Realtors flex political muscle, power up housing agenda
By Steve Kerch, CBS.MarketWatch.com, Nov. 12, 2002
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NEW ORLEANS (CBS.MW) -- Members of the National Association of Realtors expect to see a positive return on their invested political capital following Congressional elections that elevated industry allies.
With about 850,000 members, NAR is the nation's largest trade group. And with a political action committee that spent about $3 million in the last two years, it also boasts one of the biggest hard-money PACs around.
Those kinds of numbers would make any politician sit up and take notice. But after an election in which their candidates prevailed in several critical races -- not the least of which was Colorado Republican Sen. Wayne Allard's key win -- Realtors were feeling pretty confident about prospects for their agenda in the upcoming 108th Congress.
"We spent a lot of time and we spent a lot of money. And we're tickled to death with some of the people we were involved with who won," NAR President Martin Edwards Jr. said.
Single minded
Republican control of the Senate provides a major boost for one of the Realtors' top legislative priorities -- keeping banks out of the realty brokerage business. Yet the organization is an equal-opportunity contributor: 53 percent of its PAC money went to Republicans and 47 percent to Democrats.
"Regardless of here the party lines fall, we look at where the lawmakers fall on the Realtor line," said Cathy Whatley, who will succeed Edwards as president in 2003.
Key House victories for the cause included Anne Northrup, R-Ky., Shelley Capito, D-W.Va., and Paul Kanjorski, D-Pa.
"This wasn't a tidal wave election. It was more like a gust of wind at the end," political analyst and newsletter editor Charlie Cook said. "The tossup races all broke the same way ... and the business community especially did a good job getting the vote turned out."
The best news for Realtors is likely to be the change in Senate leadership, which will put Alabama Republican Sen. Richard Shelby at the helm of the Banking, Housing and Urban Affairs Committee. Shelby has been a staunch opponent of banks getting into the real estate brokerage business, a position that makes him a Realtor favorite.
The Gramm-Leach-Bliley Financial Services Modernization Act was signed into law in late 1999. In addition to expanding the financial activities that banks could engage in, the law allowed the treasury secretary and Federal Reserve chairman to decide future permissible activities not spelled out in the original law.
"We could have included real estate in the list of permissible activities when we wrote the law in 1999. We did not. The ink was not nearly dry and the banks were trying to expand their power at your expense," Shelby told the NAR's annual convention, which ended here Monday.
An ally against banks
Shelby was one of the co-sponsors of a bill that would have precluded bank activity in real estate brokerage. That bill and a companion measure in the House will die when the lame-duck session of Congress ends, perhaps this week.
The Fed has yet to issue its final determination on whether banks will be allowed into realty brokerage, and action isn't anticipated until sometime next year. But Shelby made it clear that a fight looms if the answer is yes.
"I do not believe it is within the appropriate role of banks in our society," Shelby said.
The real estate industry seems to have a major ally in President Bush as well. One of the biggest housing initiatives on the boards is Bush's call for increasing the number of minority households who own homes by 5.5 million before the end of the decade. See story.
Yet for all the attention being paid to real estate these days, there has been no major housing bill to come out of Congress since 1992. Among the most pressing issues that many would like to see addressed is creation of a new production program for affordable housing that might help alleviate a growing shortage of homes within reach of working-class families. See related story.
Affordability concerns
"We've been to a lot of Senate and House offices over the last year. And a lot of people think that's all been about the banking issue. But it hasn't. It's been on housing and housing affordability," Edwards said.
Among the other issues at the top of the industry's agenda in the coming year: Extension of the low-income-housing tax credit, protecting the mortgage-interest deduction and capital-gains home-sale rollover provision in any tax reform and a re-examination of housing programs in the FHA, VA and from Fannie Mae and Freddie Mac as they relate to high-cost housing markets.
Reform of the Real Estate Settlement and Procedures Act is also a priority. But the Realtors are calling for a delay in implementing any new RESPA rules to allow for more research into the proposals. (next story)
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The case against mortgage reform
Realty groups not convinced HUD plan benefits consumers
By Steve Kerch, CBS.MarketWatch.com, Oct. 29, 2002
CHICAGO (CBS.MW) -- Realty trade groups aren't buying into all the proposed reforms for laws governing residential transactions. At least two organizations say new guidelines allowing "guaranteed mortgage packaging" may actually lead to less competition and higher costs to consumers.
"I know not everyone is happy with (the proposal). But no segment of the industry is being singled out," HUD Sect. Mel Martinez told mortgage bankers meeting here last week. "We are never losing sight of the fact, though, that RESPA is a consumer tool to protect consumers in the mortgage process."
"We're working to remove the uncertainty from the mortgage process. And how to make the process more consumer friendly, yet be the least disruptive to your business. We look forward to receiving all the comments and reacting in a thoughtful way to them," Martinez said. "But we will as quickly as possible complete the rule."
Martinez estimated that HUD's three-part plan to reform RESPA rules could reduce settlement costs by as much as $700 on the average housing transaction, adding up to $7 billion in annual savings to homebuyers and sellers.
But not everyone thinks HUD is heading in the right direction.
More time needed
In letters to members to the House Financial Services Committee and the Senate Banking Committee, the president of the National Association of Realtors said his group supports Martinez's goal of improving the mortgage process for consumers and increasing homeownership rates, "but is concerned the proposal may not achieve desired results."
"It is critical to ensure that any reform does not disrupt a system that works well for the vast majority of consumers," NAR President Martin Edwards Jr. wrote. "Housing is too important to the overall health of the nation's economy to make such sweeping changes prematurely."
HUD's 90-day comment period for the proposal was unreasonable, said Edwards, who urged Congress to hold additional hearings on the matter next year.
"We believe some of the proposed changes will undoubtedly alter the structure of the settlement service and lending industry, may increase market concentration and ultimately reduce competition for services. Changes of this magnitude deserve significant analysis and debate."
The American Land Title Association, which was one of the first groups to file comments on the changes, questioned whether HUD even had the legal authority to pursue the reforms.
"Our overriding concern with the proposed changes center around HUD's lack of statutory authority to implement and enforce the proposed changes," said James Maher, ALTA's executive vice president.
"While ALTA supports settlement services legislation or regulations that promote consumer choice and empowerment, require meaningful disclosure and enhance consumer ability to shop effectively for settlement services, we believe HUD's current proposals to revise the RESPA regulations do not achieve these goals," he said.
Competitive forces
The association takes particular exception to the mortgage-packaging proposal, saying it believes the idea does not "afford consumers the information and freedom to choose services and providers that protect their interests in such transactions."
"Widespread adoption of the HUD packaging regime would mean that settlement service providers would have access to the consumer only through lenders, which would have an adverse effect on the entire industry, but particularly on small businesses who have always constituted a large and very important segment of the industry," ALTA said.
The association said HUD's reform objectives "could be achieved without these consumer and competitive problems if packages for loan and loan-related services at a guaranteed single price were offered by lenders, and separate packages of non-lender-related settlement services, such as title and closing-related charges, and government charges, could be offered at a guaranteed single price by anyone, including title companies, Realtors, and lenders."
"Such an approach would be far more competitive and would enable the market to tailor settlement service packages to practices in the various regions of the country that would better meet the needs of purchasers and sellers of residential real estate," Maher said.
To be sure, the interests that are protesting the current version of RESPA reform have much as stake in the debate: Both the Realtors and the title companies would like to consider themselves as the center of the residential transaction and both would like to offer bundled services of their own, something that is tricky under RESPA today.
"We criticize HUD because they make a lot of decisions we consider inept. But sometimes they are right and sometimes they are wrong," said Rod Alba, director of government affairs for the Mortgage Bankers Association of America and a former HUD staff member who helped draft RESPA interpretations.
"It's not easy being a regulator when you have all these people knocking on your door all the time," he said.The mortgage banking community, for its part, is willing to embrace most of HUD's RESPA reform.
All for simplification
"Simplifying the mortgage process is absolutely something we believe in," said John Courson, chairman of the Mortgage Bankers Association of America.
Courson said the MBA supports two out of three major components of the HUD proposal: The establishment of guaranteed mortgage packages and the full disclosure of yield spread premiums, which is the added interest rate a retail lender tacks onto a wholesale mortgage as a means of compensation.
But the support of the loan packages comes with a caveat. Courson said the portion of the proposal that mandates a guaranteed interest rate, which can only move in accordance with a fixed index specified at the time of the loan application, will likely prove unworkable in "a dynamic marketplace."
Courson said the third piece, a beefed up and simplified Good Faith Estimate that lets consumers know ahead of time what it will cost to close a mortgage, ought not to be implemented at the same time as other changes.
"There should be a transition, where the market can adapt to the packages, and then you can come back and address the Good Faith Estimate," he said.
HUD expects the new rules to made final sometime in the spring. But Congress could still amend or augment any changes through legislation. |
