Business Issues Committee National Association of REALTORS® 2006 REALTORS® Conference & Expo Hilton New Orleans Riverside JeffersonBallroom Friday, November 10, 2006 9:00 AM - 11:30 AMChair:Adam Cockey, Severna Park, MD Vice Chair:Peter Casey, Weston, MA Committee Liaison:Nick D’Ambrosia, La Plata, MD Committee Executive:Marcia Salkin, Ken Trepeta, Washington, DCI. Call To Order
1. When NAR has an ownership interest in an entity and a member has an ownership interest* in that same entity, 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 with an 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 to speaking 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 immediatelydisclose 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 conflict of 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 inwhich 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).
REALTORS® advocate a market-based approach to RESPA reform that encourages fair competition, protects consumer choiceand provides full disclosure of costs and services in the mortgage transaction.
HUD’s withdrawn 2004 RESPA rule would have put lenders in control of the entire real estate settlement transaction while operating under an exemption from Section 8’s anti-kickback provisions. The rule could have lead to increased concentration but less competition within the lending industry. Any regulation that moves an industry toward greater concentration should be viewed with considerable caution, as it could lead to higher closing costs.
A new proposal from HUD has been delayed. When released, it is expected to be based upon a series of informal meetings with industry and consumer representatives to initiate a “meaningful exchangeof ideas” on possible changes to the RESPA regulations. Public roundtable meetings were held in July and August of 2005. At the roundtables, HUD disclosed the provisions of a 2004 “final” RESPA rule which was withdrawnfrom the Office of Management and Budget’s (OMB) consideration. That RESPA rule would have included an enhanced Good Faith Estimate (GFE) four-page form with yield spread premium disclosure and tolerances for third party settlement services; a Mortgage Package Offer (MPO) (formerly the Guaranteed Mortgage Package Offer or GMP), that would have been exempt from RESPA’s Section 8 anti-kickback provisions; and a Settlement Services Package (SSP) product that would allow non-lenders to offer packages including appraisals, title services, recording fees and other lender required settlement services. HUD’s 2004 rule would not have required a lender to accept an SSP the consumer brought to the transaction.
HUD has said it is committed to drafting a rule that would provide greater certainty of closing costs for consumers. While there is no "formal" consensus, most roundtable participants seemed to agree that HUD should pursue an enhanced or improved GFE and should forgo its regulatory efforts to develop a packaging rule.
ISSUE:Congress is considering legislation to amend the U.S. Telecommunications Act. Among the issues being debated is whether there is the need to codify the "net neutrality" principles that have guided the development of the Internet to date and, if so, how extensive or prescriptive those principles should be.
NAR POSITION: NAR currently has no policy applicable to the net neutrality debate.
The Committee may recommend action on thefollowing item(s):
Should NAR support the position of those advocating for more extensive and prescriptive net neutrality provisions?
PROS: So-called “net neutrality” proponents advocating for more extensive net neutrality language than is already included in existing bills argue that:
-- Widespread broadband competition does not exist. Most U.S. residents have the choice of only one or two broadband carriers.
-- Without a net neutrality law, the fundamental openness of the Internet, with all voices having a chance to be heard, will be killed.
-- There is no law preventing broadband providers from blocking competing content and services. Broadband providers do not have an economic interestin giving competing service providers access to consumers.
-- Broadband providers will be tempted to increase profits by signing lucrative contracts giving large e-commerce companies better speeds and quality of service. This will create a two-tier Internet where the richest Internet companies can afford to pay for the best service and everyone else is in the slow lane.
-- Without a law, startup Internet companies that can’t afford to pay premium prices will be stuck in the slow lane and may not be able to find an audience. Innovation will be killed and small companies won’t be able to compete.
CONS: Those who are opposed to more extensive legislative language argue:
-- Extensive net neutrality statutes would create a system of new, unnecessary and burdensome regulation on the Internet.
-- It would be bad business for broadband providers to block or degrade Web content and services their customers now receive and want.
-- Broadband competition should be allowed to work. If one broadband provider were to block some Web content, competitors will seize the opportunity to woo that provider's customers to their more open system.
-- Many of today's common network quality control protocols designed to deal with blocking spam or viruses, maintain the quality of VOIP or video applications, and maintaining network speeds would be prohibited by net neutrality proposals.
-- Broadband providers and many of the companies advocating for extensive net neutrality provisions want to be able to deploy new services, such as television over IP. In order to provide the capacity to do so, broadband providers will need to be able to assign this type of time-sensitive data to a tier of broadband service that doesn’t have to share “space” with everything else on the public Internet – your neighbor’s e-mail with five photos attached, a college kid’s streaming music service, people downloading video clips from YouTube.com. Without a separate tier, broadband providers say they won’t be able to guarantee the quality of service that customers demand.
-- Broadband providers point out that without new source of revenue, efforts to buildthe next-generation of super-fast broadband networks will be delayed. Prescriptive net neutrality provisions would prevent a broadband provider from charging for preferential speeds and service regardless of the demands placed on the broadband system bya service or application provider.
IMPACT ON REALTORS®: The outcome of this debate could impact the future functioning of the Internet. As such, some real estate practitioners have argued that it could also increase costs incurred by realestate firms as they work to maintain an Internet presence that is accessible to the greatest number of consumers.
Other real estate industry participants have argued that (1) government regulation interferes with competitive market forces which have adequately promoted internet developments to date; (2) market forces will do a better job of working out how the Internet functions than government regulations can; (3) Internet infrastructure providers and content providers are engaged in a business, not a public utility, and should be allowed to determine their business strategies; and (4) it would be unwise for NAR to be advocating for greater government intervention and laws/regulations when the real estate industry is itself in the middle of battling charges of anti-competitiveness and has argued that businesses - like real estate and the cooperative multiple listing services - and markets should be allowed to operate without excessive interference.
STATUS/OUTLOOK: Representative Joe Barton (R-TX) and Senator Ted Stevens (R-AK), the chairmen of the House and Senate Commerce committees, each introduced bills in 2006 to update the Telecommunications Act which regulates the nation's phone, cable, Internet, television and satellite industries.
Representative Barton's bill, HR 5252, the Communications Opportunity, Promotion, and Enhancement Act of 2006, was the first to move and was approved by the full House in June 2006. The Senate Commerce Committee then took up the House approved version of HR 5252 and amended it by replacing the contents of the House measure with the text of Senate Commerce Chairman Ted Stevens' Advanced Telecommunications and Opportunities Reform Act. The full Senate has not yet debated the bill as amended.
Senator Stevens has publicly acknowledged that he does not have the votes necessary to move the bill. As a result, it is possible that the bill may not be brought up during the post election session. If this is the case, a new bill will need to be reintroduced in both the House and Senate in the new Congress.
Obstacles to Passage. The major obstacle to Senate consideration is disagreement over the extent of prescriptive "net neutrality" language that should be included in a finalbill. With no concrete basis for anticipating how broadband network providers may behave in the future, the topic is a divisive one even within the Internet technology community.
Traditionally, "net neutrality" has referred to the principles that have guided the development of the Internet. These principles have created a network that is open to all and allows any computer to send a "packet" of information to any other computer with minimal interference from the network. The network does not discriminate against particular hardware, software, underlying network, language, culture, disability, or against particular types of data (with some exceptions for quality of service and network security network practices). The Internet therefore has been"neutral" in its treatment of users and data.
Proponents of More Extensive Provisions. Those supporting extensive and prescriptive net neutrality language argue that without legislation, net neutrality will become a thing of the past. They point to statements made by some broadband CEOs that would seem to indicate that they believe that a June 2005 U.S. Supreme Court ruling allows them to modify their current business practices in a way that conflicts with traditional net neutrality principles. That "Brand X" decision ruled that broadband providers' DSL services were not subject to the "common carrier" rules that govern more traditional telecom services like phones and, therefore, did not have to make their networks open to competing InternetService Providers.
Two broad categories of potential non-neutral practices often mentioned by proponents as likely to be common place if net neutrality provisions are not approved are (1) blocking access, slowing access or providing lesser quality of service to websites, applications or alternative networks that compete with the broadband provider's own websites or services and (2) instituting pricing structures, i.e. "tiers", for different levels of network access used by Internet applicationand service providers.
Proponents of net neutrality include a diverse group of Internet application companies (Google, Yahoo, eBay), consumer/civil liberties groups (Public Knowledge, Consumer Federation of America, American Civil Liberties Union), special-interest groups (Gun Owners of America, MoveOn.org, the Christian Coalition) and some Internet pioneers (Vinton Cerf , Tim Berners-Lee, and Craig Newmark).
Opponents of More Extensive Provisions. Opponents of more prescriptive netneutrality language argue that to create a set of detailed net neutrality rules would (1) impose regulatory burdens on Internet service and content providers that will stifle innovation and competition, (2) ignore the competitive pressures that broadbandproviders face given customer expectations and demands, (3) prohibit many of the network maintenance/security practices necessary to insuring that the net works efficiently, (4) stifle the further development and expansion of broadband networks, and (5) shift the cost of future network development to consumers.
The ranks of the opponents include large broadband providers (AT&T, Verizon, Comcast), network equipment providers (Cisco, Qualcomm, Corning), free market think tanks (Competitive Enterprise Institute, Center for Individual Freedom) as well as special-interest groups (U.S. Chamber of Commerce, National Association of Manufacturers, National Black Chamber of Commerce, Latinos in Information Sciences and Technology Association).
Existing Bill Provisions. Both the House and Senate bills contain net neutrality provisions that identify a set of principles to which internet participants must adhere. The House bill gives the FCC the authority to enforce the FCC’s April 2005Statement of Policy and Principles that spell out the Commission’s expectations of what rights the consumer has with respect to access to Internet sites and/or freedom to use services, applications, software and hardware of the consumer’s choice and the Commission’s authority to enforce that policy and principles. The Senate bill takes a different tack and explicitly spells out in the bill the consumer’s rights to free net access and unobstructed use of sites, software, applications, and hardware of the consumer’s choice. The text of both bill’s neutrality provisions are attached to the Business Issues Committee agenda as an exhibit.
Business Issues Committee Conference Call Results. In August, the BusinessIssue Committee leadership held a conference call to discuss what, if any, role NAR should take in the current Congressional debate over the pending telecommunications bill's net neutrality provisions. With the possibility that the telecom reform bill could move prior to the November meetings, the committee leadership wanted to get the sense of the committee on the matter. Subsequently, the bill stalled, hence the opportunity to consider the bill at these meetings.
Fourteen committee members participated in the Monday afternoon conference call or shared their thoughts with committee staff via email. Summarizing, the majority of those who responded indicated that they believed that NAR should stay out of the debate over net neutrality; one individual suggested opposing the inclusion of net neutrality provisions; and three individuals indicated that they thought that NAR should support the inclusion of net neutrality provisions.
While there was acknowledgement that the natural first tendency was to side with those who believe that there is a need for strong net neutrality provisions, those who favored taking a neutral or opposing position questioned the wisdom of advocating for government regulation of what has proven to be a very successful, competitive industry.
The points made included:
NAR has traditionally advocated for private market approaches over governmental solutions when possible,
In general, market forces do a better jobof directing economic activities and encouraging innovation than government regulations do;
Broadband providers are engaged in businesses, not public utilities, and should not be burden with additional regulations unless there is evidence that such regulation is necessary to protect the public interest;
The Internet is a very robust and competitive economic sector - the broadband providers today include multiple land line, cable, wireless and satellite providers;
The Federal Communications Commission has shown itself willing to quickly respond to abusive practices, and
The tech community itself is widely split over the need for and impact of proposed amendments to the bill's existing net neutrality provisions.
In addition, and perhaps equally important, participants questioned the wisdom of NAR advocating for laws/regulations that would put the government in the position of regulating how firms that provide the net infrastructure do their business when the real estate industry is itself in the middle of battling charges of anti-competitiveness and has publicly argued that businesses - like real estate and the cooperative multiple listing services - and markets should be allowed to operate without excessive interference.House Net Neutrality ProvisionsSenate Net Neutrality Provisions
Personal Data Security
As 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 beencompromised 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.
Credit bureaus and companies that hold personal information differ onwho should be responsible for notification of data theft. They also oppose the creation of burdensome reporting requirements. Consumer groups oppose federal preemption that would prohibit stronger state protections or enforcement.
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 the consumer of a security breach, and 2) the cost of compliance with State and/or Federal Law.
In late July, NAR conducted a survey to determine what information is collected from clients as well as how this information is stored by two groupsof our membership (agents and brokers). Thus far, the survey has helped guide association lobbying efforts as Congress considers the issue of data security. NAR will continue to urge Congress to balance the needs of the consumer and small business owners,and specifically make sure the REALTOR® voice is heard.
As the 109th Congress wraps up, it remains unlikely data security legislation will pass either chamber upon their return in November for a lame-duck session. The numerous bills considered before the House and Senate proved to be too contentious and therefore agreement could not be reached this year. Both parties and all committees involved (claiming jurisdiction) have said data security will be a high priority for each in the 110th Congress.
Retirement Visa
Memo on Current Visas The Visa Situation Today and the Potential for a Retirement Visa
B2 Visa for Pleasure
Generally, a citizen of a foreign country who wishes to enter the United States must first obtain a visa, either a nonimmigrant visa for temporary stay, or an immigrant visa for permanent residence. The visa allows a foreign citizen, to travel to the United States port-of entry and request permission of the U.S. immigration inspector to enter the U.S. The "visitor" visa is a nonimmigrant visa for persons desiring to enter the United States temporarily for business (B-1) and for pleasure or medical treatment (B-2). As examples, if the purpose of your planned travel is recreational in nature, including tourism, amusement, visits with friends or relatives, rest, medical treatment, and activities of a fraternal, social, or service nature, then a visitor visa (B-2) would be the appropriate type of visa for your travel. This is the primary visa type for those wishing to stay in the U.S. for pleasurepurposes that last more than three (3) months.
The visa itself does not govern the length of stay. B2 visas are valid for ten years. However, the length of stay is determined on the I-94 form and the decision is made by the U.S. Citizenship andImmigration Office (USCIS) at the point of entry into the U.S. Below are the commonly accepted lengths of stay.
B2 Visa
Length of Stay in US:
6 months renewable for a total of 12 months.
Documentation:
I-94 w/ B-2 status.
Those visitors who wish to stay beyond the time indicated on their Form I-94 must contact the Department of Homeland Security’s Bureau of Citizenship and Immigration Services to request an application to extend status. The decision to grant or deny a request for extension of stay is made solely by the Bureau of Citizenship and Immigration Services. It is noted that if granted a six month extension, a person must then leave the U.S. and reapply to return. In these circumstances, a short stay out ofthe U.S. is not viewed favorably when seeking readmission. It can be interpreted as a de facto “intention to remain” in the U.S. which implies that a person should be seeking a visa under the various immigrant visa programs.
OtherMeans of Remaining in the United States for an Extended Stay
At present, the only other way to remain in the U.S. for a stay in excess of 12 months is to apply for permanent residence under a variety of programs, none of which easily conform tothe situation of a retired person. There are more than 80 immigrant and non-immigrant type visas and various permanent residency programs. Most require work or some other special circumstance in order to remain permanently.
The “Retirement” or ‘R” VisaIf a visa were created to allow foreign nationals year round residence, many parameters would need to be addressed:1) What type of assets must the visa applicant have to ensure they have the meansto support themselves? What would be the nature and size of provable stream of income required? How would it be proved?2) What value of property in the U.S. must they own?3) What would be the duration of the visa term and lengthof stay? What interval of time out of the country would be necessary prior to reapplication for admittance? If the visa were to allow someone to be year-round, how would it be differentiated from permanent resident status?4) What - if any -benefits would the person be eligible for?5) What would the fee structure for the visa be?6) What security qualifications/limitations would apply?PoliticsImmigration politics have been contentious. The creation of a vehicle to allow people to stay in this country year round without being permanent residents will likely spark considerable debate. It has not been the policy of the U.S. to allow this for those not seeking to be permanent residents and/or towork. Even a well-crafted proposal could lead to debate about such things as the negative impacts on the social welfare system incidental to the presence of a significant population of older foreigners. In short, any proposal that has the appearance of creating an opening for non-citizens and people who do not wish to be citizens to enter this country will have implications beyond the narrower parameters of the proposal.VII. Priority Legislation/Regulations
A broad coalition of trade organizations, including NAR, support legislation that would allow small businesses to join together through their trade associations to form small business health plan (SBHP) programs. SBHP would allow these firms to pool their risks and collectively negotiate for health insurance coverage for firm employees, principals and the self-employed. SBHPs would offer a uniform insurance plan to trade association members, their dependents and employees regardless of where each member resides. The most recent actuarial study of SBHPs estimates the potential savings in premium costs for a participant in an small business health plan to be 12 percent on average.
NAR supports legislation - S. 1955, S. 406 and HR 525 - to allow professional and trade associationsto create small business health plans and offer uniform health insurance coverage plans to association members regardless of where the member resides.
Despite the Senate's failure to take up S. 1955, small business health plan (SBHP) legislation, on Thursday, May 11, 2006, NAR and the SBHP Coalition have continued to press the Senate to work out their differences and bring the bill back up prior to recessing for the year. The bill, cosponsored by Senators Mike Enzi (R-WY), Ben Nelson (D-NE) andConrad Burns (R-MT), would allow trade associations to negotiate health insurance coverage for members and is pending on the Senate floor. The Senate leader, Senator Frist (R-TN) has indicated that he is exploring all options for bringing S. 1955 back tothe floor. With the current political climate and the still unfinished Appropriations bills, it is unclear how much will get done during the post-election lame duck session.
At the urging of the Senate leadership, House leadership planned to attach the House's SBHP measure, HR 525, to the House's minimum wage bill in late July. By including the health insurance provisions favored by small businesses and Republicans, House GOP leaders hoped to secure a “majority of the majority” forthe minimum wage bill while also increasing the likelihood of passing AHP/SBHP legislation this year. Ultimately, estate tax extenders bumped the SBHP legislation from the bill late Thursday night just prior to the Friday, July 28, 2006, House vote.
S. 1955 is based on the fully-insured component of the AHP concept long championed by Senator Olympia Snowe (R–ME). Under the Enzi/Nelson proposal, insurers working with a sponsoring trade association would be required to be licensed in everystate in which the SBHP enrolled participants. The insurers would therefore be regulated by the state insurance commissioner in each state and subject to all state laws with the exception of mandate and small group market premium rating rules explicitlyaddressed in the bill. In order to avoid the potential for adverse selection and disruption of existing insurance markets, eligible insurers would also be allowed to offer an SBHP-like insurance product to the general market.
While an SBHP mayoffer insurance plans that do not comply with state laws that require specific types of coverage, if an SBHP product does not comply with those state mandates then at least one additional plan option must be offered that complies either with state mandates or with coverage offered by a state employee plan offered in one of the five most populous states (California, New York, Florida, Illinois or Texas). Further amendments planned for consideration but not discussed due to the failed cloture vote were amendments to require SBHPs to offer all of the mandates required by 26 states and to tighten the bill's small group rating rules.
Despite charges that have been made by critics of the bill, S. 1955 does not preempt all state insurance laws and SBHPs are required to offer quality insurance plans. The bill does create a limited preemption of state mandate and small group rating laws for SBHPs products. As was noted above, small business health plans are required to follow mandate and rating rules spelled out in the bill. Exceptions to state mandate laws have been criticized by the American Cancer Society, American Diabetes Association, AARP and some provider/practitioner groups.
In addition, the bill establishes a process for encouragingstates to harmonize state insurance laws governing the administrative processes involved in insurance regulation. Chairman Enzi included these provisions in an effort to streamline the current hodgepodge of varying state regulation which he believes havehelped to increase costs, discourage insurers from entering new markets and lessened competition.
Most Recent NAR Actions:
A September NAR Call For Action was delivered to NAR members. Members were asked to write and urge their Senators to pass S. 1955 and tell their Representatives to push the House leadership to work with the Senate to get small business health plan legislation enacted this year. To date, over 62,000 letters have been delivered to the Senate, while over 20,000 letters have gone to the House.
To complement September 2006 REALTOR® grassroots and lobbying activities, a new NAR print ad ran in Capitol Hill publications, The Hill and Roll Call. The full page color ad header says, Congress: Pass Small Business Health Plans...America is Waiting. The message centers on the 89% of Americans who support the SBHP concept whether from a red state or blue state, Republican or Democrat and calls on Congress to do the right thing and do it now.
President Tom Stevens has met with Senate Majority Leader Bill Frist and Minority Leader Harry Reid on the need to enact small business health plan legislation this year.
Meetings continue to be held with the staff of those Senators who expressed interest to Senators Enzi and Nelson in continuing to work on identifying a compromise measure that could be taken up again this year. Meetings to date have focused on the remaining issues of concern and possible compromise measures.
SBHP legislation is one of the primary talking point issues for NAR's August recess “Realtor Month in the District” programs and has been featured in RPAC candidate mailings.
NAR staff met with the disease management and provider groups who were vocally opposed to the legislation including the American Cancer Society, the American Diabetes Association, and the American Association of Chiropractors in an effort toexplore possible areas of agreement and/or compromise. While the meetings were a necessary and important step, it is unlikely that these groups will reconsider their opposition to S. 1955 without significant changes to the mandate provisions.
NAR and state associations are working on the placement of op-eds and letters to the editor citing the continuing need for the Congress to enact SBHP legislation this year. State association presidents in 47 states also sent letters to each of their Senators urging them to work with Senators Enzi and Nelson on a compromise measure that could be adopted this year.
NAR in-district “thank you” ads for those Senators who voted for cloture during the Senate floor discussions were run in the major state capital papers during the July 4th recess period.
Legislative History:
S. 1955 has been pending on the Senate calendar since the bill was set asidewhen S. 1955 cosponsors failed to win the Democratic votes for cloture necessary to avoid a filibuster on the bill. The procedural cloture vote, which required 60 votes for passage, failed 55-43. Senators Ben Nelson and Mary Landrieu (LA) were the only Democrats voting to advance the bill while Senator Lincoln Chafee (RI) was the only Republican to oppose moving forward. This is the first time in the 11 year history of small business health plan legislation that the Senate took up an SBHP bill. The bill had earlier passed the Senate Health, Education and Pensions Committee on 11-9 vote in March 2006.
Federal legislation will likely be introduced in the 110th Congress to replace the existing state-based insurance regulatory system with a uniform set of federal standards.
REALTORS® oppose replacing the current state regulatory system for insurance with a system of mandatory, uniform national standards. Federally-imposed, pre-emptive standards for residential and commercial property insurance would eliminate the ability of states to regulate insurance rates and monitor local needs.
Critics charge that the existing state-based regulatory system has failed to effectively regulate the increasingly complex insurance industry. Others believe that compliance with 50 separate state regulatory agencies creates a regulatory burden for companies operating nationwide. Some observers believe this inefficiency contributes to recent problems with the availability and affordability of insurance products.
Affordable and accessible insurance is essential to the real estate market. Property and casualty coverage is an underwriting requirement for conventional, government-assisted and commercial mortgages. In addition, any movement towards a national licensing system for insurance brokers could have adverse implications for the future of the state-based regulatory system for real estatelicensees.
For the last two years, Congressional interest in insurance regulatory reform has been growing. Regardless of which political party wins the majority in the November 2006 elections, observers expect that insurance reform measures introduced in the 109th Congress will again be reintroduced. Among the measures anticipated to be introduced are bills based on:
-- The "State Modernization and Regulatory Transparency (SMART) Act," a draft bill developed by current Financial Services Committee Chair Mike Oxley (R-OH) and Subcommittee Chair Richard Baker (R-LA). The subject of hearings in 2006, the proposed but not introduced SMART Act sought to eliminate duplicative oversight in licensing and administrative processes by requiring the states to adopt uniform national practices. The legislation would have preempted existing state laws regulating insurance, deregulated insurance rate structures and provided incentives to states that adopt model laws developed by the National Association of Insurance Commissioners. State insurance commissioners and departments would have administered the new federal standards as well as state discrimination and unfair practices laws. Representatives Oxley and Baker believe such reform would increaseefficiency and competition in the insurance industry and help to reduce insurance premiums.
-- The "National Insurance Act of 2006" introduced in 2006 by Senators John Sununu (R-NH) and Tim Johnson (D-SD) as S. 2509. This bill would have created an "optional federal insurance charter." The legislation went much further than the SMART Act and drew broad opposition, most notably from independent insurers and state insurance commissioners.
C.A.R. & NAR will be closely following insurance reform measures and participating in the expected 2007 discussions.
The federal Controlling the Assault of Non-Solicited Pornography and Marketing Act ("CAN SPAM") does not ban unsolicited commercial e-mails but identifies protocols that must be observed by those sending unsolicited emails which advertise a commercial good or service. The bill also authorized the Federal Trade Commission (FTC) to establish a Do-Not-E-mail Registry and required the agency to report to Congress on the feasibility of such a registry.
REALTORS® strongly support efforts to control fraudulent, misleading and abusive unsolicited e-mails and e-mailing practices. Such efforts must be carefully considered to balance the elimination of abusive spamming practices withthe needs of small business to conduct legitimate business via e-mail without the imposition of significant compliance burdens.
REALTORS® use email to (1) respond to inquiries, (2) contact clients and firms involved in sales transactions,(3) remain in contact with former clients and (4) promote property listings. Overly onerous anti-spam legislation could limit the use of e-mail for business purposes.
Since the CAN-SPAM Act was signed into law by President Bush in December 2003, the FTC has chosen not to establish a national Do-Not-E-mail Registry but has issued rules implementing the Act. The most recent final rule issued was a December, 16, 2004 final rule defining the criteria for determining the "primary purpose" of an electronic mail message under CAN SPAM. During the rulemaking process, NAR’s urged the Commission to address the subjectivity of certain factors the FTC identified as relevant to an interpretation that the primary purpose of an e-mail message is commercial. The final rule, which became effective on March 28, 2005, will help e-mail senders determine whether or not an e-mail message’s “primary purpose” is commercial and thus, subject to the provisions of the CAN SPAM Act.
OnJune 27, 2005, NAR submitted comments in response to further rulemaking by the FTC relating to CAN-SPAM. While NAR supported 2 definitional issues and clarification that an e-mail sender can use P.O. boxes in his opt-out notice, we strongly opposed the Commission’s proposed action to shortening the time an e-mail sender has to honor recipient’s opt-out requests. The current opt-out timeframe is 10 days; the FTC is now initiating its discretionary authority to shorten that opt-out timeframe to3 days. NAR also asked the FTC to issue regulations expanding the types of e-mail that are considered "transactional or relationship" (messages that are considered "transactional or relationship" do not have to comply with CAN-SPAM op-out requirements). No significant action has been taken since June 2005 by FTC.
IX. Other Issues
Prescreening/Triggers FACT Act
Many real estate professionals have complained about the practice ofcredit bureaus selling lists of recent mortgage applicants to so-called "lead generators" that in turn compile the information and resell it to third parties.
Here is how the process works. A buyer makes an application for a mortgage. The loanofficer begins the process of opening the application by making a credit inquiry. The credit bureau notes the inquiry and usually within 24 hours generates a list of recent mortgage applicants. This process is called "prescreening" and is used for a number scenarios including credit card offers. The credit bureau sells the list to lead generators or other interested parties. The parties then contact the mortgage applicant and make some kind of offer or counter-offer based upon little more than what is presented in the prescreened list.
In a number of cases, this practice leads to a variety of negative scenarios for real estate agents, brokers, mortgage originators, other real estate professionals and their clients. In some cases, the client erroneously thinks the original mortgage company has sold their information often leading to tension at a minimum. In others, the client is presented with unrealistic terms and either wastes time with the second mortgage company, goes through the process with the second company only to find the terms change, goes through with the deal and pays more than they would have with the original company or sees the deal fall apart because the new company can't provide the credit at the originally presented terms or at all. While a bad outcome is not necessarily the case, the practice has become frustrating to a number of real estate professionals who see deals jeopardized and clients hurt by the practice.
The practice of prescreening is permitted, with some limitations that may be applicable to practices described above, under the Fair and Accurate Credit Transactions Act (FACT) and is regulated by the Federal Trade Commission. One existing remedy for consumers is to "opt-out" of prescreening for all unsolicited offers of credit that come through credit bureau screens. This can be done online and fairly quickly at http://www.optoutprescreen.com or by calling 1-888-567-8688. The opt-out takes five days to becomeeffective and can be established for a five year period or permanently.
