2009 Conventional Finance and Lending Committee
National Association of REALTORS®
2009 REALTORS® Conference
San Diego Marriott Hotel & Marina
Ballroom C, North Tower, Lobby Level
Friday, November 13, 2009
1:30 pm – 4:00 pm

Chair: George Wonica, Staten Island, NY
Vice Chair: Iona Harrison, Potomac, MD
Committee Liaison: Lance Lacy, San Angelo, TX
Committee Executive: Jeff Lischer and Tony Hutchinson, Washington, DC

I. Call to Order

II. Opening Remarks

III. NAR Conflict of Interest Statement 

IV. Approval of Previous Meeting’s Minutes 

V. Committee Goals Update
Goal No. 1: Position the Association to address legislation and regulations aimed at housing stimulus and mortgage reform.

Rationale: In 2009, Congress and the Administration will continue taking steps to directly address the housing sector in an attempt to stabilize housing prices through efforts to reduce foreclosures and stimulate home sales. The committee will be informed of legislation and regulatory actions taken by Congress and government agencies to kick-start the housing sector.

Abusive and irresponsible lending practices have caused the credit markets to seize up and the economy to go into recession. In October 2008, Congress enacted the Emergency Economic Stabilization Act (EESA) of 2008 to stave off a significant economic recession by focusing monetary stimulus to financial institutions. The Obama Administration is implementing its Marking Home Affordable Programs, providing for refinancing of GSE loans and modifying GSE and other loans. The goal is to minimize foreclosures.

The committee will advise NAR staff on actions required to ensure the housing sector is adequately addressed in legislation and regulation, and ensure that consumers are adequately protected.

Expected Outcome: The jury is still out on the success of the current steps being taken to address the housing and economic crises.

Update: The early stages of a recovery are being seen in a number of markets. The Federal Reserve Board continues to support the mortgage market, including an ongoing $1.25 trillion of MBS purchases, now scheduled through March 2010. NAR will push the Fed to continue support as long as necessary, until private investment returns in sufficient amounts. The House has passed mortgage reform legislation and is currently working on financial regulatory reform, but action by Senate on both seems extremely unlikely until 2010, if then. NAR continues to push the Administration for release of its Making Home Affordable Short Sales Program.

Goal No. 2: Fannie Mae, Freddie Mac and Federal Home Loan Banks (GSEs) Restructuring

Rationale: In September 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac, the largest holders of U.S. housing debt, into conservatorship. Since that time, Congress, federal agencies, and housing advocates have been considering the appropriate business model for the organizations when they exit conservatorship.

The committee will be kept apprised of potential GSE business models developed by congressional, regulatory, and housing advocates and advise staff on issues that directly affect the housing market, and/or REALTORS®, as they arise.

Expected Outcome: The Obama Administration plans to release its proposal for GSE restructuring in February 2010, when it releases its FY 2011 budget. Restructuring legislation is not anticipated until late in 2010, or even later.

Update:
While timing for the GSEs exit from conservatorship is uncertain, NAR will continue to work to make sure that the restructuring of the GSEs will bring stability to the housing markets, while they maintain their housing mission of helping home buyers and homeowners in high cost areas obtain fair and affordable mortgages. The GSE PAG is developing recommendations for NAR policy on the future of the GSEs.

VI. Speakers
A. Obama Making Home Affordable Short Sales Program/Servicing Issues
(Makinghomeaffordable.gov)

B. HVCC Issues (Jacqueline Doty, Collateral Policy Director, and Lance Wolf, Managing Associate General Counsel, Freddie Mac)(NAR’s on-line HVCC Resource Page) 

VII. Issues Update
A. Economic Update – Jed Smith, NAR Managing Director, Quantitative Research

B. Financial Regulatory Restructuring (including Consumer Financial Protection Agency)
The Obama Administration has proposed a very broad and robust set of reforms to the Nation’s financial services structure. There are 13 separate initiatives that comprise the Administration’s plan, and as of late October 2009, plans for six of these initiatives have been submitted to Congress for discussion. They focus on the following areas: over-the-counter derivatives, private fund investment advisors, insurance, investor protection, consumer financial services protection, and accountability and transparency for credit rating agencies.

House Financial Services Committee (HFSC) Chairman, Barney Frank, has indicated that regulatory reform will be on a piecemeal basis over the next several months, beginning with the cornerstone piece of the reform plan, H.R. 3126, the “Consumer Financial Protection Agency Act.” The original bill to create this agency, known as CFPA, would have affected real estate professionals by virtue of its far reaching authorities going far beyond financial services. But NAR sought and won a carve-out for real estate professionals for their real estate brokerage activities in the version of the bill approved by the House Committee. The Committee refused, however, to accept NAR’s recommendation that RESPA remain under HUD’s jurisdiction.

Real estate professionals are subject to longstanding and robust regulation at the state level. Making real estate brokers and agents subject to regulation by CFPA would unnecessarily transform the existing relationship between real estate professionals and state regulators by imposing national standards applicable to real estate that do not fit all markets and causing confusion and duplicative regulation that stifles business activity.

The implementation of the CFPA legislation, without an exclusion for REALTORS® and other real estate brokers and agents, would curtail business activity as state regulators work to understand how existing state requirements will coexist with new national statutes that may be inappropriate for their particular market. The transfer of the governance of RESPA from HUD to the CFPA may create challenges for the industry as the new agency comes up to speed on the current state of RESPA in the marketplace and considers possible changes to HUD’s implementation of RESPA.

C.A.R. and NAR currently has no official policy regarding the creation of a consumer financial protection agency.

The full Conventional Finance and Lending (CFL) committee, as well as a select committee composed of the Chairs and Vice Chairs from the CFL and Business Issues committees, the political and leadership liaisons, and NAR staff discussed, drafted, and submitted to the House Committee staff REALTOR® concerns and recommended changes to the CFPA bill. These concerns were largely accepted by the Committee. Committee staff has advised NAR informally that the original intention of the reform was not to reach into the real estate brokerage space, and Senate staff has told NAR staff that they agree.

On October 22nd, the CFPA bill was passed by the House Financial Services Committee, 39-29. The bill, which includes an explicit exclusion for real estate professionals, is headed to the floor of the House of Representatives for a vote. NAR expects that the bill will be taken up by the House this year, possibly prior to the 2009 NAR Annual Convention. The Senate Banking, Housing and Urban Affairs Committee has yet to introduce a companion bill for discussion, and Senate action in 2009 is considered unlikely.

C. GSE Restructuring—update of GSE PAG—Vince Malta, Chairman, GSE PAG (Principles Approved November 2008)
NAR Principles for Ensuring a Strong, Robust Financing Environment for Homeownership--Approved by the Board of Directors, November 2008

In light of disruptions in the credit markets and the conservatorship of Fannie Mae and Freddie Mac, NAR has developed principles for the consideration of the 111th Congress and the new Administration. The goal of these principles is to ensure there is sufficient capital to support mortgage lending in all types of markets for qualified borrowers. [Footnote: NAR’s Responsible Lending Policy supports requiring all mortgage originators to verify the borrower’s ability to repay the loan based on all its terms, including taxes and insurance, without having to refinance or sell the home (with limited exceptions for borrowers with significant assets).] NAR believes that these principles require a continuing role for the federal government in the mortgage market.

The new secondary mortgage market model must:

1. Ensure an active secondary mortgage market by facilitating the flow of capital into the mortgage market, in all market conditions.
2. Seek to ensure affordable mortgage rates for qualified borrowers.
3. Establish reasonable affordable housing goals so all qualified borrowers, including low- and moderate-income households, have an opportunity to realize the dream of homeownership. Affordable housing goals should not provide incentives for the institution that are inconsistent with sustainable homeownership.
4. Require the institution to pass on the advantage of its lower borrowing costs (and other costs of raising capital) by making mortgages with lower rates and fees available to qualified borrowers.
5. Ensure mortgage availability throughout the nation. NAR supports indexing conforming loan limits based on increases in median sales prices, including higher indexed limits for areas with high housing costs.
6. Require sound underwriting standards.
7. Require the highest standards of transparency and soundness with respect to disclosure and structuring of mortgage related securities.
8. Ensure there is sufficient capital to support mortgage lending in all types of markets.
9. Provide for rigorous oversight.

D. TILA (Revised Disclosure Requirements; Proposed Major Revision)
Lenders are subject to new TILA disclosure requirements for mortgage loans. The new requirements apply to loan applications filed on or after July 30, 2009 (about two months earlier than originally planned). The new rules are complex and compliance will be a challenge for lenders. NAR staff has NOT heard any complaints so far.

The new requirements apply to all mortgages secured by a borrower’s home, including primary and second homes and refinancings. Investor loans continue to be exempt.
Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan (early disclosure). The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.

The closing may not take place until expiration of a 7 day waiting period after the consumer receives the early disclosure.

Consumers may shorten or waive the 3-day and/or 7-day waiting periods for a “bona fide personal financial emergency,” but only after receiving an accurate TILA disclosure.
If the annual percentage rate (APR) changes by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan. The APR includes not only the interest rate on the loan but certain other costs related to settlement.

Federal Reserve Board Final Rule and Staff Commentary (Federal Register, May 19, 2009)
http://edocket.access.gpo.gov/2009/pdf/E9-11567.pdf

Wells Fargo Website with Its Advice on the New TILA Requirements
https://www.wellsfargo.com/mortgage/resources

NAR Video
http://www.realtor.org/government_affairs/government_affairs_news_videos

Mortgage Bankers Association Summary of New Requirements

On August 26, 2009, the Fed published a proposed rule to overhaul the TILA rules that impose duties on lenders. The main purpose is to improve borrower understanding of the terms and conditions of the mortgage through educational materials (e.g. brochures and graphs) and enhanced presentation of disclosures (e.g. format and content). The four points of disclosure addressed in this rule are:

--Disclosure at time of application,
--Disclosures within 3 days of application.
--Disclosures 3 days before closing.
--Disclosures after closing (new disclosure).

NAR supports the goals, but is still analyzing the rule. Implementation of a final rule, after consideration of comments, is unlikely until October 2010 at the earliest. Of particular interest:

1. Restrictions on Compensation of Loan Originators (Mortgage Brokers & Retail Loan Officers).
In response to the mortgage crisis, the Fed is proposing to revamp long-standing industry compensation practices by using its general authority to prohibit unfair or deceptive acts or practices (UDAP). The Fed (and other policymakers) believe that industry compensation methods encourage loan originators to steer borrowers to products that generate the most income for the originator and not to products that are in the consumers’ best interests. Instead of current incentives, loan origination staff would have to be paid on a flat fee or hourly basis. The Fed also proposes to establish a specific “anti-steering” requirement that would place a duty on the loan originator not to steer a borrower to a lender that offers greater compensation to the originator “when the loan is not in the consumer’s interest.” As a general policy, NAR does not comment on compensation rules for non-REALTORS®.

2. Revision of the calculation of the finance charge and the APR to include more fees and costs.
The goal of including more fees in the APR is to “allow consumers to evaluate competing mortgage products by reviewing one variable” (APR). It is designed to bring the APR closer to being the “total cost of credit.”

3. Requirement for redisclosure of “final” TILA disclosure three days prior to closing.
The Fed offers two alternative scenarios for triggering redisclosure. Comments are solicited on when redisclosure should be required. The choices are: (1) if any terms change, redisclosure with new 3 day waiting period, or (2) if the APR exceeds a certain tolerance or ARM feature is added, redisclosure with new 3 day waiting period. Otherwise, redisclosure occurs at closing.

E. NAR’s New Short Sales and Foreclosure Resource (SFR) Certification-Marc Gould, NAR VP, Business Specialties

VIII. Roundtable Discussion by Full Committee

IX. Announcements
A. RPAC Message from NAR President Charles McMillan
Thank you for your investment in the REALTORS® Political Action Committee!

On behalf of 2009 NAR President-Elect Vicki Cox Golder and Political Fundraising Liaison John Harrison, I extend a tremendous thank you to each and every one of you who contributed to the REALTORS® Political Action Committee (RPAC). As you know, at the 2009 Midyear Meetings, I challenged all NAR national committees to reach 100 percent RPAC Participation. Committees that have reached this goal will be recognized at the Board of Directors meeting this Monday, November 16.

The REALTORS® Political Action Committee is the only PAC that exists for the sole purpose of protecting YOU and your business. By making a contribution to RPAC, you have helped our industry achieve many victories, including the $8,000 first-time homebuyer tax credit and instituting a permanent ban on banking conglomerates entering the real estate business. These successes would not have happened without loyal supporters like you.

Again, on behalf of the leadership and staff at NAR, I thank you for supporting the REALTORS® Political Action Committee. We cannot thank you enough for your participation, as we move full speed ahead, “United Toward Tomorrow.”

B. An Hour with the FHA Commissioner (Saturday, November 14, 12:00 pm – 1:15 pm, Convention Center, Room 6A, Upper Level)

C. REO Updates: The Fannie Mae Perspective (Sunday, November 15, 1:30 pm – 2:30 pm, Convention Center, Room 23 AC, Upper Level Entrance 23A)

D. RESPA Update: Top 10 GSE and HUD-1 Questions (Sunday, November 15, 1:30 pm – 3:00 pm, Convention Center, Room 11 AB, Upper Level, Entrance 11B)

X. Adjournment