One of the benefits of membership is the important information that REALTORS® share with each other about the latest regulatory changes affecting the industry. I wanted to share with you an important new change to the Federal Reserve Board Truth in Lending Regulation (Reg Z). The new requirements apply to loan applications filed on or after July 30, 2009. Lenders will be subjected to new disclosure requirements for mortgage loans. The new rules are complex and compliance will be a challenge for lenders.
REALTORS® will want to learn the basics so we can advise our clients of potential delays and the new procedures. Having this information, is part of our effort to re-enforce your position as a primary information source in the sales process.
Here are key highlights of the changes:
• 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. In the final rule’s preamble, the Fed stated that it “believes waivers should not be used routinely to expedite consummation for reasons of convenience.” The Fed decided not to insulate lenders from liability even where a consumer modifies or waives the waiting periods.
• 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, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TILA disclosure.
To read more about the new rule, NAR’s Government Affairs Washington Report has more detailed information. Some industrious Realtors® are sending information regarding Regulation Z to their clients and customers as well as current ‘for sale by owners,’ in the effort to show the FISBOs why they need representation.
Each step of the way it gets more complicated requiring more knowledge and experience: knowledge and experience that we as Realtors® have and bring to task. As soon as your up to speed on the new rule, drop me a comment and let me know how it is affecting your business. I would really like to hear what our members have to say. – Ron Phipps, 2009 NAR First Vice President
Earlier this month, I blogged about my meetings with the New York Attorney General’s Office, the Federal Housing Finance Agency, and Fannie Mae to share our concerns about the Home Valuation Code of Conduct. I also mentioned the ongoing problems in my latest President’s Podcast.
It looks like our persistence on this issue is paying off. Fannie Mae and Freddie Mac recently issued new guidance to all lenders on the Home Valuation Code of Conduct. Specifically, they have advised lenders to use appraisers who have clear experience in the geographic area. They also made is clear that appraisers are not prohibited from talking to real estate agents.
We have e-mailed all members about this development, but I wanted to post it on the blog, as well, to make sure everyone is aware. Just go to Realtor.org/HVCC for the details.
This is a good first step, but we realize that we need to do much more to ensure that appraisals are being handled properly and don’t inhibit the market. NAR will continue to work on this issue in the weeks and months ahead and keep you updated on our progress.
I thank all of you for sharing your concerns and stories – especially those who responded on this blog. Keep the comments coming, and please share these updates with your colleagues. – Charles McMillan, 2009 NAR President
There are many forums dedicated to debating the wisdom – or folly – of Congress’ recent “Cap and Trade” Energy Bill. Amid the partisan outcry, substantive questions arose about how NAR policy is formulated. As a member-driven body, I would like to address this.
NAR’s well-known legislative mandate — to protect private property rights and to be the “Voice of Real Estate”– means our primary goal as an industry trade association is to ensure, to the extent possible, no legislation goes forward which restricts property rights or our members’ ability to conduct business.
On most legislation, NAR does not take any stand. When we do, it is from policies and guidelines adopted by our Committees and PAG’s (Presidential Action Groups) on which thousands of Realtors serve as well as advice from the Leadership Team. These groups meet at least twice a year to formulate policies in open discussions (sometimes heated…) that are then voted on by the 900 Directors.
The policies are then carried out by the Leadership Team in conjunction with NAR Staff. Our full-time Staff plays an important role here because they inform our volunteer Committees, PAGs, and other leaders about forthcoming legislative issues. They also work to keep our Realtor volunteers aware of policy debates.
The “Cap and Trade” bill included many provisions that could have seriously damaged our industry. When the offending real estate portions were successfully lobbied out, NAR then offered its support to the bill. NAR lobbyists predicted the bill would most likely pass, and it did in the House.
To critics of the Bill, it appears NAR chose short-term victories and overlooked potential long-term problems. To others, a successful resolution of the problems of the day was sufficient.
My point is that NAR legislative decisions are not arbitrary, individual decisions, nor just Staff decisions, nor just Leadership Team decisions. They are decisions that are made to fulfill the policies adopted by our organization in the most effective way possible.
Bottom line: Whether you take the short-term or long-term view, I encourage everyone reading to volunteer next year for our Committees and be willing to serve and be a part of the decision-making process. It makes a difference: if real estate is our profession, then politics must be our business. About that there is no question. — Steve Brown, 2009 NAR Vice President and Liaison to Committees
One of the advantages of living in the Southwest is the great outdoors. I love the outdoors and everything about it—well, almost everything. Recently, while cleaning out a pond in my back yard, a hive of bees decided I had invaded their territory and came after me. I was stung 6 times, and the worst place was on my bottom lip. Anyone who has been stung on the lip knows how fast and how much the lip swells. My best hope would have been to have lips that look like Angelina Jolie’s, but there was nothing uniform about this particular sting.
While the sting hurt, the whole experience made me think about how bees make honey, and how it applies to our efforts in the REALTOR® organization.
They are led and organized by a queen bee. (I know that the members of WCR couldn’t agree more with that leadership!)
Next, the queen bee quickly establishes the nest, lays the eggs, which allows the new bees to build the nest. A big nest is an indication of the strength of the colony. With our 1.2 million members, REALTORS® have indeed built a strong colony of support. During this challenging market, the size of our nest is an important benefit for our members.
Finally, in order to make the honey, bees magnify their strength by grouping themselves in interlocking honeycombs. The REALTOR organization with our affiliates has built a structure that interlocks between our different interests and disciplines. This magnifies our strength and allows us to work together more efficiently to advocate for our industry.
The affiliates offer a specialized focus that helps members better understand their particular strengths in real estate. Just as IREM and CCIM help commercial members by focusing on the commercial sector, the Women’s Council of REALTORS empowers women to succeed as entrepreneurs and industry leaders.
NAR looks at the big picture for the entire industry. This means NAR must take into account every real estate sector when determining how decisions are made and how to proceed. Because of this, NAR depends on our affiliates for specific information about issues affecting their members.
While the bees use honeycombs to strengthen their hive, NAR has a strengthened organizational structure as a result of the involvement of our institutes, societies and councils. We all depend on each other to advance the goals of our members and our industry. – Vicki Cox Golder, 2009 NAR President-Elect
We have heard from many of you lately regarding the recent article in SmartMoney entitled, “10 Things Your Real Estate Broker Won’t Say.” We share your outrage over the clear distortion and misrepresention of the service real estate professional provide. Articles like this do a terrible disservice to homebuyers and sellers everywhere by providing false information.
Below is the letter I sent to the Personal Finance Editor at SmartMoney.com. Please share it with your colleagues. I have also included the Personal Finance Editor’s e-mail address if you wish to send your own comments.
July 14, 2009
Ms. Tedra Meyer
Smart Money Personal Finance Managing Editor
VIA E-MAIL: tedrameyer@hearst.com
Dear Ms. Meyer,
The recent article (“10 Things Your Real Estate Broker Won’t Say,” SmartMoney, July 9, 2009) was full of inaccuracies, false assumptions and personal opinion, rather than any hard data that might actually be useful to home buyers and sellers.
The article does a great disservice to America’s real estate professionals, who are working harder than ever in this tough economy to help their clients buy and sell homes. Your article seems to imply that the unfortunate and unethical behaviors of a few real estate agents seem to be the industry rule, rather than the exception. Realtors® subscribe to NAR’s strict Code of Ethics; buyers and sellers who work with a Realtor® are assured of the protections the Code affords.
Real estate agents are not in the business of deceiving their clients in an industry dependent on the satisfaction of their customers for referrals and repeat business. In fact, buyers and sellers give high marks to Realtors® for the expertise and professionalism they bring to the real estate transaction. In a national survey of recent home buyers, nearly nine out of 10 were very satisfied with their agent’s honesty and integrity.
The article also inaccurately states that 20 to 25 percent of sellers market their homes on their own. In fact the number is much lower, around 13 percent – this number has been consistently trending down from a high of 20 percent in 1987. And nearly half of those were transactions in which the seller already knew the buyer – the home was not sold on the open market.
While some home sellers do choose to market and sell their homes on their own, unrepresented sellers have no access to fundamental marketing services, such as a Multiple Listing Service. The average person may only sell a handful of times during their lifetime, while Realtors® sell hundreds, if not thousands, of homes over the course of their careers. Unrepresented sellers face today’s challenging marketplace, complex transactions, with more disclosures and legal requirements than ever; time demands to market and show their property; and security concerns about strangers coming into their home.
In closing, please note for future stories that the term “Realtor®” is a protected trademark of the National Association of Realtors®, and is not synonymous with “real estate agent.” Realtors® are trained professional real estate practitioners, and only Realtors® are members of NAR and subscribe to the association’s strict code of ethics.
Sincerely,
Charles McMillan
President, National Association of Realtors
By “The Parliaments” (George Clinton and Daron Taylor – 1967)
Some of you are old enough to remember this song. Some of you won’t admit that you are. It is a lead in to my blog entry this week for good reason. Not once, but twice in the past two weeks I had the opportunity to represent our association at Congressional hearings. Last week, I traveled to Washington, DC to speak about the floundering commercial real estate market. Joining me at the panelist table was Jon Greenlee from the Federal Reserve, Richard Parkus from Deutsche Bank, and Jeffery DeBoer, CEO of the Real Estate Roundtable.
We all brought a unique perspective to Congress, but, in the end, we were all were saying the same thing. $1.3 trillion of debt in the commercial real estate sector needs to be refinanced over the next several years and no one is doing a thing about it. Yes, the Troubled Assets Relief Program (TARP) was created to help, but the banks seemingly took the money, shored up their balance sheets and have refused, for the most part, to lend it out. Yes, Term-asset Loan Facitilites Facilities (TALF) should help but it only works if Commercial Mortgage Backed Securities (CMBSs) are being purchased. The first round of CMBS sales didn’t bring a single buyer to the table. Following that, Standard and Poors, the privately owned and often times revered rating company, reduced ratings of bonds from triple-A to double-A and even single-A. TALF money, under its current requirements can’t be used for anything that isn’t triple-A rated. I provided several examples of “real world” problems when trying to finance even simple transactions involving commercial real property. In the end, we all told Congress we are scared. If the “second shoe drops” (i.e. the commercial sector fails which is more likely to happen than not, as of today) it will make our recent wrestling match with the residential market woes look like kindergarten. Please tell your Representative and Senators we need their help and we need it now!!
Apparently, someone noticed that I enjoy this type of assignment – the exact quote was “Jim, you really know how to have a good time.” This precipitated President Charles McMillan and the NAR’s Government Affairs staff to ask me to come to Washington again this week for – you guessed it — more testifying! This time I shared the panelist table with the General Services Administration (They handle the government owned and leased real property management duties including leasing, maintenance, etc.), the Department of Energy and the Department of Transportation. This hearing was to discuss “green” benefits and all that it encompasses. Congresswoman Norton from the District of Columbia chairs this Subcommittee and our DC building is smack dab in the middle of her geographic area of representation. I first met her in 2004 when we dedicated our new headquarters building. She truly appreciates our efforts.
In the end, it was obvious that NAR is well respected for our green building and Green designation efforts.
We have put our money where our mouth is with our own real property. We were also able to give IREM a boost by letting Congress know we didn’t understand why the GSA didn’t use the preeminent property management institute for consulting and real property management – especially when the private sector seems to be so capable and efficient!!
I wouldn’t be honest if I didn’t say that I really do enjoy testifying. The chance to get our message out on behalf of the entire membership makes me feel so good. Our Association is well respected on Capitol Hill. We will continue to get the word out. There is no reason to be shy about telling our story. Not only is it a wonderful story to tell but it’s the truth! That’s why it helps every single person that lives or works in the United States. Have a great summer! — Jim Helsel, 2009 NAR Treasurer
Last Thursday, July 9th, Senator Mary Landrieu, chair of the Senate Small Business Committee held a roundtable on health reform and its impact on Small Businesses. Senators Olympia Snowe, Chris Bond, Ron Wyden, Jeanne Sheehan, and Kay Hagan attendaned for a conversation with 9 ‘stakeholders.’ I was honored to represent REALTOR® stakeholders. This was my second visit in the past two weeks to Washington, DC to meet with health reform decision makers. The process of government is very ‘deliberate.’ Two general observations, first, people in Washington are generally well intentioned and are trying to do right by their constituents and the country. Second, it is amazing that anything gets done given the first observation.
In real estate, we have an industry specific vocabulary: PITI, FISBO, HUD-1s, CMAs, BPOs, etc. Washington also has its own vocabulary and the health reform conversation its own vocabulary. (Our Washington Staff does an exceptional job with preparation for each of the meetings. Jerry, Jamie, Marcia, and Ken all met with me to review our policies and to teach me the ‘nuances.’ There is a lot to absorb. In my case they give me a list of vocabulary words to use AND a list of words to avoid). Among the recommendations that I shared with the Senators is the need to use plain speak, understandable language, in the deliberations on health reform, but more importantly with the actual program. It is important for Americans to be able to understand the choices they have in language that they can understand. When I am involved in the conversation, I find it necessary to listen with a very precise ear to actually understand what is being said.
The main message I delivered was the nature of REALTORS® and our business models. The demographics are telling: The average REALTOR® is 54 years old, up 2 years over the past two years, 60 percent of REALTORS® are female. The average REALTOR® earned just over $36,000 before $5,800 of business expenses. More than 300,000 of our 1.2 million members have NO insurance. A significant portion of the remainder have limited, non-comprehensive insurance. Over lay the fact that most REALTORS® are independent contractors. As REALTORS®, we have a need for affordable, portable, comprehensive insurance. You can review the balance of our ‘principles in the health care reform conversation at www.realtors.org/healthreform.
One of the other messages that we have delivered is that health care reform should be funded and paid for from insurance reforms, and cost savings. It should not be funded from any housing related taxes. Our comments are clear: “Do not ask us to choose between health care and home ownership.”
I concluded my comments with the observation that REALTORS® are making economic ‘triage’ decisions right now. Many REALTORS® are forced to make choices between paying their mortgages or health insurance. Obviously, many forgo comprehensive health insurance and rely on the HOPE Insurance program: Hope I do not get sick.”
Among the industrialized countries, the United States spends more of its Gross Domestic Product on health care than any other country, and yet the outcome of that investment is an inferior medical delivery system. REALTORS® want what is good for Americans, but they are pragmatic. Make sure that what is spent has value. Make sure that the costs reflect rather than belie the value. — Ron Phipps, 2009 NAR First Vice President
Sometimes in business I think we can get tunnel vision and not recognize a good investment opportunity when it comes around. An example that is close to my heart is RPAC. I have been contributing to RPAC for years and have been a member of the President’s Circle since its inception in 2004.
I don’t look at my contributions as just handing over money to a particular candidate. I look at them as a wise business investment, just like marketing materials, networking, and continuing education classes.
RPAC serves as the single voice for REALTORS® in the national political process. I know my investment is especially important now, as REALTORS® face a challenging housing market and the leaders in Washington are making decisions critical to our success.
The President’s Circle is an especially powerful RPAC tool. Political Action Committees, like RPAC, can only legally contribute $10,000 per election cycle to a candidate. With the President’s Circle, REALTORS® can invest money directly to REALTOR® friendly candidates over and beyond the $10,000 limit, allowing us to make an even greater impact on Capitol Hill.
The President’s Circle has record-high membership this year with 326 members. But we want to make it to 373. We currently have 20 percent participation in RPAC. However, we want to push that number up to 34 percent. We want to do all of this by October 22, our year-end deadline.
I know this is possible, and I know the extraordinary impact it would have on the businesses each of us run every day. I urge you to go to REALTORActionCenter.com and learn more about RPAC and the President’s Circle.
Even though power shifts between political parties in Washington, RPAC invests in leaders of both parties who support the real estate business. I know times are tough right now, but RPAC is one investment I won’t be sorry I made. — Gary Thomas, 2009 NAR Vice President and Liaison to Government Affairs
Living on the great open desert lands under the blazing Arizona sun is one of life’s greatest pleasures. However, I must admit, it isn’t always easy. In fact, just last week, we were hit hard by a terrible and devastating monsoon. All of our power was knocked out. I lost an entire day. My business was put on hold; my work for the Association stopped. I couldn’t do a thing but wait for the storm to blow over. Once it did, it still wasn’t over because then I had to assess my property damage, and then begin the repairs. My initial response was to get frustrated at the monsoon for making me lose a day of work and potentially causing several thousand dollars in property damage.
One good thing about the storm is that I had the opportunity to stop and reflect. I thought about the many members I have met when traveling who have the same look of frustration on their face because of this monsoon of a market. There is no doubt that these are tough times for the economy and for many of us. But then I remembered something that I have known for a long time – we cannot change those things beyond our control. I could not stop this monsoon from happening, but what I could do is not let it ruin my day. The difference is how we respond to it. If we accept that we can’t control the economy or everything that is happening in Congress, then we will make plans for our businesses with that in mind. Now, it may be hard to hear this when this market has been one of the most challenging in a generation, but if you unlock a positive attitude now, when the markets fully recovers, you will be in a better position than if you let frustration get the better of you.
There are hopeful signs on the horizon. The market is beginning to stabilize with existing home sales inching up and prices not falling as fast. We are not by any means out of the woods yet (appraisals are a huge problem, and the commercial market needs help), but if you are not looking at the glass as half full, you won’t be able to recognize the positive signs that many of us are seeing.
Those of us that have been around as a part of this industry for a long time (over 35 years for me) understand that this too shall pass, the market will recover—it always does. It just may look different than it ever has before. But, I can assure you, if you develop a positive attitude now and make the necessary adjustments we all can thrive, no matter what the market holds in our future. – Vicki Cox Golder, 2009 NAR President-Elect
I just returned to Texas after a whirlwind trip to the east coast, where I met with the New York Attorney General’s office and officials from the Federal Housing Finance Agency and Fannie Mae. The topic: appraisals, and specifically the concerns and perspectives that you, our REALTORS and appraiser members have raised about the implementation of the HVCC.
First and foremost, I want to thank all of you for sharing your comments on the Voices of Real Estate blog this past week. Steve Brown’s entry, “All’s Not Quiet on the Midwestern Front” has received more than 120 comments – all of them very insightful. In fact, your thoughts were so important to the discussion that we shared them directly with the staff from the New York Attorney General’s office as prime examples of the problems we are seeing. We also shared the results of a recent survey of members, which highlights the overall impact of appraisal challenges on the mortgage transaction.
Those of you who have met me know that I don’t pull any punches. So, let me give you my honest assessment of my meetings:
1. All of the officials we met with wanted to hear about our experiences, and they conceded that there are problems.
2. All agreed that we can and should immediately address gaps in communication and education to help resolve how the HVCC is being applied.
3. How we resolve other more fundamental problems is not yet clear and will likely require a longer-term effort.
So what’s next?
First, in the weeks ahead NAR will be working closely with everyone in the industry, including Fannie Mae, Freddie Mac, the Appraisal Institute and government officials, to clarify the HVCC and how it should be applied. As many of you noted in your comments on this blog – pointing fingers is not the solution, we have to work together to improve the process for everyone.
Second, NAR is working with Congress to move legislation that would place an 18-month moratorium on the Home Valuation Code of Conduct, so that we can consider how best to modify the HVCC and to resolve additional concerns that many of you have raised about it and other appraisal issues in the current environment.
As always, we will keep you posted on our efforts on this blog and on Realtor.org. I encourage you to check out our HVCC Myths and Facts for more information. We also will be updating our FAQ to answer many of the questions you have raised in your e-mails and posts.
Of course, we encourage you to continue to share your thoughts and experiences with us whenever you can. With your participation, we will move the housing market forward, “United Toward Tomorrow.” – Charles McMillan, 2009 NAR President
