lines, but Simitian indicated "it takes participation by all in order for it to succeed."

"I don't think there's anything wrong with partisanship, as long as we manage it positively," said Simitian. "Partisanship should be used as a positive force rather than a destructive force. It doesn't mean we always have to split the difference; it's about finding common ground."

SILVAR 2008 President Leannah Hunt introduced Simitian to SILVAR Realtors and affiliates as "Palo Alto's favorite son." Simitian, who was raised in California and is a graduate of Palo Alto High School, was elected to the California State Senate in 2004 and represents the 11th Senate District, which encompasses three counties - Santa Clara, San Mateo and Santa Cruz - and includes the communities of San Carlos, Redwood City, Menlo Park, Atherton, East Palo Alto, Palo Alto, Stanford, Los Altos, Los Altos Hills, Cupertino, Campbell, Santa Cruz, Capitola, and a third of San Jose.

Simitian spoke of the need for politicians to look beyond the party and "to acknowledge the objective reality that is out there. I believe in the power of government to do good, to find things wrong and make them right."

He also spoke of the need for politicians to talk to voters "in terms that are real, tangible, relevant in their daily lives, whether they are running for city council, school board or any position in government."

Looking ahead, Simitian indicated the state is facing a $40 million budget shortfall this year and needs to set priorities.

SILVAR Realtors asked Simitian to share his views on the subprime loan crisis, private transfer taxes, conforming loan limits and the lack of affordable housing.

The state senator said the subprime loan crisis is a result of "ripples that have had ripples that have had ripples. … We'll see legislation that addresses the problem prospectively, but we can't unring the bell."

Simitian said the private transfer tax issue is a debate between Realtors and builders' interests, and the bill passed in 2007 was a compromise, a way to place a limit on the amount and to deal with the worst cases. "We are going to have to live with it for a while," he told SILVAR Realtors.

AB 980 (Calderon), Disclosure of Private Transfer Taxes, was signed into law by the Governor last fall. The legislation seeks to protect home buyers by requiring that existing private transfer taxes be clearly disclosed so home buyers aren't surprised by an additional expense at the close of escrow.

Throughout 2007, California Realtors fought to prohibit private transfer taxes that allow developers, non-government entities and individual property owners to impose fees on home buyers every time the home is sold with no oversight, no accountability and no limit on the amount of the tax.

On the issue of conforming loan limits and affordable housing, Simitian commented, "I am acutely aware of the need for affordable housing. Between 1991 and 2000, Silicon Valley created six times more jobs than housing. … It's a tough one. The area I represent is a high cost area, and unfortunately, this area is receiving no sympathy from other legislators; if anything, we are receiving resentment."

The conforming loan limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.

The cost of financing a home remains out of reach for many households in California because of the low loan limit. California still has the third highest home price in the nation, compared with Hawaii at seventh, and Alaska, which ranks 39th in terms of median home price. Yet Alaska, Hawaii, Guam and the U.S. Virgin Islands are recognized as 'high-cost' areas. Allowing regional adjustments to Fannie Mae and Freddie Mac loan limits and to modernize FHA loan programs are a key step to allowing families in California an opportunity to climb the first rung of the homeownership ladder, according to Realtors.


The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.

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