Agenda Summary 2007 Conventional Finance & Lending Committee National Association of REALTORS® 2007 REALTORS® Conference & Expo Venetian Resort Hotel Casino Palazzo N, Level 5 Tuesday, November 13, 2007 1:30 PM - 5:00 PMChair: Judy Zeigler (CA) Vice Chair: Beth Peerce(CA) Committee Liaison: Gary Thomas (CA) Committee Executive: Jeff Lischer (DC) & Lynn King (DC)I. Call To Order
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.
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, thensuch 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.
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:
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
Holds a seat on the board of directors of the Business unless theperson’s only relationship to the Business is service on such board of directors as NAR’s representative; or
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 bodyin 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 andto 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.
VII. New BusinessA. Committee Discussion of draftNAR Housing PolicyB. Report of Visitability Work GroupThe Equal Opportunity Cultural Diversity Committee recommended policy at the 2007 Midyear meetings that NAR support the concept of visitable housing. This recommendation was referred back to committee by the Board of Directors to allow time for a Working Group comprised of members of the following Committees and Advisory Boards in the development of NAR policy:
Conventional Lending and Finance Federal Housing Policy Federal Taxation Housing Needs Housing Opportunities Advisory Board Land Use, Property Rights and Environment REALTORS® Commercial Alliance Smart Growth Advisory Board State and Local Issues
The Working Group met twice, in July and October to develop its recommendation. Input was received from homebuilders, members of the accessibility community, and local government officials. NAR also provided some research on desired home featuresof recent homebuyers.
Issue Background Visitable housing is housing in which someone can host a guest who has mobility impairments. Often people with mobility impairments are limited from access by stairs, hallways and doors that are toonarrow for a wheelchair, or lack of a useable bathroom. Visitability does not mean accessibility as defined in the Fair Housing Act or the Americans with Disabilities Act. Accessibility refers to the ability of someone with mobility impairments to live inthe home. Visitability is limited to those features needed to accommodate a guest. Generally visitability involves a no-step entrance into one level of a home, passage doorways at least 32” wide, and access to a bathroom toilet and sink, all on thelevel with a no-step entrance. Some visitability ordinances also require that environmental controls such as light switches, electric outlets and thermostats be at an accessible level.
Several communities and states have begun to encourage orrequire that new single family housing be built as visitable. The approaches differ from location to location and mandatory visitability often includes exceptions where visitability would be impractical, such as in highly sloped terrain.
Advocates for Visitability maintain that many people have family members or friends who are mobility impaired and therefore the benefits of visitability extend far beyond the population with disabilities. They also state that the costs to make houses visitableis far less at the time of construction than it is as a modification after construction is complete.
Homebuilders and others point out that the costs can vary significantly based on terrain, requirements for foundations and raised structures (such as in flood plain areas), historical preservation, small lot size or square footage, etc. Costs include the need to redraw plans, the loss of square footage in a unit, and the additional material needed to make houses visitable. In addition, there arethose who argue that private property rights should prohibit any mandatory standards, leaving those choices to the discretion of the homeowner.
Existing NAR Policy NAR has no policy on visitable housing, however existing policy in three areas impacts visitable housing. NAR strongly endorses private property rights. NAR opposes undue regulatory burdens that increase the costs of housing. NAR supports equal housing opportunity without discrimination on the basis of disability. Additionally,NAR devotes significant resources to increase housing opportunities and the supply of affordable housing.
The rights of people with disabilities to live where they want are a key part of NAR’s support for equal opportunity. NAR supportedboth the passage of the 1988 Fair Housing Act Amendments and the Americans with Disabilities Act. These laws do provide for new construction in multi-unit housing and in places of public accommodation, generally commercial real estate, to be built to federal accessibility standards. These requirements do not extend to single family housing.
Proposed Policy Recommendation That NAR believes that visitability, the ability to host visitors with mobility impairments, can be important in homes.
That NAR believes that any visitability policy should be defined as voluntary. Further, NAR believes that the market is the best mechanism to produce visitable housing and opposes any federal visitability mandates.
For the purposes of this policy, the key features of visitability apply to one level of the home. These are a no-step entry, passage doorways that provide at least 32” clearance, and a minimum of a useable half bathroom with a sink and water closet. That NAR educate its members about the concept of visitable housing.
That NAR become a resource on visitable housing, compile best practices and examples of local and state building codes and make this information available to state and local associations. Rationale Certain features of a home can be designed to make it possible for people with mobility impairments to visit the homes of others. This can be important not only to the person with the mobility impairment but also to others that person interacts with. These features are distinguished from those that allow a person with mobility impairments to live in a home.Generally, in order to visit a home, someone needs to get into the home, move about a portion of the home and have access to a toilet and sink while visiting. Visitors generally do not need access to all rooms in a home, nor do they need accessible features in kitchens or access to environmental controls such as thermostats.
The rights of property owners, particularly homeowners, to choose the design of their homes are a cornerstone of private property rights. Individual homeowners make many decisions regarding the design of their homes and take multiple factors into account when purchasing or designing homes. Requiring houses to be visitable could impact the visual appeal of a home, the layout and flow of the rooms, increase costs and take space away from other uses. However, for some these visitable features could also add appeal and make the homes more usable.
Regulatory burdens often add to the cost of housing. In the case of visitability, there is no agreement on the costs of the basic visitability features. Some communities and homebuilders can document minimal costs, in the range of $500 to $1000. However, in other communities existing code requirements or property conditions could add significantly to the costs. Federal requirements are more difficult to apply to unique local conditions. Land use issues, particularly building codes, which protect health and safety, are a local issue.
Since there are communities where homes can be made visitable with minimal cost impacts and some home designs can make visitable features an attractive part of the design, educating REALTORS® about visitable home design will result in more visitable home being built and marketed on a voluntary basis. As communities debate changesto their local land use laws and building codes, being a resource to state and local associations, with examples of various state and local laws, will better position REALTORS® and associations addressing proposed local legislation and regulation.C.Mortgage Bankruptcy ReformThe issue of including mortgages in bankruptcy proceedings was last strongly broached in the early 1990’s. At this time, NAR and C.A.R.were against the concept, specifically the cramdown provisions. However, in the early 1990’s, loans were predominantly fixed rate mortgages and ALT-A loans with exploding ARMS were not predominant on the market. Needless to say, times and mortgages have changed dramatically since the last time this issue was taken up by REALTORS®. Is it time for C.A.R. and/or NAR to revisit these issues considering the current market conditions?
VIII. Unfinished BusinessA. Committee Discussion of Housing and Mortgage MarketsB. Regulatory and Congressional UpdateC. Anti-abusive Lending Regulations and LegislationAbusive lending practices are a serious problem for our nation's communities. While abusive lending is mostly found in subprime loans, not all subprime loans are abusive. Responsible subprime lenders play an important role in helping millions of consumers achieve homeownership. Unfortunately, some lenders take advantage of vulnerable borrowers by charging extremely high interest rates and loan fees, use aggressive sales tactics to steer consumers into unnecessarily expensive loan products, and advertise very low "teaser rates" that steeply increase after two or three years. Abusive loans lead to higher foreclosures, increased vacancy rates, lower home values, and communitydeterioration.REALTORS® have a strong stake in preventing abusive lending because:
Abusive lending erodes confidence in the Nation's housing system.
Congress and the regulators could over-react and inadvertently limit the availability of reasonable credit for prime and subprime borrowers.
If abusive lending constrains the secondary mortgage market, the cost of mortgages for all homebuyers will go up.
Abusive lending harms citizens and communities, including REALTORS®.
REALTORS® support federal legislation and regulation that prevents abusive lending while keeping fair and affordable subprime loans available. Consumer education is an important tool for combating abusive lending, and NAR encourages its members to help consumers learn how to avoid abusive lending and has developed educational materials as part of this effort. In April 2006, NAR announced its Enhanced Subprime Lending Policy that builds on existing policy. Mortgage originators should treat all parties honestly. NAR policy supports adoption of responsible lending principles to assure lenders make loans to borrowers that are fair and affordable. Subprime loans should have a reasonable debt-to-income ratio and an escrow for taxes and insurance. Borrowers should have a reasonable choice of mortgages priced to reflect the borrower's creditworthiness. NAR also urges various actions to prevent foreclosure and minimize its impact and other policy initiatives.Congress intends to respond to lending abuses by amending the Truth in Lending Act to impose restrictions and limitations on high-cost mortgages and establish standards and additional consumer protections for all subprime loans. On October 22, 2007, House Financial Services Committee Chairman Barney Frank (D-MA) along with Representatives Brad Miller (D-NC) and Mel Watt (D-MC) introduced H.R. 3915, the “Mortgage Reform and Anti-Predatory Lending Act of 2007.” The legislation addresses many abusive lending practices that contributed to today’s foreclosure crisis, including reckless underwriting practices, subprime prepayment penalties, and new remedy and enforcement provisions. Senate Banking Committee Chairman Chris Dodd (D-CT) has also indicated he will introduce mortgage reform lending legislation, the foundation of which is a new duty for all lenders and brokers to act in good faith and with fair dealings. The banking regulators have issued guidelines for nontraditional and subprime mortgage lending, and the Federal Reserve Board intends to issue proposed anti-abusive lending regulations by the end of 2007 that will apply to all mortgage lenders.D.ILCIn 2006, in response to applications from Wal-Mart and Home Depot to become owners of industrial loan companies (ILCs), NAR, bank trade associations, and many others voiced concerns with the Federal Deposit Insurance Corporation (FDIC) and Congress about mixing of banking and commerce through the ILC statutory loophole that permits commercial firms to own this type of federally insured state bank. Congress is considering amending the Federal Deposit Insurance Act to close the ILC loophole. An ILC is a special type of federally insured state-chartered bank (Utah has chartered about half of all ILCs). Responding to pressure by Congress and the regulators, Wal-Mart withdrew its application to charter an ILC. However, other commercial companies, including Home Depot, are still pursuing owning an ILC.Banks should not be swayed into making credit or other business decisions based on their affiliation with commercial firms. When commercial firms are allowed to engage in banking, the bank functions under an inherent and irreconcilable conflictof interest. The bank’s commercial parent will be tempted to use the bank in a manner that furthers its own corporate objectives, which may be at odds with what is in the best interests of the bank subsidiary, customers, competitors, REALTORS®,and our financial system.REALTORS® support amending the Federal Deposit Insurance Act to tighten or eliminate the exception that permits commercial firms to own ILCs. NAR opposes FDIC approval of any commercial company's application toacquire an existing ILC or to obtain federal deposit insurance for new a ILC. NAR believes that Congress should close the ILC loophole and strengthen our national policy against mixing banking and commerce.In response to pressure from NAR andothers, the FDIC extended the moratorium on applications from commercial firms to acquire or charter ILCs until January 31, 2008. NAR supports enactment of H.R. 698, the "Industrial Bank Holding Company Act of 2007." On May 2, 2007, the House Financial Services Committee overwhelmingly passed H.R. 698 by voice vote. During the debate, some Committee members voiced support for an exception for automobile companies from the prohibition of owning an ILC. Representative John Campbell (R-CA) introduced an amendment exempting automobile companies from H.R. 698, but withdrew it after Chairman Frank indicated a willingness to accept a very narrow exception prior to final enactment. The House overwhelmingly passed H.R. 698 on May 21, 2007, by a vote of 371-16. While the Senate Banking Committee has yet to consider S. 1356, there was a full committee hearing on October 4, 2007, focusing on the adequacy of the regulation and supervision of ILCs.E. GSE ReformThe new Democratic-controlled Congress raises the prospect that GSE reform legislation may be adopted in 2007. Under the leadership of House Financial Services Committee Chairman Barney Frank (D-MA), the House has passed a bill to overhaul the regulatory oversight of the housing government-sponsored enterprises (GSEs) -- Fannie Mae, Freddie Mac, and the Federal Home Loan Banks system (FHLBanks). The bill is a product of both bipartisan legislation considered in the 109th Congress and compromise agreements between House Democrats and the Department of the Treasury. The new legislation creates a strong, independent safety and soundness regulator withbroad powers analogous to current banking regulators. Senate action is uncertain.Housing and real estate account for nearly 20 percent of the national economy. The GSEs buttress the nation's housing finance system by assuring stability and liquidity in all housing markets allowing investors to fund mortgages regardless of the interest rate environment, or other factors affecting the economy. The GSEs represent a significant federal subsidy that supports housing and homeownership.REALTORS® support strengthening GSE financial safety and soundness regulation through an independent agency that recognizes and facilitates their unique corporate structures and public missions that assure stability and liquidity in the nation’s housing finance system. NAR also supports the affordable housing and community development programs of the FHLBanks that provide alternative financing for Bank member credit unions, banks and thrifts. REALTORS® also supports increasing the maximumloan amounts (conforming loan limits) that the GSEs can purchase in high cost housing markets.On March 29, 2007, the House Financial Services Committee passed H.R. 1427 – GSE Reform Bill. Over the course of the two day mark-up, there were a number of amendments, the most significant for REALTORS® was an attempt by Representative Jeb Hensarling (R-TX) to eliminate the conforming loan limit provision in H.R. 1427, arguing that it would allow the GSEs to enter the luxury home financemarket. NAR worked closely with Representative Gary Miller to defeat the Hensarling amendment by a vote of 10 (in support) and 51 (opposed to the amendment). On May 29, 2007, the U.S. House of Representatives passed H.R. 1427, the “Federal HousingFinance Reform Act of 2007,” by an overwhelming bipartisan vote of 313 to 104.
In response to disruptions in the credit markets in the summer of 2007, NAR joined the Mortgage Bankers Association and the National Association of Home Builders in writing to OFHEO urging it to increase the caps on the investment portfolios of Fannie Mae and Freddie Mac. OFHEO, the Office of Federal Housing Enterprise Oversight, is the safety and soundness regulator of Fannie Mae and Freddie Mac. OFHEO did modify the portfolio cap formulas in September, which provided some additional flexibility for Fannie and Freddie.
On October 16, 2007, OFHEO announced that the conforming loan limit (CLLs), which limit the dollar size of mortgages that Fannie andFreddie may purchase, would remain at $417,000 for 2008. OFHEO also invited public comment on guidance for amending CLLs in the future. The proposal would permit decreasing CLLs, which C.A.R. and NAR oppose.F. Banks in Real EstateIn early 2001 the Federal Reserve Board and the U.S. Treasury Department proposed rules to expand the powers ofnational 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, inherently commercial activities.If banks are allowed to engage in real estate brokerage, it would create anti-competitive and anti-consumer concentrations of power within the financial services sector, which would ultimately increase costs for homebuyers. Financial holding companies and bank 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 (thanks to federal deposit insurance and loans from the Federal Home Loan Bank System) 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.REALTORS® strongly support enactment of the Community Choice in Real Estate Act, H.R.111/S.413, which removes the powers of the Fed and the Treasury Department to regulate these real estate activities. NAR believes that, if permitted to engage in realestate brokerage and management, national bank conglomerates would have an unfair competitive advantage and inherent conflicts of interest would result.On January 4, 2007, Representatives Paul Kanjorski (D-PA) and Ken Calvert (R-CA) reintroduced H.R. 111, "The Community Choice in Real Estate Act," which clarifies Congressional intent that real estate brokerage and management are not banking activities. Currently, 267 House members have signed on as cosponsors of H.R. 111. On January 26, 2007,Senators Hillary Rodham Clinton (D-NY) and Wayne Allard (R-CO) introduced a Senate version of "The Community Choice in Real Estate Act," which has 21 cosponsors.
On June 29, 2007, the U.S. House of Representatives passed the FY2008 Financial Services and General Government Appropriations bill, which includes an NAR supported provision prohibiting the Federal Reserve and Treasury Department from finalizing a rule allowing banks to engage in real estate brokerage and management. The final vote on passage of the appropriations bill was 240 in support and 179 against. On July 19, 2007, the Senate Appropriations Committee approved language to permanently prohibits banks from entering the real estate brokerage business. This is the fourth year the Senate Appropriations Committee has supported the permanent language. At this point in time, it is hard to predict when the full Senate will approve our permanent provision as they have only acted on 6 of the 12 appropriations bills. However, NAR is extremely optimistic that, when the House and Senate appropriators conference on the permanent versus one-year prohibition, the outcome will be exactly what we have been advocating for over the last 6 years - a permanent ban on national bank conglomerates fromentering the real estate brokerage, property leasing and management business.IX. AnnouncementsA. Freddie Mac Reception, The Wynn Hotel, Casino Level, Chambertin Room, Wednesday, November 14, 7-9 p.m.
X. Guest SpeakerA. "Mortgage Lending Issues: Subprime Mess and What's Next," with FHA Commissioner Brian Montgomery & Fannie Mae President and CEO Dan Mudd. Titian 2203-2206/2303-2306, Level 2. Tuesday, November 13, 3:30-5 p.m.XI. Adjournment
