Agenda Summary
2007 Business Issues Committee
National Association of REALTORS®
Midyear Legislative Meetings & Trade Expo
Marriott Wardman Park
Cotillion Ballroom North, Mezzanine Level
Wednesday, May 16, 2007
10:00 AM - 12:00 PM
Chair: Peter Casey
Vice Chair: Douglas Whitehouse
Committee Liaison: Gary Thomas
Committee Executive: Marcia Salkin, Ken TrepetaI. Call To Order
II. Opening Remarks
III. Ownership/Conflict of Interest1. 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 decisionmaking 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 conflict of interest, including votes to block or alter the actions of the body in order to benefit theBusiness in which they have an interest.
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*Ownership interest is defined as the cumulative holdings of the member, the member’s spouse, children, siblings and to any trust, corporationor 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 and 2007 Committee Goals
V. Action/Discussion Items
A.Net Neutrality- Thomas Navin - FCC Wireline Competition Bureau Chief
Please see IBP for further information.
Thomas J Navin Bio
Thomas J. Navin is Chief of the Wireline Competition Bureau and principal adviser to the Commission on common carrier and Internet-related issues. In his role as Chief, Mr. Navin has been and is responsible for reviewing and making recommendations on commoncarrier mergers, including those of AT&T/SBC, Verizon/MCI, and AT&T/BellSouth. He also is responsible for implementing national Broadband policies, including those that apply to Internet-based communications. Moreover, Mr. Navin oversees proceedings relating to inter-carrier compensation, and universal service policy for schools and libraries as well as rural telephone carriers. Previously, he served as Chief of the Wireline Competition Bureau’s Competition Policy Division. As Chief of theCompetition Policy Division, Mr. Navin managed implementation of certain key aspects of the Telecommunications Act of 1996, including the Commission’s UNE proceedings pursuant to section 251 and issues affecting Broadband policy such as VoIP.
Before joining the FCC, he was an associate at McDermott, Will & Emery. Tom received a B.S. from Wake Forest University, and a J.D. from the University of Virginia, where he was an Executive Editor of the Virginia Journal of International Law.
B. Retirement Visa/Silver Card .The current visa system does not allow foreign citizens who own a retirement or vacation home in the United States to use that home on a full-time basis and/or to enter and exit the U.S. without restriction. Individuals who want to live in the U.S. and/or come and go freely should become U.S. citizens or meet the requirements of one of the nation's more than 80 visa categories. However, the addition of a “silver card” would boost housing prices and sales, contribute to economic growth, and increase foreign investment in the U.S.A measure addressing this issue is likely to be legislative and could be a stand alone bill or part of a larger immigration bill. NAR staff has worked with NAR members and outside consultants on research necessary to evaluate the necessary components of a "silver card" legislative proposal, as well as the likelihood that such a proposal could receive the support needed for passage. Member survey work has found that in some resort markets, REALTORS® have indicated that concerns with visa requirements have been a factor in some foreign nationals' purchase decisions. The results of outsidelegal and legislative research into the factors that would need to be addressed in any retirement visa proposal will be presented to the Business Issues Committee at the May NAR meetings.NAR took policy where NAR's Board of Directors directed staff to explore the feasibility of creating and implementing a retirement visa or "silver card" for foreign nationals who are over 55 years of age, have documented income and own U.S. residential real property.C.A.R. policy is to recommendto NAR that NAR continue to explore the issue of creating a new U.S. retirement visa designation.C.Patent Reform. Patent reform is being introduced in the House and Senate during the 110th Congress. In the Senate, S. 1145 was introduced by Senator Leahy (D-VT) and in the House H.R. 1908 was introduced by Congress Berman (D-CA).
The patent reform bills would retain the international first-to-file system from last year's bills, but would include post-grant opposition proceeding process (narrower than the provisions of last year's bill to prevent abuse of the process. They would narrow the current willful infringement standard to require the patent owner to show infringement after a warning in writing, intentional copying of a patented invention, or infringement after a court finding of infringement. Additionally, they would limit infringement damages to the patent’s “specific contribution over the prior art,” not the value of the entire product in which the patent is used and drop provisions relating to “inequitable conduct,” and extraterritoriality, or application ofdamages to foreign sales, which are now under Supreme Court consideration.They would also require that attorney fees would paid by each party - change from last year's prevailing party pay provision – and limit jurisdiction and venue to prevent forum shopping.VI. Priority Legislation/Regulations
A. Small Business Health Coverage Update. 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 a small business health plan to be 12 percent on average.
Access to affordable healthinsurance has increasingly become an issue for NAR's members. In 1996, 13% of Realtors were uninsured; by 2006, 28% - roughly 360,000 - REALTORS® had no health insurance. Given that the average REALTOR® household includes 2.6 persons, it is possible that the number of uninsured REALTORS® and dependents is much higher. SBHPs could enable real estate associations to make health insurance available their members, their families and employees.
Small business health plans bills failed to gain cloture in the Senate during the 109th Congress (S. 1955 & S. 406). With the Republicans losing the majority, the issue has changed to a degree. Republicans must now work closer with the new Democratic majority to find language that is suitable to both sides of the aisle. NAR still supports small business health plans and is working with Senator Enzi (R-WY) to find ways to include small business health plans in health billsduring the 110th Congress.
Currently, C.A.R. and its members have taken a “NEUTRAL” position on small business health plans (SBHP). While previous bills may help REALTORS®in some states, they could harm small businesses and REALTORS® in California. While competition typically lowers prices to consumers, in this instance it could significantly threaten the already-strong coverage that is required tobe provided by state insurers under California law. California already has a superior state system in place that should not be jeopardized. B. Personal Data Security.As technology has evolvedand 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 haveput consumers at an elevated risk of becoming victims of identity theft.Most observers believe that data security legislation will be a high priority for each chamber in the 110th Congress. In the Senate, three bills have been introduced andconsidered at the committee level, including S. 495, (Leahy, D-NH), the Personal Data Privacy and Security Act of 2007, S.239 (Feinstein, D-CA), the Notification of Risk to Personal Data Act of 2007, and S. 1178 (Inouye, D-HI; Stevens, R-AK). While eachbill varies in its terms, all three would require businesses holding consumers' "sensitive personal information" to institute a security program, notify those consumers whose data has been compromised by a data breach and report breaches to either the Federal Trade Commission and/or the Secret Service. In the House, H.R. 958 (Rush, D-IL; Stearns, R-FL), the "Data Accountability and Trust Act”, was introduced with similar provisions in February 2007. The bill is pending in the House Energy and Commerce Committee.
S. 1178 passed out of the Senate Commerce Committee on a voice vote on April 25, 2007. Both S. 495 and S. 239 were marked-up in the Senate Judiciary Committee on May 3, 2007. However, gettinga final bill enacted will be difficult. A total of at least eight congressional committees in the Senate and House have jurisdiction over some component of the data security issue. Jurisdictional spats derailed efforts to get a consensus bill last year. NAR submitted letters outlining its concerns with each of the bills at mark-up and will continue to work with each of the committees of jurisdiction to ensure that careful consideration be given to the potential unintended consequences that these measurescould have for the nation's small businesses, as well as for the ability of states to enact more consumer protective data security measures.REALTORS® strongly support efforts to protect their clients' sensitive personal information but believe that any legislation must not overly burden small firms with limited resources. In addition, any federal data security legislation should not preempt state laws which may offer state residents additional protection.VII. Pending Issues
A.RESPA Reform. In June 2005, the Department of Housing and Urban Development (HUD) released its “roadmap to RESPA reform,” a continuation of its efforts to revamp the Real Estate Settlement Procedures Act (RESPA) regulations. A new proposal has been delayed after Secretary Jackson initially indicated it would be available in the spring.
NAR advocates a market-based approach to RESPA reform that encourages fair competition, protectsconsumer choice and 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 but efforts are being made to come out with a proposal in 2007.
At roundtables in 2005, HUD disclosed the provisions of a 2004 “final” RESPA rule which was withdrawn from 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) productthat 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.
2006 NAR President Tom Stevens met with Secretary Jackson and OMB Director Portman in 2006 and reiterated NARs position. NAR staff met with the HUD General Counsel in July 2006 gave him a detailed view of NAR's position as well. In April 2007, NAR President Pat Vredevoogd-Combs sent a letter to acting General Counsel, Robert Couch asking that he continue to pursue his predecessor's proposal to issue "no action" letters to firms that seek approval for activities under RESPA. NAR believes such letters will help people better comply with RESPA.
Letter to HUD- Online Complaint Questionnaire
Letter to HUD- Endorsing Effort to Provide Greater TransparencyB. Prescreening/Triggers/ ID Theft Prevention(Letter to FTC)January 18, 2007
Federal Trade Commission
Office of the Secretary
Room H-135 (Annex N)
600 Pennsylvania Ave, N.W.
Washington, D.C. 20580
Re: Identity Theft Task Force, P065410
Dear Sir or Madam:
On behalf of more than 1.35 million members of the National Associationof Realtors® (NAR), I am pleased to offer comments on the Federal Identity Theft Task Force’s Interim Recommendations.
The National Association of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, including NAR’s five commercial real estate institutes and its societies and councils. REALTORS® are involved in all aspects of the residential and commercial real estate industries and belong to one or more of some 1,500 local associations or boards, and 54 state and territory associations of REALTORS® and therefore has a significant interest in the outcome of this process.
NAR is a strong proponent of ID theft prevention. Identity theft continues to be a significant concern amongst our membership and the general public at large. Given the critical importance of credit to homeownership and our industry, NAR has taken a leading role in promoting identity theft awareness and prevention measures through our partnership with the FTC on the “Deter, Detect, and Defend” campaign. We believe further educational efforts would be quite valuable to consumers.
Any such efforts should include not only the usual advice to safeguard one’s data from electronic theft but also proactive measures such as “opting out” of prescreened credit offers. According to the FTC’s own data, a full 26% of ID Theft complaints involve credit card fraud. Asignificant number of these ID Theft cases are the result of stolen mail containing prescreened offers of credit and other similar offers. The proliferation of prescreened credit offers creates many opportunities for criminals to obtain personal information even without computer hacking or other electronic theft methods. Consumers should be made aware of their ability to reduce this risk through the “opt out prescreen.”
NAR also believes business should be required to take reasonable and cost effective measures to protect the security of personal data. However, the government should weigh carefully the financial impositions on small business of various methods as well as the likelihood of significant risk. Imposing onerous securityschemes on small business will add significant cost burdens. Costs, risks, and remedies must be balanced.
Similarly, any data breach notice requirements should also be carefully tailored to situations where tangible harm is likely. Once again,small businesses should not be put at a disadvantage and face onerous burdens because of the large stream of data breach cases emanating from government and large scale credit and financial operations.
Thank you for the opportunity to presentthe views of the National Association of REALTORS®. If you have any questions, please do not hesitate to contact our Regulatory Policy Representative, Ken Trepeta at (202) 383-1294 or ktrepeta@realtor.org.
Yours Truly,
Pat Vredevoogd Combs, ABR, CRS, GRI, PMN
2007 President, National Association of REALTORS®C.GAO Title Industry Study
Title Insurance- Actions Needed to Improve Oversight of the Title Industry and Better Protect Consumers
GAO Highlights
Highlights of GAO-07-401, a report to the Ranking Member, Committee on
Financial Services, House of Representatives
Why GAO Did This Study:
Ina previous report and testimony, GAO identified issues related to title insurance markets, including questions about the extent to which premium rates reflect underlying costs, oversight of title agent practices, and the implications of recent state and federal investigations. This report addresses those issues by examining (1) the characteristics of title insurance markets across states, (2) factors influencing competition and prices within those markets, and (3) the current regulatory environment and planned regulatory changes. To conduct this review, GAO analyzed available industry data and studies, and interviewed industry and regulatory officials in a sample of six states selected on the basis of differences in size, industry practices, regulatory environments, and number of investigations.
What GAO Found:
The U.S. title insurance market is highly concentrated at the insurer level, but market characteristics varied across states. In 2005, for example, five insurers accounted for 92 percent of the national market, with most states dominated by two or three large insurers. Variations across states included the way title agents conducted their searches as well as the number of affiliated business arrangements (ABA) in which real estate agents, brokers, and others have a stake in a title agency. Finally, premiums varied across states due to cost and market variations that can also make understanding and overseeing title insurance markets a challenge on the national level.
Certain factors raise questions about the extent of competition and the reasonableness of prices that consumers pay for title insurance. Consumers find it difficult to comparison shop for title insurance because it is an unfamiliar and small part of a larger transaction that most consumers do not want to disrupt or delay for comparatively small potential savings. In addition, because consumers generally do not pick their title agent or insurer, title agents do not market to them but to the real estate and mortgage professionals who generally make the decision. This can create conflicts of interest if those making the referrals have a financial interest in the agent. These and other factors put consumers in a potentially vulnerable situation where, to a great extent, they have little or no influence over the price of title insurance but have little choice but to purchase it. Furthermore, recent investigations by the Department of Housing and Urban Development (HUD) and state insurance regulators have identifiedinstances of alleged illegal activities within the title industry that appeared to take advantage of consumers’ vulnerability by compensating realtors, builders, and others for consumer referrals. Combined, these factors raise questions about whether consumers are overpaying for title insurance.
Given consumers’ weak position in the title insurance market, regulatory efforts to ensure reasonable prices and deter illegal marketing activities are critical. However, state regulators have not collected the type of data, primarily on title agents’ costs and operations, needed to analyze premium prices and underlying costs.
In addition, the efforts of HUD and state insurance regulators to identify inappropriate marketingand sales activities under the Real Estate Settlement Procedures Act (RESPA) have faced obstacles, including constrained resources, HUD’s lack of statutory civil money penalty authority, some state regulators’ minimal oversight of title agents, and the increasing number of complicated ABAs. Finally, given the variety of professionals involved in a real estate transaction, a lack of coordination among different regulators within states, and between HUD and the states, could potentially hinderenforcement efforts against compensation for consumer referrals. Because of the involvement of both federal and state regulators, including multiple regulators at the state level, effective regulatory improvements will be a challenge and will require a coordinated effort among all involved.
What GAO Recommends:
GAO recommends that HUD and state insurance regulators take actions to improve consumers’ ability to comparison shop for title insurance and strengthen the regulation and oversight of the title insurance market, including the collection of data on title agents’ operations. Further, Congress may want to consider, as part of its oversight of HUD, exploring the need for modifications to RESPA, including increasing HUD’s enforcement authority. HUD generally agreed with these recommendations, and NAIC agreed they should be explored.
VIII. ReportsA.US District Court Decision: ReMax Ideal vs Ryan Swanberg(Court Decision)B. NAR Letter to FCC
C. RESPA EducationNAR continues its broad effort to educate its members on RESPA enforcement. The effort began three year ago with the creation of the “RESPA Realities” program at Midyear and Annual convention. The session brings together leading RESPA attorneys and real estate and real estate services practitioners to discuss the latest developments in RESPA enforcement and compliance. There is usually a lengthy question and answer session involving the audience. The most recent session in New Orleans attracted 300 REALTORS®. The next session, at Midyear will be held at the Marriott Wardman Park in the Virginia Suite on Tuesday, May 15, 2007 at 8:00. For more info visit:http://www.realtor.org/government_affairs/respa/index.htmlFollowing on the development of “RESPA Realities,” NAR produced a series of brochures and laminated cards to educate members of their obligations under RESPA. The RESPA “Dos and Don’ts” laminated cards have become popular across the nation. The brochures incorporate more details and questions and answers on key RESPA issues for agents and for those involved in affiliated business arrangements (ABAs). These materials are available for purchase through the REALTOR® website:
http://www.realtor.org/RESPA The REALTOR® RESPA page contains links to the REALTOR® store and other information onthe latest RESPA happenings.
In 2006, NAR undertook to create a RESPA education course that would be eligible for state continuing education credit. The first approved course was held in Maryland on April 17, 2007. More than 300 REALTORS®attended. The course was jointly sponsored by NAR and the Maryland Association of REALTORS®. NAR secured RESPA expert Phil Schulman to conduct the course. The Maryland Association and several Maryland brokers promoted the course to REALTORS®. The Maryland Association worked to secure CE credit and also handled the onsite logistics for the course. NAR hopes to partner with other state associations to conduct future courses.
The Future:
NAR plans to continue to expand its RESPA education efforts. The Midyear 2007 session of RESPA Realities will be recorded and made available for a reasonable fee as an educational tool for agents, brokers, and associations. The session may even be used as a one credit component of a larger course should states wish. NAR will continue to partner with states to offer RESPA education sessions to members across the country. Finally, NAR continues to remain active in the ongoing debate about RESPA reform. NAR remains engaged with HUD and OMB as well asother industry players in an effort to ensure that all REALTORS® are represented in the decision-making process.
D. RESPARealities Session – May 15th
E. NAR Insurance Task Force
IX. New Business
X. Adjournment
