2008 Conventional Finance And Lending Committee
National Association of REALTORS®
2008 Midyear Legislative Meetings & Trade Expo
Marriott Wardman Park
Wilson Room A & B, Mezzanine Level
Wednesday, May 14, 2008
10:00 AM - 12:00 PM

Chair: Beth Peerce, Beverly Hills, CA
Vice Chair: George Wonica, Staten Island, NY
Committee Liaison: Steven Brown, Dayton, OH
Committee Executive: Jeff Lischer, Washington, DC, Marcia Salkin, Washington, DC

I . Call To Order

II. Opening Remarks

III . NAR Conflict of Interest Statement

IV. Approval of Previous Meeting's Minutes

V. Review of Committee Goals

VI. Panel Discussion: State of the Mortgage Market--From the Lenders' Perspective

A. Panelists :

• Bank of America, Allen Jones, Senior Vice President, Consumer Real Estate
• Fannie Mae, Gwen MuseEvans, Vice President for Credit Policy and Controls
• Freddie Mac, Bob Ryan, Vice President for Portfolio Management and Pricing
• Wells Fargo, John Goulding, Retail Southeast Regional Sales Manager

B. Committee Questions and Discussion

VII. New Business

A. Report of the Short Sales Issues Work Group

1. Interim Report ( Full Interim Report)

The Short Sales work group was authorized because existing conditions are creating a large number of sales in which the value of the property may not be sufficient to meet all of the seller's financial obligations, including mortgages, other liens and the payment of a real estate broker's commission. These "potential short sales" present agents with challenges which differ from "normal" sales conditions. The work group will consider current policies and resources of the National Association which could be used or could be created to assist consumers and better prepare members to provide professional services in the current market environment.

2. Blueprint ( Full Blueprint)

B. Immigration PAG Report and Proposed Principles

1. Purpose

The purpose of the Immigration PAG was to review a number of timely issues that relate to the Realtor community and provide recommendations to NAR's Leadership Team. The charge to the PAG consisted of the following:

Review the status of the immigration debate in Congress and the issues/conflicts involved.
Review ITIN lending. Some have suggested that mortgage lending based on Individual Taxpayer Identification Numbers (ITINs) be made more available. These identification numbers are given by the IRS to those who do not qualify for Social Security numbers (usually people who are not permanent residents, i.e. non-resident foreign citizens, green card holders, etc).

Recommend if or how NAR should become involved in the larger immigration issue.

C. Other New Business

VIII . Updates

A. Regulatory Update

1. Fed HOEPA Rule Comment Letter

2. GSE Action Plan

3. Conforming Loan Limit Guidelines

On March 26, 2008, the Office of Federal Housing Enterprise Oversight (OFHEO) released its final guidance on calculating conforming loan limits (CLLs). OFHEO is the federal regulator for Fannie Mae and Freddie Mac.

In a major victory for the housing and mortgage markets, OFHEO reversed course and agreed to drop its proposal to decrease CLLs when the government survey of national average house prices shows a decrease. NAR's comment letter argued that OFHEO lacked statutory authority to lower CLLs and that the worst possible time to reduce CLLs is during a declining market.

The OFHEO decision means that the current CLL of $417,000 will stay in effect until there is a net increase in home prices. OFHEO will keep track of any decreases (for 2006 and 2007, the combined decrease is 3.65 percent) and will offset the decreases against future increases. Only when there is a net increase will OFHEO increase the CLL above $417,000.

4. Treasury Restructuring Blueprint ( NAR Comment Letter)

On March 31, 2008, Secretary Paulson announced the Treasury Department's Blueprint for a Modernized Financial Regulatory Structure. The plan includes short, intermediate, and long-term recommendations.

Of most immediate importance to REALTORS® is the proposal to create a Mortgage Origination Commission to set minimum state licensing standards for state mortgage market participants. Most believe Congress will not act on this or other elements of the plan this year, but the Commission could be an exception.

In the section on long-term issues, Treasury supports allowing holding companies to own both banks and commercial firms. NAR is strongly opposing to mixing banking and commerce. This section of the Blueprint would take many, many years to enact and be extensively revised along the way.

Read below for more details and a link to the Treasury website on this subject.

========================================

Short-Term Recommendations:

• 
  - Create a federal Mortgage Origination Commission (with federal and state regulators) to set minimum licensing standards for state licensing of its mortgage market participants. Treasury decided not to propose preemption of state rules in this area. (But setting minimum standards for state entities may be seen as a form of preemption.) The Fed would continue to issue regulations implementing national mortgage lending laws.
• - Enhance the mission of the President's Working Group on Financial Markets (PWG), made up of the Treasury, the Federal Reserve Board, the SEC, and the CFTC. The Blueprint would enlarge PWG membership to add the missing bank regulators: OTS, OCC, and FDIC.
  
• - Consider the role of the Fed in providing additional liquidity for participants in the financial markets.

Intermediate Term Recommendations:

• - Repeal the thrift charter and abolish OTS, the thrift federal regulator.
• - Improve oversight of the payments system by establishing a new federal charter for the major players.
• - Merge the SEC and the CFTC (the commodity futures regulator).
  
• - Authorize an optional federal insurance charter. Congress would establish a federal Office of Insurance Oversight within Treasury.
  
• - Study the federal regulation of state-chartered banks (some now regulated by the Fed and others by the FDIC), and consider the appropriate federal regulator for state-chartered banks, to promote efficiency and minimize duplication.

Long-Term Recommendations:

-The Blueprint proposed a complete restructuring of the current regulatory structure. Secretary Paulson acknowledges this will take many any years to achieve. There would be 3 regulators:

• - Market Stability Regulator. The Fed would oversee all the various actors in the financial markets, to promote market stability. This is a major expansion of Fed powers.
  
• - Prudential Regulator. There would be a safety and soundness regulator for institutions with explicit government guarantees?insured depository institutions and insurance companies. The OCC would be the model. Treasury recommends continuing a separate regulator for the GSEs, to avoid the implication the Federal government guarantees GSE obligations.
  
  -Business Conduct Regulator. There would be a new entity to monitor business conduct to protect consumers and investors.

Key Long-Term Issues

The Treasury Blueprint includes a discussion of key long-term issues, including its proposal for a Federal Insured Depository Institution (FIDI) Charter. The Treasury recommendation contains a number of extremely troublesome recommendations.

• - First, in the Treasury's opinion of an optimal structure would allow FIDIs to affiliate with commercial firms (see page 163). This would permit banks to own real estate brokerage and management firms. NAR?s position opposing mixing banking and commerce is well-established.
• - Second, banks with state charters would also be required to have an FIDI Charter. Federal preemption would override state laws and permit the state banks to engage in the same activities as banks that hold only an FIDI Charter. This would mark the end of the state banking system, for practical purposes, since few institutions would retain a state charter. The role of the state regulator would be limited to developing and enforcing business conduct regulation.
• 
  This Treasury page includes links to the Paulson statement, a Fact Sheet, the full Blueprint, and related information:
  
  

Treasury Link

5. NAR Comments on Cuomo-GSE Appraisal Agreement ( NAR Comment Letter)

6. GSE Goals

B. Legislative Update

1. GSE Reform ( NAR Testimony)

Many analysts in D.C. believed GSE was effectively dead for the 110^th Session of Congress.  Bipartisan bickering and Administration opposition to any bill they believe does not ?rein in? Fannie and Freddie had created a stalemate.  Many believe it would take both Congress and the Presidency to be controlled by a single party before full GSE Reform has a chance to pass.

On May 22, 2007, the House passed H.R. 1427 - GSE Reform Bill.  Included in the final version is a provision to increase conforming loan limits.  Beyond increasing the loan limit, the bill will also overhaul the regulatory oversight of the housing government-sponsored enterprises (GSEs) -- Fannie Mae, Freddie Mac, and the Federal Home Loan Banks system (FHLBanks). The proposed legislation would create a strong, independent safety and soundness regulator with broad powers analogous to current banking regulators.

Senator Dodd (D-CT), Chairman of the Senate Banking, Housing, and Urban Affairs Committee, has held multiple hearings on GSE Reform but has not yet introduced a bill.  At the most recent hearings in early March where Vince Malta spoke on behalf of NAR, Dodd stated his belief that Congress would increase the loan limits; though not to the level that NAR's new policy requests.  In March, NAR took the policy position to support "a permanent national conforming loan limit no less than 50 percent higher than the current conforming loan limit ($625,500 or higher).  In addition, that NAR support making the temporary conforming loan limit increase for high cost areas as provided in the economic stimulus legislation permanent.  Accordingly, for high cost areas, the conforming loan limit should be increased to 125 percent of the local median home sales price, but not to exceed $729,750."

Dodd was expected to introduce and markup a bill the week of May 5; however, this did not happen.  Frank will try to include GSE reform in any stimulus package that is moved by Congress.

2. Two-Year Ban on Banks in Real Estate

On December 26, 2007, President Bush signed into law the FY2008 omnibus appropriations bill which includes a two-year provision prohibiting banks from entering the real estate brokerage, property leasing and management business. NAR was well position to secure a permanent ban. However, due to a last minute objection by Senator Robert Byrd (D-WV), Chairman of the Senate Appropriations Committee, the permanent language was struck and replaced with a two-year ban. In 2008 NAR will be advocating Congress to approve its Community Choice in Real Estate bill (H.R.111/S.413).

3. Economic Stimulus II

In April, the Senate passed their second economic stimulus package of 2008.  The intent of the package is to help homeowners avoid foreclosure.  In actuality, the bill passed by the Senate would do little to help individuals avoid foreclosure.  The final bill was full of tax incentives directed towards lenders and homebuilders, along with FHA reform that would severely cut the current higher loan limits implemented under stimulus I. 

As expected, the House has started from scratch on their own Housing Stimulus Plan; which it is expected to pass before the NAR May meetings begin.  The House bill will likely include:

• - A permanent extension of the temporary increase in the GSE and FHA loan limits from the first stimulus package,
• - GSE and FHA reform,
• A tax credit for homebuyers,
• - A FIRPTA fix,
• - An increase in the VA loan limit for high-cost areas, and
• - Expanding FHA so it may purchase and insure troubled mortgages from lenders.
  

It is unclear if the Senate and the House will be able to workout their differences between the two bills.  Additionally, the Administration is not supporting these efforts and had threatened a veto.

4. Mortgage Reform

The continued crisis in the subprime market has caused both the Senate and the House to introduce subprime and mortgage reform bills to address what many politicians and consumer groups perceive as predatory practices.  The hope of the legislation is to protect consumers while not crippling the subprime market; which, when properly utilized by home buyers serves as a valuable resource for home ownership opportunities to those not able to procure prime rated financing.

The House bill, H.R. 3915, was passed on November 15, 2007, by a vote of 291-127.  The House bill primarily proposes the following:

• - Create minimum standards for state licensing of "mortgage loan originators" and create a federal registration for them.  This would not include real estate agents; and is intended for mortgage brokers and bank employees who originate mortgages.
• - Require creditors to ensure the borrower has a reasonable ability to repay the loan, and for refinancing there must be a net tangible benefit to the consumer.
• - Tighten Home Owners Equity Protection Act (HEOPA) requirements so the APR and fee triggers are reduced.
• - Prohibit the financing of points and fees, balloon payments, or excessive fees for payoff information, modifications, and/or late payments.
  

The Senate bill, S. 2542, which was introduced at the end of 2007 by Senator Dodd is waiting to be heard in the Senate Banking, Housing, and Urban Affairs Committee.  While both Democrats and Republicans will make recommendations and amendments to Dodd?s bill, as introduced it would:

• - Redefine a HOEPA loan to 8% above Treasury on the first, 10% for the second, or 5% of fees (including YSP),
• Define a "subprime mortgage" as 3% above Treasury on the first, 5% for the second,
• - Prohibit any Yield Spread Premium (YSP) and prepayment penalties on HOEPA, subprime, and nontraditional mortgages,
• - Give borrowers the ability to ?unwind? or rescind a loan that violates provisions laid out in the legislation (it would actually be up to the note holder to help make the home buyer whole; we will have to see the actual text of the legislation to better understand this provision),
• Require mortgage brokers to have a fiduciary duty to their customers and hold them accountable under the Truth in Lending Act (TILA),
• - Prohibit Steering,
• - Allow "YSPs only in the case of no-cost loans" that are prime (Where YSPs are paid, brokers may not receive any other compensation from any other source and prepayment penalties are prohibited), and
• - Address appraisals, loan servicers, and foreclosure prevention.
  

Dodd's bill was drafted and introduced with little to no consultation from many within the industry and appears to be more of a wish list for consumer groups.  If Dodd is serious about moving his bill there will be many amendments made.

Senator Feinstein has introduced S. 2595, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which is intended to force mortgage brokers in every state to meet high standards, stop criminals from migrating to different states, and protect home buyers from unscrupulous individuals.  This would be done with minimum licensing requirements and a national loan-originator registry.  C.A.R. is concerned that the licensing requirement in the bill would force California to create a separate mortgage broker license; however, C.A.R. is working with the Senator to ensure California?s real estate license requirements satisfy the bill?s minimum requirements.

IX. Announcements

A. May 27 Deadline for Committee Recommendation Process
Deadline: Tuesday, May 27, 2008

Don't know where or how to place a recommendation?

Log onto REALTOR.org and click on "NAR Governance" (left side bar)

Click "Read More" under "Submit Your Committee Recommendations for 2009" in the "What's New" section

Click "Enter a recommendation"

Did you know?

Members can and should make recommendations for themselves

Members should seek quality endorsements/recommendations from: NAR leadership figures (including Officers, Committee Liaisons, Regional Vice Presidents), current Chairs/Vice Chairs, NAR Directors, State and Local Associations, etc.

Have You Completed/Updated Your Expertise Profile?

Members interested in serving on NAR's committees are encouraged (but not required) to complete an Expertise Profile.

Log onto REALTOR.org, click on "NAR Governance" (left side bar)

Click "Read More" under "Expertise Profiles" in the "What's New"section

Create a new profile or edit an existing one.

Did you know? You can add a photo to your profile! However, please make sure the file name is specific (e.g."JoeSmith1.jpg"). Files with generic names like "NAR.jpg" or "Photo1.jpg" can cause the wrong photo to appear on your profile.

Expertise Profiles are independent of the recommendation process- they can be completed or updated whenever!

If you have any questions, contact Mary Swaykus:
(312) 329-8457 or mswaykus@realtors.org

X. Adjourment