Agenda Summary
2006 Conventional Finance andLending Committee
National Association of REALTORS®
2006 Midyear Legislative Meetings & Trade Expo
Marriott Wardman Park Hotel
Marriott Ballroom, Salon 1
Wednesday, May 17, 2006
10:00 AM - 12:00 PM
Chair: John Veneris, Downers Grove, IL
Vice Chair: Judy Weiss Zeigler, Palm Desert, CA
Committee Liaison: Nic D’Ambrosia, La Plata, MD
Committee Executive: Jeff Lischer, Washington, DC, Lynn King, Washington, DCI. Call to Order
II. Opening Remarks
III. NAR Conflict of Interest StatementOwnership Disclosure Policy
1. When NAR has an ownership interest in an entity and a member has an ownership interest* in that sameentity, such member must disclose the existence of his or her ownership interest prior to speaking to a decision making body on any matter involving that entity.
2. If a member has personal knowledge that NAR is considering doing business withan entity in which a member has any financial interest**, or with an entity in which the member serves in a decision-making capacity*, or wit, then such member must disclose the existence of his or her financial interest or decision making role prior tospeaking to a decision making body about the entity.
3. If a member has a financial interest in, or serves in a decision-making capacity for, any entity that the member knows is offering competing products and services as those offered by NAR,then such member must disclose the existence of his or her financial interest or decision-making role prior to speaking to a decision making body about an issue involving those competing products and services.
After making the necessary disclosure, a member may participate in the discussion and vote on the matter unless that member has a conflict of interest as defined below.
Conflict of Interest Policy
A member of any of NAR’s decision making bodies will be considered to have a conflict of interest whenever that member:
1. Is a principal, partner or corporate officer of a business providing products or services to NAR or in a business being considered as a provider of products or services (“Business:); or
2. Holds a seat on the board of directors of the Business unless the person’s only relationship to the Business is service on such board of directors as NAR’s representative; or
3. Holds an ownership interest of more than 1 percent of the Business.
Members with a conflict of interest must immediately disclose their interest at the outset of any discussions by a decision making body pertaining to the Business or any of its products or services. Such members may not participate in the discussion relating to that Business other than to respond to questions asked of them by other members of the body. Furthermore, no member with a conflict of interest may vote on any matter in which the member has a conflictof interest, including votes to block or alter the actions of the body in order to benefit the Business in which they have an interest.
________________________________________
*Ownership interest is defined as the cumulative holdings of the member, the member’s spouse, children, siblings and to any trust, corporation or partnership in which any of the foregoing individuals is an officer or director, or owns, in the aggregate, at least 50% of the (a) beneficial interest (if a trust), (b) stock (if a corporation) or (c) partnership interests (if a partnership).
**Financial interest means any interest involving money, investments, credit or contractual rights..IV. Approval of Previous Meeting's
Minutes
V. Review of Committee Goals
VI. Report of the Subprime Lending Work Group
VII. Guest Speaker: FTC/NAR Identity Theft Campaign
Ms. Betsy Broder, Assistant Director for the Division of Planning and Information of the Bureau of Consumer Protection, Federal Trade CommissionVIII. New BusinessA. Data SecurityAs technology has evolved and become vital for businesses to thrive, a growing number of public and private entities (including colleges, universities, health insurance companies and data brokers) that keep and maintain personal information (financial accounts, social security numbers, phone numbers), have become victims of security breaches. These breaches have exposed fundamental security flaws in the way that companies handle consumers’ personal information. Individual privacy has been compromised and these breaches have put consumers at an elevated risk of becoming victims of identity theft.
NAR strongly encourages REALTORS® to protect the personal information of the client. This standard is set out in NAR's Code of Ethics and Standards of Practice. NAR also seeks to educate REALTOR® members on the issue of data security and how best to continue to protect client personal information.
REALTORS®have a strong stake in keeping consumers' personal information secure. Two main concerns of REALTORS® in any comprehensive Data Security and Consumer Notification bill are: 1) What are the specific provisions and mechanisms that trigger notifying theconsumer of a security breach, and 2) the cost of compliance with State and/or Federal Law.
A number of committees have been engaged in creating data security legislation during the 109th Congress. Currently, four committees have held mark-upsand passed legislation regarding data security (S. 1789, Senate Judiciary, S. 1408, Senate Commerce, H.R. 3997, Financial Services, H.R. 4127, Energy and Commerce). Both the House and Senate are having ongoing discussions on compromise language, howeverthus far no deal has been reached. Unless another significant security breach occurs, data security legislation seems unlikely to pass this year. NAR will continue to monitor this issue and work with both the House and Senate to make certain REALTOR®interests and concerns are heard.IX. Unfinished Business
A. Banks in Real Estate
In early 2001 the Federal Reserve and the U.S. Treasury Department proposed rules to expand the powers of national bank conglomerates. The agencies proposed allowing national bank conglomerates to engage in real estate brokerage and management, reclassifying these activities as financial in nature. NAR strongly opposes the proposal, arguing that the Bank Holding Company Act of 1956 and the Gramm-Leach-Bliley Act (GLB Act) of 1999 do not authorize banking firms to provide real estate brokerage and property management services, as these are nonfinancial activities. NAR strongly supports enactment of the Community Choice in Real Estate Act, H.R.111/S.98, which removes the powers of these agencies to regulate these real estate activities. NARbelieves the potential problems would occur in the context of national mega-bank conglomerates and has not taken a position against the limited real estate activities, authorized by law, engaged in by a few state banks, credit unions, and thrifts.
C.A.R. and NAR policy supports the separation of banking and commerce. If permitted to engage in real estate brokerage and management, national bank conglomerates would have an unfair competitive advantage and inherent conflicts of interest would result.
The Federal Reserve/Treasury proposal creates anti-competitive and anti-consumer concentrations of power within the financial services sector. Additionally, the proposal increases costs to consumers. Financial holding companies and subsidiaries with direct and indirect federal subsidies will compete unfairly with real estate firms and their affiliates because they have access to cheap sources of capital and will cross-subsidize their commercial operations. Permitting banks to engage in commerce will compromise bank lending decisions and create conflicts of interest while restricting consumer choice and competition among mortgage lenders. If the rule is finalized, real estate brokers' and managers' activities would be considered financial in nature, and thus subject to increased regulation by the Federal Reserve, Treasury Department, and the Federal Trade Commission. This increased regulatory burden could involve privacy regulations, financial solvency, and reporting requirements.
As it has since 2002, Congress has enacted another one-year ban, effective through September 30, 2006, against the Treasury Department from issuing a final rule permitting national bank conglomerates to engage in real estate brokerage and management. NAR continues to urge Congress to enact a permanent ban. H.R. 111/S. 98 was reintroduced in the 109th Congress by Representatives Calvert (R-CA) and Kanjorski (D-PA) and Senators Allard (R-CO), Clinton (D-NY) and Shelby (R-AL). H.R. 111 has 251 House cosponsors while S. 98 has 26 Senate cosponsors. This represents the fifth consecutive year that authorizing legislation has been introduced permanently barring national banks from engaging in real estate brokerage and management activities. Congress has not acted on H.R. 111/S. 98. On May 26, 2005, House Financial Services Chairman Mike Oxley (R-OH) and Ranking Democrat Barney Frank (D-MA) introduced H.R. 2660, the "Fair Choice and Competition in Real Estate Act of 2005," which would authorize financial holding companies and national bank subsidiaries to conduct real estate brokerage and management activities. NAR is opposed to this bill, which has languished with no additional co-sponsors.
B. OCC Real Estate Development Rulings
In December 2005, the Office of the Comptroller of the Currency (OCC) announced it was authorizing national banks to invest in real estate projects involving the development of office buildings, hotels, residential condominiums, and windmill farms. OCC is the principal federal banking regulator for national banks. The OCC actions represent a marked departure from what is permitted by the National Bank Act, the OCC’s regulations, and previous OCC rulings regarding the types of real estate activities in which national banks may engage. The new rulings represent the OCC’s continued efforts to dramatically expand the real estate powers of national banks.
NAR is strongly opposed to the OCC actions and on January 27, 2006, sent a letter to Comptroller John Dugan explaining in detail the basis for our objections.OCC has set in motion a process that will inevitably lead to national banks becoming actively involved in real estate development and brokerage activities. This will result in inherent conflicts of interest when real estate developers seek financing for competing projects. Moreover, federal subsidies give banks an unfair advantage when competing with other developers. These activities also will markedly increase the risk exposure of national banks, threaten the safety and soundness of the bankingsystem, and lead to authorization of banks becoming real estate brokers.
In addition, permitting national banks to engage in real estate activities undermines the long-standing, Congressionally-mandated separation between banking and commerce.The lessons learned from the savings and loan scandal of the 1980s and the sluggish Japanese economy, where banks are intertwined with real estate and commercial enterprises, are two dramatic examples of negative consequences of mixing banking and commerce.C.A.R. opposed a 1983 California law allowing banks to engage directly in real estate activity and has continued to oppose similar legislation.NAR believes the potential problems would occur in the context of national banks and has not taken a position against the limited real estate activities, authorized by law, engaged in by a few state banks, credit unions, and thrifts.
Federal subsidies give banks access to cheap sources of capital, which gives them an unfair advantage over REALTORS® and others involved in real estate development. Expanding the authority of banks to develop real estate could lead to the OCC giving banks the authority to broker real estate as well.
Allowing banks into real estate development lets them compete unfairly with real estate professionals. For example, a bank could take a real estate professional’s application for financing to develop a piece of property and use the information to develop a competing proposal that cuts out the real estate professional.
Investing in real estate can be a risky venture as markets change. The OCC should not expand the authority of banks to invest in real estate development because it creates the risk that, as in the savings and loan scandal in the 1980s, REALTORS® and all other taxpayers will be forced to bail out the banks.
NAR has raised its concerns about the OCC rulings with OCC Comptroller John Dugan, Chairman Ben Bernanke of the Federal Reserve Board, Treasury Secretary John Snow, and acting Chairman Martin Gruenberg of the Federal Deposit Insurance Corporation. NAR is also communicating its strong objections to Members of Congress, urging Members to communicate their objections directly to OCC, and suggesting that Congress take action to reinin the inappropriate expansion of banks into real estate development.C. Wal-Mart Bank Application
D.
Nontraditional Mortgage GuidanceComment Letter ; FTC Workshop on Nontraditional Mortgages
E. Predatory Lending LegislationA number of bills have been introduced in the 109th Congress that address the issue of predatory and subprime lending. One of the bills that has been mentioned as a vehicle for this issue should Congress decide to address it is H.R. 1295, the Responsible Lending Act. Introduced byRepresentatives Bob Ney (R-OH) and Paul Kanjorski (D-PA), this bill, also known as the Ney-Kanjorski bill, has gained the support and backing of lenders throughout the country because of its preemption of state laws addressing subprime and predatory loans. At the C.A.R. September 2005 business meetings, C.A.R. took the following position: “that C.A.R. ‘OPPOSE,’ and seek the support of NAR to ‘OPPOSE,’ H.R. 1295 because it includes:
-- A federal preemption of California’s subprime lending law;
-- Federal requirements for a uniform mortgage broker license and
-- A hard numerical threshold on debt to income ratio for borrowers;”At NAR’s October business meetings, C.A.R. asked the Conventional Finance Committee to consider C.A.R.’s policy. The Committee referred the motion to the NAR Subprime Lending Working Group for consideration. H.R. 1295 has 38 cosponsors and has been referred to the Subcommittee on Housing and Community Opportunity.
F. GSE ReformRecently Congress has reinvigorated its attempt to write Government Sponsored Enterprise (GSE) regulatory reform legislation amid continuing scrutiny of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Proposed GSE reform legislation in the House was used as a vehicle by California legislators, Gary Miller and Brad Sherman, to attach a high-cost conforming loan limit amendment. This amendment would allow a newly created independent GSE regulator to set high-cost conforming loan limits by an area’s median home price, up to 150% of the national conforming loan limit. This would increase the conforming loan limit to $625,500 in California’s highest-cost areas.Legislation, H.R. 1461 passed the House of Representatives on October 26, 2005 by a 331-90 bipartisan vote. An amendment by Representative Garrett (R-NJ) to strip the high-cost conforming loan limit provision from the House bill was easily defeated. In addition to the high-cost provision, H.R. 1461 would reform the GSE in the following way:- It would create a new independent regulator with broad authority to direct the activities of Fannie Mae, Freddie Mac, andthe Federal Home Loan Banks,- It does not set statutory limits on the retained portfolio of the GSE, nor limit what may be held,- It would create a streamlined approval process to bring new programs to the market quickly,- It would require the new regulator to define mortgage origination and the secondary market, prohibiting the GSE from participating in activity not considered a secondary market activity (The bill does exempt existing automated underwriting, consumer education, and counseling programs from this definition), and- It would create an affordable housing fund using 5% of the GSE’s after-tax profits.S. 190, the Senate GSE reform bill, was reported by the Senate Banking Committee along a party line vote, and does not include the high-cost conforming loan limit provision. After the Senate Banking Committee reported S. 190 back in July,the Chairman of the Committee, Senator Shelby (R-AL), stated his hesitation to move S. 190 forward without amendments to garner more bipartisan support. Recently, Senator Shelby stated thatGSE reform would be addressed in the Senate prior to the end of this year.X. Announcements
A. Committee Appointments
B. Action CenterXI. Adjournment
