By NAR First Vice President Steve Brown
We used to fear things that go bump in the night. With the internet, however, we must now look over our shoulder 24/7/365.
eHarmony…AOL…Monster.com…Google…CardSystems Solutions: what do all these large companies have in common? All were victims of some of the worst data security breaches ever. REALTORS are not immune. Greater use of databases and social media make data privacy and security very important issue for the real estate industry. In our wired world, the vulnerabilities of technology are more than enough to keep us awake at night.
When the 113th Congress meets in January, they are expected to look at the issues of data privacy and security and how they can better protect consumers from criminals ready to exploit weaknesses in technology.
Already in 2009, though, NAR had the foresight to create a Federal Technology Policy Work Group. Their task was to look at the Association’s technology and telecommunications policy positions. Among the work group’s resulting recommendations were a set of principles guiding privacy and data security.
The work group recognized the need to explore the development of a real estate industry self-regulatory program for privacy and data security. The purpose would be to seek a “safe harbor” from future federal privacy legislation. To accomplish this goal, NAR established a permanent Federal Technology Policy Subcommittee.
Now many members, particularly the large brokers, believe it’s critical that we establish a set of “Privacy Best Practices” for REALTORS. These would further enhance the working relationship with consumers and help prepare members for future federal privacy legislation.
The key to implementing a self-regulatory program will be education and outreach efforts by NAR. These will focus on creating educational opportunities for NAR members, centralizing a place where members can go for information, and increasing security precautions on standard real estate forms. These efforts will go forward, even as the Federal Technology Policy Subcommittee continues to explore the best way to achieve a self-regulatory program that will meet future federal requirements.
No one wants their private information in the hands of computer hackers. Know that NAR has been, and continues to work to establish the strongest, cutting edge methods to better protect you, your families and your clients. Things may continue to go bump in the night—but you can get a good night’s sleep. Through NAR, your fellow members are on guard.
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By Steve Brown, First Vice President, National Association of REALTORS®
Late last week, the U.S. Supreme Court ruled favorably on a case involving unearned fees under Real Estate Settlement Procedures Act (RESPA). While the ruling was about mortgage lending, it has direct implications for real estate brokerages and the transparency of settlement service fees.
In short, here are the key points to the cases that led to the Supreme Court ruling and the implications for real estate brokerages:
What did the Supreme Court rule?
In Freeman v. Quicken Loans, Inc., the Supreme Court held that there is a violation of RESPA only when a settlement service fee is shared, or split, with a third party.
For even more details about the ruling, check out this blog post from Speaking of Real Estate.
What was the original case?
It all started when three married couples received mortgage loans from Quicken Loans. The couples filed three separate lawsuits against Quicken, contending that Quicken had charged fees for which no services were provided and therefore the fees violated RESPA. One such charge was labeled a “loan processing fee” and another charge was called a “loan discount fee.” It was alleged Quicken had not provided a discount in exchange for those fees.
What was the couples’ basis for their argument?
The three couples relied on a 2001 policy statement issued by U.S. Housing and Urban Development, or HUD, that interpreted RESPA to prohibit the collection of unearned fees in real estate settlement services even when the charges are not shared with a third party. They argued that any of Quicken’s charges that didn’t relate directly to service provided were a violation of RESPA, regardless of whether the fees were shared with another party.
Quicken argued that it had not violated RESPA, since it did not split any fees with a third party.
The couples’ lawsuits were consolidated and went to federal circuit court. This court ruled in favor of Quicken. Then the couples appealed, and the case went to the Supreme Court.
What else did the Supreme Court find?
The Supreme Court easily recognized that HUD’s own policy statement was inconsistent with the plain language of the statute. In other words, HUD was interpreting the statute to mean that a fee split with a third party doesn’t need to take place in order for a RESPA violation to have occurred when, in fact, the statute itself states that a RESPA violation involves a fee split.
In addition, prior to the Supreme Court’s ruling, federal circuit courts throughout the country differed in what they considered a RESPA violation. Some agreed with HUD’s policy statement prohibiting any unearned fees, while others required a third party fee split for a RESPA violation to occur. Fortunately, the Supreme Court resolved this difference.
What was NAR’s role?
NAR filed a brief in the Supreme Court to emphasize the importance of this issue to the real estate brokerage industry. NAR’s brief informed the Court about several prior cases that had held brokers liable for RESPA violations for charging “administrative fees” even though those fees were not split with other parties.
What does this decision mean for real estate brokerages?
Because of the unanimous Supreme Court ruling, administrative fees charged by a brokerage in addition to a percentage-based commission do not violate RESPA unless the broker splits it and pays a portion of it to a third party outside of the brokerage firm who provides no services in exchange for the fee.
REALTORS have long supported the goals and aspirations of RESPA to bring fairness into the marketplace for both consumers and industry players. This most recent Supreme Court ruling brings needed clarity to RESPA’s intent.
By Steve Brown, First Vice President, National Association of REALTORS®
When people think of the National Association of REALTORS® (NAR), they usually think of our issues advocacy with the Legislative and Executive branches. But the truth is NAR also works with the Judicial Branch when needed.
Standing up for the rights of property owners is one of NAR’s critical missions. Sometimes that means going all the way to the highest court in the land. Not long ago, NAR joined a dozen other associations in submitting what’s called a “friend-of-the-court” brief to the Supreme Court of the United States.
When NAR heard the story of Chantell and Mike Sackett from Priest Lake, Idaho, it seemed like, in this instance, the U.S. Environmental Protection Agency (EPA) had gone too far.
Here’s what happened:
Four years ago, the Sacketts bought less than an acre of land sitting in the middle of a developed subdivision, complete with a sewer infrastructure. The couple had obtained local building permits and even a verbal okay from the U.S. Army Corps of Engineers that the property, which periodically has water on it, was not a wetlands.
As soon as the Sacketts started to build their home, EPA officials, citing the Clean Water Act, ordered them to stop and restore the property to its original condition and monitor the property because they hadn’t obtained a permit from the Army Corps of Engineers. If they didn’t comply, they could be fined as much as $32,500 a day!
Then, the EPA said that the Sacketts could not challenge the EPA’s order because they had not been charged with noncompliance, and prior to that the agency’s orders are not subject to judicial review.
NAR and others filed a brief, arguing that the Sacketts were denied due process because they couldn’t contest the EPA’s order without violating it and facing serious or substantial penalties for non- compliance, or alternatively, seeking a permit, which is a lengthy and potentially expensive process.
After considering the case, the Supreme Court handed the Sacketts, and private property owners, a victory. It ruled that property owners may contest in court EPA compliance orders like the one issued to the Sacketts without having to first violate that order. This means the Sacketts can now appeal the EPA ruling. Finally, they get their day in court.
This is just one case, but be assured that NAR will not rest. We will continue to be proactive in all three branches of government, protecting the dream of home ownership in every way we can.
by Steve Brown, First Vice President, National Association of REALTORS®
Recently, President Obama proposed several programs to revive the housing market. One such proposal calls for the bulk sale of real estate owned (REO) properties. In areas where property values have plummeted and there is a backlog of inventory, units would be bundled together and sold to investors, creating additional single-family rental properties, thus helping to stabilize housing value market.
According to a letter sent to Congress by Federal Reserve Chairman Bernanke, increasing rentals may reduce losses by lenders on foreclosed and surrendered properties and stem declines in home prices.
While NAR supports the goals of the program, we urge the Federal Housing Finance Agency (FHFA) to proceed cautiously with its REO Initiative pilot program to sell homes repossessed by government agencies to private investors to convert into rental units. While it may help to quickly reduce high REO inventories, the plan would obviously decrease the overall number of property owners and require taxpayers to perhaps accept more risk and larger losses than are necessary if the market were able to react to these properties individually.
NAR supports small pilot programs in those areas that would potentially benefit from this type of market approach, and we will closely monitor the impact of such. At the same time, we believe the government needs to also follow through on separate efforts to loosen tight credit markets, modify existing loans to keep people in their homes and remove bureaucratic burdens associated with short sales.
Individual sales should be incentivized over bulk sales, except in small geographic areas. Selling in bulk to large national investors puts a large section of the housing market into the hands of fewer property owners, which then puts individual home buyers and sellers at a great disadvantage.
We must watch closely the increased risk to taxpayers from loans that involve large deals and foreclosed and abandoned properties, backed by Fannie Mae and Freddie Mac.
That said, this program could very well benefit some areas of the country. In Florida, the foreclosure inventory is at 14.27 percent, and many REALTORS® believe this would help move the market. Yet, other areas may not need it. In California, the inventory has already been reduced to 3.45 percent. Instead of helping California’s market, bulk sales would take more transactions out of the market, thus hurting the consumer’s access to the housing market in such a high cost area.
One well learned principle of real estate must be applied to Federal policy—all real estate is local. Federal programs will succeed only if this underlying principle is observed.
by Steve Brown, First Vice President, National Association of REALTORS®
NAR recently held its 2012 REALTOR Party Policy and Advocacy Conference in Washington, DC. The purpose was to give our members the opportunity to prioritize NAR’s policy agenda for the upcoming year. Our members listed their top public priorities for 2012 in five broad areas of serious concern: taxation, real estate finance, property insurance, appraisal and commercial issues.
During the conference we heard from many government and policy experts as well. To a person, they told us not to expect much legislative activity this coming year because our elected officials are focused on their own campaigns and the Presidential election. Once the election is over, however, we can expect a flurry of activity. In short, our best efforts over the next few months will be in tilling the soil on a number of critical real estate matters. We are going to be planting seeds in fallow ground over the next few months to reap a harvest of better housing and commercial real estate health later.
On Taxes:
With Congress looking to expand the tax base to reduce the federal deficit, many of the exemptions that home ownership and real estate receive today could winnowed away. The tax issues that NAR will focus on are protecting the Mortgage Interest Deduction, extending Mortgage Debt Cancellation Relief for homeowners in trouble, preserving the capital gains exclusion on the sale of residences, and maintaining the property tax deduction for homeowners.
On Finance
In real estate finance, the lack of available and affordable mortgage financing has been apparent for some time. Congress is considering a number of proposals aimed at creating healthier housing and mortgage markets. NAR priorities are the reform of Government Sponsored Enterprises credit policies and short sales. We believe that Fannie Mae and Freddie Mac should be restructured in a way that ensures consumers a reliable source of mortgage funding in all types of markets, under all types of economic conditions. With regard to credit, we believe the lending community needs to focus on providing more reasonable mortgage financing to qualified consumers. And on short sales, NAR continues to push for a faster, more efficient process that will help reduce the inventory of foreclosed homes.
On Insurance
In the area of property insurance, NAR continues to seek a re-authorization of the National Flood Insurance Program. NFIP has already been extended nine times in the last three years. A 5-year authorization would provide certainty and avoid further disruption of the real estate markets.
Appraisals are definitely on the minds of many REALTORS®. NAR strongly supports the independence of appraisers and the process and opposes the use of indemnification clauses by Appraisal Management Companies. Realtors throughout the country report serious problems with the current appraisal process.
Commercial Real Estate
Finally, the commercial real estate industry continues to face adverse conditions, with more than $1.2 million in commercial loans scheduled to come due in the next few years. NAR supports protecting and enhancing the flow of capital to commercial real estate. We believe that Congress should consider legislation aimed at improving commercial lending standards and practices.
While the year ahead is expected to see little legislative activity, when the issues that pertain to the health and vitality of the real estate market do finally break through today’s political ground, we’ll be ready. We are diligent caretakers of the ground that lies beneath all—NAR is and will be advocating policies that will result in a bountiful harvest for a recovering economy and an improving housing and commercial real estate industry.
By Steve Brown, First Vice President, National Association of REALTORS®
On December 17, Congress passed an extension of the National Flood Insurance Program, known as NFIP, until May 31, 2012. This is good news because NAR research estimates that each day of an NFIP lapse results in the delay or cancellation of 1,332 home sale closings nationwide.
Floods are a devastating problem with a huge impact, not only on the real estate business, but on human lives. Anyone who has experienced the personal loss and the accompanying life disruption of home flooding knows how debilitating this is.
It doesn’t matter where one lives to be affected by flooding. From 1990 to 2005, flood disasters were declared in every state—along rivers and lakes, behind levees and dams, anywhere snow melted or rain fell.
Because of the rising cost to taxpayers of post-disaster payments for uninsured properties and the lack of a private market for flood insurance, Congress created NFIP in 1968. The idea was to ensure that, through NFIP, homeowners and renters could access affordable flood insurance.
Today, 5.6 million property owners rely on NFIP in 21,000 communities where flood insurance is required.
Adding to the problem, private markets will not guarantee access to affordable flood insurance. The four large insurers that write virtually all the private flood insurance today do so only for “high net worth” owners and high-value property at an average price twice the NFIP’s.
NAR is committed to protecting the long-term stability of the NFIP and to ensuring that flood insurance rate maps are regularly and accurately updated. Reauthorizing the NFIP saves taxpayers both money and property. That’s because historically, NFIP has collected enough revenue to cover its cost or pay back a short-term loan from the U.S. Treasury with interest.
Without NFIP, there would be more uninsured and unmitigated properties, taxpayers would still be “on the hook” for disaster assistance to these properties. Also, there would be no premiums to pay down any remaining loan balance or collect interest.
And not only does the reauthorization of NFIP makes good sense economically, it also is another element in bringing stability to the housing market. The real estate consumer will feel more confident in purchasing a home knowing that the property can be reasonably insured. This in itself brings stability to housing values and prices.
Over the next six months, NAR will continue to push Congress for a five-year NFIP re-authorization bill to provide certainty and avoid further disruption to real estate markets. Your Calls for Action remain essential in getting the message to Congress to stop this ongoing uncertainty when it comes to housing policies. Keep on the lookout for upcoming activity, and be sure to let Congress know where REALTORS® stand.
By Steve Brown, First Vice President, National Association of REALTORS®
Winston Churchill once said, “All the great things are simple, and many can be expressed in a single word: freedom, justice, honor, duty, mercy, hope.”
I’d like to add another word to that list—home.
Throughout the ages, though the shape and fashion of home has taken many forms, it is a place all of humankind can relate to. In fact, the ever present hope of home has inspired us as a country and civilization since the founding of our nation. But the idea of home is not just an American value. The importance of home has driven nations throughout the centuries to both defend their lands and to liberate other lands so all could find a place to live securely.
Practically speaking, home provides one of the basic needs of all living beings, that is, it is a place of shelter. Still few would argue that it is far more than just a shelter. It is the stage, the set if you would, for each person to play out their life and all that comes with life, both the joys and the sadness. Truly the walls of home become a sacred place.
And so the Christmas story comes to mind, two soon to be parents seeking shelter find their home for a time in a stable that they shared with the animals. And then there was a star above them providing perhaps both hope and light.
Well, today we too need to look up a bit to see some of the stars—to see a few glimmers of light regarding homes in today’s fragile economy.
Existing-home sales rose 1.4 percent in October. They are 13.5 percent above the level of where we were last year.
In November, unemployment sunk to its lowest rate in nearly three years—8.6 percent. The decline was better than the experts predicted.
On the Friday after Thanksgiving—known as Black Friday and almost always the biggest shopping day of the year—a record 226 million shoppers flocked to stores and to the Internet, spending 6.6 percent more than last year.
And this month, spending on Christmas trees is projected to rise 3.1 percent this year. According to one research firm, Americans will spend $3.4 billion on Christmas trees alone. This would be the highest number since before the recession.
There are some real indications that the economy and home sales may indeed improve this coming year. Positive economic “lights” lead to a more stable residential market and an increase in home sales.
As Realtors, never let us forget how important our job is in helping others find their home. And as we face the year ahead, let us do so not with hype, but with genuine hope.
Happy Holidays to you all.
Consumer Financial Products Bureau Seeks REALTOR® Input on Mortgage Disclosure Forms
As a broker and agent in the field, I know how daunting the mortgage process is to my clients these days. In no way, shape or form do the complexities of the mortgage disclosure forms facilitate the mortgage process for my clients. The bottom line is that the process, paperwork and explanations need to be simplified.
Because of our work in the field, many of us also know what would help our clients understand the process better and feel more at ease throughout. Unfortunately, in the past, when we wanted to be part of the solution, rather than just grumbling about the process, our suggestions and ideas to improve the disclosure forms seemed to fall on deaf ears.
But perhaps things are “a changin” for the good. REALTORS® now have an opportunity to provide feedback on the mortgage forms. The Consumer Financial Protection Bureau (CFPB) recently previewed two versions of a two-sided simplified Good FaithEstimate/Truth in Lending form. The Dodd-Frank Act requires that the CFBP merge and simplify the two forms — that’s got to be a good thing! The CFPB outlined an extensive process for public and industry review that will include “pre-comment” opportunities. The comment period is OPEN NOW, and will end on FRIDAY, MAY 27th.
So after the CFPB finishes the pre-comment period, they will propose a new rule. What seems to be different this time around is that ElizabethWarren, the head of the CFPB, really wants to avoid the classic Washington situation where an agency proposes a rule, people submit comments, and then the agency totally ignores the suggestions, and only defends the rule as it was originally published . This time the process promises to be both hopeful and perhaps amazingly productive.
I would encourage all brokers and agents to submit your comments because the CFPB is listening. To view the forms and add your comment, click here. Then click on the “Switch to Industry Tool” to add your comment.
Please, if you want the mortgage disclosure form improved, don’t hold back — comment now.
Steve Brown, 2012 NAR First Vice President-Elect
