How the financial services bill affects Realtors

The effectiveness of Realtor® lobbying is sometimes better measured by what didn’t happen, rather than by what did happen. Such is the case for the financial services reform bill which is expected to be passed by the US Senate this week.

Real estate is a significant part of our country’s financial services sector. Sweeping and potentially onerous new regulations could have been heaped upon an already troubled national real estate market, but NAR was successful in exempting real estate firms from many of the financial services reform bill’s provisions.

If the bill passes as expected, there are four things you and your clients will need to know about, according to NAR. In a nutshell, they are:

  1. Administration of the Real Estate Settlement Procedures Act (RESPA) will move out of HUD and into a new agency in the Federal Reserve called the Consumer Financial Protection Bureau. This isn’t expected to have any significant effect in the short term, but NAR will closely monitor the situation because the Federal Reserve and HUD have different cultures that could produce subtle changes in the way RESPA is administered.
  2. Exotic loans that are widely recognized for their destabilizing effect on mortgage markets several years ago will face a much different regulatory environment in the future. These changes will lead to slightly longer processing times for subprime and other exotic mortgages but the increased time shouldn’t be an issue for most buyers or your business. Importantly, there’s nothing in the bill that would impact plain vanilla fixed and adjustable-rate mortgages.
  3. Investors and homeowners who want to provide seller financing to buyers will be able to do so as long as they limit those transactions to three times a year.
  4. Although the legislation leaves reform of secondary mortgage market companies Fannie Mae and Freddie Mac for later, it requires regulators to come up with some initial planning by certain deadlines, the first being in early 2011. In other words, legislators insist that the process for reforming Fannie, Freddie and the Federal Home Loan Banks must start in earnest next year.

This video from NAR provides much more detail.

(photo credit)

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One Response to How the financial services bill affects Realtors

  1. Victim or Villain says:

    I wonder what sort of response the new Financial Stability Oversight Council would have had back, during the Clinton years, when the lending world was compelled by the government to make home ownership more affordable, when credit requirements were greatly diluted and lenders were coerced into making outrageous loans to people who, by no rational standards, should have been approved.
    Please read this article from the NY Times, September, 1999:

    I’m frustrated with legislation that is so lengthy, jumbled and vague that we the people are left wondering what it really says and what its impact will really be. The term “unintended consequences” has gone from being cliché to symptomatic of the current magistrates’ perceived role as micro-managing nannies.

    Putting limits on seller financing is outrageous and a clear violation of the spirit of free enterprise, capitalization and property ownership rights! It’s hard enough for the little guy to compete with the fat-cat banks in a true, free and open market. This restriction will simply further limit small investors’ options, forcing them, in many situations, to surrender their business (after only three loans per year) to Wall Street. The reason I love seller-financing is because it is free from the mountain of regulations, time-wasting processes and consequential fees of the Big Banking world. This new law will only grow the bureaucracy and direct more capital to the Banks and siphon more away from the little guy.

    I am truly grateful for the efforts of NAR in working to shrink the impact of this freedom-reducing legislation. I encourage those at the NAR (and citizens everywhere) to be as tireless in your opposition to this onslaught of regulation as the current regime is in its assault.

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