2011 NAR Legislative and Regulatory Year in Review

8/3/2019 2011 NAR Legislative and Regulatory Year in Review

1/11

NAR Legislative & RegulatoryYear in Review

2011


2/11

As the largest proessional trade association in the United States, the NATIONAL

ASSOCIATION OF REALTORS represents nearly 1.1 million members involved

in all acets o residential and commercial real estate as brokers, salespeople,

property managers, appraisers and counselors. NAR advocates policy initiatives

that will result in the return o a undamentally sound and dynamic U.S. real

estate market ostering vibrant communities in which to live and work.

During 2011, the REALTOR Legislative and Regulatory Agenda has ocused on

ensuring the continued ow o capital into the real estate market, preserving

residential and commercial property ownership, and protecting the business

interests o its members. NAR has made signifcant progress on all ronts.

The issues highlighted here represent just a portion o the advocacy activity

conducted on behal o REALTORS. To view the ull list o issues NAR is

working on, please visit www.realtor.org/politicaladvocacy.

*Note that items in this brochure were current as of October 2011.

Located just one block rom the

U.S. Capitol, the headquarters othe NATIONAL ASSOCIATION OF

REALTORS is perectly positioned

to make REALTORS voices heard

in Washington, D.C.

NARs sta uses this physical

proximity and its long-standing

relationships with legislators

to work closely with Congress

and regulatory agencies to pushorward issues that beneft

REALTORS, the real estate

industry and consumers.


3/11

ENSURING THE FLOW OF CAPITAL INTO THE REAL ESTATE MARKET

RESTRUCTURING THE SECONDARY MORTGAGE MARKET

(FANNIE MAE/FREDDIE MAC THE GSEs)

Building upon the recommendations developed by NARs GSE Presidential Advisory Group (PAG), NARhas strongly advocated or an ongoing level o government participation in any eorts to enact comprehensive

secondary mortgage market reorm. Legislative reorm proposals introduced in 2010, however, had primarilyocused on ull privatization. In 2011, two comprehensive bills that include some level o governmentparticipation in the secondary mortgage market were introduced. H.R. 1859, the Housing Finance Reorm

Act o 2011, sponsored by Reps. John Campbell (R-CA) and Gary Peters (D-MI), was introduced inJune 2011; H.R. 2413, the Secondary Market Facility or Residential Mortgages Act o 2011, sponsoredby Reps. Gary Miller (R-CA) and Carolyn McCarthy (D-NY), was introduced in July 2011. While NAR

worked with both bill authors and supports both bills, H.R. 2413 was directly derived rom the principles andrecommendations developed by the NAR GSE PAG. Perhaps most importantly, with the introduction o thesetwo measures, the debate over reorm o the secondary market has shited away rom one ocused on rapidand total privatization o the GSEs to a more careul conversation on the need or continued governmentinvolvement. NAR continues to diligently advocate or the REALOR recommendations to the Obama

Administration, and our Industry Partners via ace-to-ace meetings, participation in housing nance

symposiums and responses to request or input rom the government.

COVERED BONDS

On June 22, 2011, the U.S. House Financial Services Committee passed H.R. 940, the United StatesCovered Bond Act o 2011 (Reps. Garrett (R-NJ) and Maloney (D-NY)). Te bill would create a rameworkto establish a covered bond market in the United States. NAR sent a letter in support o the bill and signed aletter with 13 other organizations supporting passage o the legislation. Te creation o a covered bond marketcould provide an additional source o capital and improve liquidity or the commercial and residential realestate industries.

FHA CONDOMINIUM RULES

On May 6, 2011, a coalition put together by NAR, including the Community Associations Institute

(CAI), the Institute or Real Estate Management (IREM), and the National Association o Home Builders(NAHB), sent a letter to acting Federal Housing Administration (FHA) Commissioner, Bob Ryan. Tecoalition recommends changes to FHAs condominium rules to provide greater liquidity to this sector o thereal estate market without causing additional risk to the FHA insurance und. In a meeting with the ActingCommissioner, the Coalition outlined support or enhancements to the rules and limits relating to (1) owner-occupancy, (2) FHA concentration, (3) investor ownership, (4) presale, (5) delinquent HOA assessmentsand (6) commercial space.

On July 1, 2011, new condominium rules were implemented or mortgages insured by FHA. Te temporarymeasures on owner-occupancy, FHA concentration and presale were made permanent, which NAR and theCoalition believes are good rst steps in addressing the lack o liquidity available or condominiums. NAR is

working with the Coalition or more enhancements to the condominium rules.


4/11

FHA, FANNIE AND FREDDIE LOAN LIMITS

NAR successully ought proposals to roll the Fannie and Freddie conorming loan limits back to a single$417,000 nationwide standard. Tis proposal would have reduced loan limits in 124 counties in 21 states.

Additionally, a House proposal to eliminate the oor (the low cost limit) or Federal Housing Administration-insured FHA mortgages did not advance. Tis proposal would have decreased limits in 257 counties in 34states. Although the housing industry eorts to urther extend the temporary higher loan limits or FHA,

Fannie and Freddie were not successul, NAR and housing industry advocacy eorts continue to seek toreinstate the high cost limits and saeguard against urther challenges.

FHA REFORM

NAR worked with Congress and the Obama Administration to protect the aordability and availability oFederal Housing Administration (FHA) mortgage insurance. Specically, NAR successully ought proposalsto increase FHAs downpayment requirement to 5 percent. FHA estimates that such an increase would haveeliminated 345,000 borrowers in the last year alone.

RISK RETENTION/QRM PROPOSED RULE

NAR spearheaded a coalition o nearly 50 members to oppose a rule proposed by six Federal regulators that

would implement the risk retention requirements o the Dodd-Frank Wall Street Reorm and ConsumerProtection Act. Te Act requires entities that securitize mortgage loans to retain 5 percent o the credit riskunless the mortgage is a qualied residential mortgage (QRM) or is otherwise exempt (GSE loans [while inconservatorship] and FHA loans would be exempt). NARs comment letter asks the six ederal regulators to

withdraw, revise and republish the rule or public comment because the rule:

IsinconsistentwiththestandardssetforthforriskretentionintheDodd-FrankActandviolatescongressional intent.

UnnecessarilydenestheQRMexemptionfromtheriskretentionrequirementstoincludeonlyanarrow slice o the mortgage market. REALORS believe that imposing a minimum 20 percentdownpayment, stringent debt-to-income ratio requirements, and rigid credit standards will denymillions o creditworthy Americans access to the lowest cost and saest mortgages.

Jeopardizesthefragilehousingmarketandgeneraleconomicrecovery.

Reducesliquidityforcommercialrealestate.www.realtor.org/topics/qrm


5/11

ABILITY TO REPAY (QM) RULE

NAR raised REALOR concerns about the pending ability-to-repay proposed rule (reerred to as the QMrule) implementing new ruth in Lending Act (ILA) requirements added by the Dodd-Frank Wall StreetReorm and Consumer Protection Act. Te rule would prohibit any creditor rom providing a mortgageloan without making a reasonable and good aith determination that the borrower has the ability to repay theloan. Te NAR comment letterurges the Consumer Financial Protection Bureau (CFPB) to retain the proposedexemption or seller nancing rom the ability-to-repay requirements to the extent it is exempt rom theILA regulatory denition o creditor that only covers persons extending consumer credit more than vetimes in the pertinent calendar year. In addition, the denition o QM should include stronger consumerprotections than proposed, promote liquidity, incorporate ability-to-repay standards, and oer lenders a saeharbor that reduces litigation exposure.

SELLER FINANCING RULE

In response to NAR comments, HUD published a nal rule under the Secure and Fair Enorcement orMortgage Licensing Act o 2008 (SAFE) Act that provides relie or those who occasionally provide sellernancing. Te nal rule narrows the requirement to be licensed to apply only to individuals who, in acommercial context and habitually or repeatedly, take a residential mortgage loan application and oer ornegotiate terms o a residential mortgage loan or compensation or gain. In July 2011, Consumer FinancialProtection Board (CFPB) assumed responsibility or the rule. NAR expects CFPB to deer to reasonablestate laws on the number o seller nancing transactions that would trigger licensing.

NAR continues to seek relie or seller nancing in the context o the ability to repay QM proposed rule.NAR is urging CFPB to retain the proposed exemption or seller nancing rom the ability-to-repay

requirements to the extent it is exempt rom the denition o creditor, which only covers persons extendingconsumer credit more than ve times in the pertinent calendar year.

www.realtor.org/government_aairs/seller_fnancing

SBA COMMERCIAL PROPERTY REFINANCING PROGRAM

Te U.S. Small Business Administration (SBA) announced in February 2011 that it would start acceptingrenancing applications or commercial real estate mortgages maturing by the end o 2012. In response to anNAR letter and those rom other small business groups, the program was expanded to loans maturing aterthe end o 2012. For the rst time, small businesses can renance certain owner-occupied commercial realestate mortgages into long-term, xed rate loans under the existing SBA 504 program. Te new renanceprogram provides an SBA loan up to 40 percent o the appraised property value with no less than 10 percento the remaining amount to be contributed by the borrower. Tis program will provide credit relie or

property owners and help stabilize the commercial real estate and small business sectors.

LEASE ACCOUNTING RULES

Ater the submission o NARs comment letter along with several coalition letters with real estate-relatedorganizations, the Financial Accounting Standards Board (FASB) and the International Accounting StandardsBoard (IASB) announced that they would invite additional public comments on their proposed leaseaccounting changes. Te NAR letter had asked the Boards to take that action due to changes in the mostrecent drat that would orce businesses to bring leased assets onto their books as liabilities. NAR disagrees

with this approach to real estate lease accounting, which would signicantly reduce liquidity or bothcommercial real estate lessees and lessors.

Advocate


6/11

PRESERVING THE VALUE OF PROPERTY OWNERSHIP

MORTGAGE INTEREST DEDUCTION, DEFICIT REDUCTION AND TAX REFORM

Given the near certainty that an eort will be made to cut back on the mortgage interest deduction, NARhas been meeting with Members o Congress and senior sta in preparation or uture tax reorm and decitreduction debates. As no single proposal has yet emerged as the basis or reorms, these meetings have ocusedon building an understanding o the concerns that arise in the context o mortgage interest deduction (MID)reorm and identiying those issues that require urther discussion and education. In addition, NAR has engagedconsultants to (1) devise the means to evaluate and compare reorm proposals when they are ormally proposedand (2) develop the extensive data needed on the impact o changes to the limits on home equity deductions,reduced caps on mortgage deductions and limitations on second home deductions. In anticipation o utureadvocacy eorts, NAR has also conducted voter ocus groups and national polling on MID-related issues.

NATIONAL FLOOD INSURANCE PROGRAM (NFIP)

With NARs support, the House passed H.R. 1309 (Biggert, IL-R; Waters, D-CA) that includes a 5-yearextension o the National Flood Insurance Program (NFIP). While the bill includes tough premium ratereorms, NAR successully worked to minimize the negative impact o those reorms and deeated severalprivatization eorts, including one to terminate the NFIP. Tanks to REALORS, this eort ailed on a38-384 vote. While the Senate continues to work on its version o the 5-year reorm bill, NAR has securedanother short-term extension until November 18, 2011 and is working to ensure that Congress nishes the5-year reorm bill in the interim.

www.realtor.org/topics/nfp

VOLUNTARY RESIDENTIAL ENERGY USE LABEL PROGRAMNAR successully delayed the implementation o a national voluntary home energy labeling programdeveloped by the ederal Department o Energy (DOE). DOE agreed to pilot test the program and includechanges in the scoring system that reduce the market disadvantage to older homes and an emphasis on thexed eatures o the home, rather than on how owners use the home. At NARs request, DOE claried in

written materials the purely voluntary nature o the program or homeowners.

ENVIRONMENTAL REGULATIONS

NAR successully advocated or the addition o provisions to House appropriation bills that would barthe Environmental Protection Agency rom (1) enorcing lead paint standards beore accurate test kitsare approved; (2) regulating CO2 rom ofce and apartment buildings when the Clean Air Act was notdesigned or global greenhouse gases; and (3) issuing voluntary guidance that would expand the number

o waters and properties subject to Clean Water Act regulations. While the Senate has yet to act on any othese bills, adding these provisions sends an important message to ederal agencies not to overregulate thebuying and selling o real estate.

LEAD TESTING REQUIREMENTS

At NARs urging, the Environmental Protection Agency (EPA) withdrew a proposed rule to add urtherexpensive testing requirements to the existing residential lead paint renovation, repair and painting rule. Tisproposal, had it gone into eect, would have required contractors to take additional steps to demonstrate thatdust-lead levels in areas where work was perormed were sae. Tese steps would have increased the costs omaking repairs to a home and would have increased REALOR liability related to disclosure o lead paint.

Sustain


7/11

Protect

PROTECTING REALTORS BUSINESS INTERESTS AND ACTIVITIES

DODD-FRANK TREATMENT OF MORTGAGE FIRMS WITH REALTY AFFILIATES

Te Dodd-Frank Wall Street Reorm and Consumer Protection Acts antipredatory lending provisionsdiscriminate against mortgage rms with afliates involved in real estate sales transactions by orcing them tocount afliate charges when calculating ees and points to meet sae harbor provisions. NAR commented on

the proposed rule seeking to remove this discriminatory element. At the same time, NAR has been working toadvance legislation throughout 2011 that would also correct the problem.

MORTGAGE ASSISTANCE RELIEF SERVICES RULE (MARS)

Ater continued eorts to urge reinterpretation or amendment o the rule, including a July 7 meeting betweenPresident Phipps and Federal rade Commission (FC) Chairman Jon Leibowitz, the FC announced on

July 15 that it will orbear rom enorcing most provisions o its MARS Rule against real estate proessionalswho assist consumers in obtaining short sale approval rom their lenders or servicers. Starting July 15, 2011,real estate proessionals acting in their licensed capacity no longer needed to comply with most o theRules requirements, including the required disclosures, advance ee ban and recordkeeping requirements.

www.realtor.org/topics/mars


8/11

MORTGAGE LOAN ORIGINATOR LICENSING

NAR won relie rom an overly narrow interpretation o the Secure and Fair Enorcement Mortgage LicensingAct o 2008 (SAFE) Act as it applies to real estate brokerage activities compensated by a lender, mortgagebroker or other loan originator (or their agent). In cases where a real estate broker/agent receives a commissionrom the lender or the sale o a REO, individuals must only be licensed i they meet the denition oengaging in the business o a loan originator. Brokers/agents rarely, i ever, take an application or oer

to negotiate terms o a residential mortgage loan or REO transactions and typically would not have to belicensed as loan originators.

RESPA GOOD FAITH ESTIMATE (GFE) AND THE TRUTH IN LENDING ACT DISCLOSURE (TILA)

Under the Dodd-Frank Wall Street Reorm and Consumer Protection Act, the Consumer FinancialProtection Bureau (CFPB) must uniy the disclosures required under the Real Estate Settlement ServicesProcedures Act (RESPA) and the ruth in Lending Act (ILA). NAR has long supported simplication omortgage disclosure orms and has been regularly meeting with CFPB since the spring o 2011 to ensurethis eort provides useul disclosure and a proper and efcient regulatory ramework that is in keeping withthe letter o RESPA and the ruth in Lending Act. NAR is also a major participant in an industry coalition

working on this eort. Te process or developing new orms has been rereshingly open and collaborativeinto the all o 2011, but major work on the underlying ramework lies ahead and will be a signicant test or

the CFPB.

HOME WARRANTY

Ater three years o eort to get the Department o Housing and Urban Development to withdraw aninormal letter calling the sale o home warranty contracts by real estate agents and brokers a likely Real EstateSettlement Procedures Act (RESPA) violation, NAR began a legislative eort to get the guidance reversed.Te topic was a major issue in a spring broker y-in. NAR, working with industry partners, secured a hearingon the issue in the House Financial Services Committee in July 2011. Legislation to address the problem,H.R. 2446, has been oered by Representatives Biggert (R-IL) and Clay (D-MO). NAR is working to securecosponsors or the House bill as well as securing support or a similar measure in the Senate.

NETWORK NEUTRALITY

On November 20, 2011, network neutrality rules established by the Federal Communications Commissiongo into eect. Net neutrality is the concept that all users, devices and websites should have equal access tothe Web. NAR supported the net neutrality rules recognizing that the business o real estate is increasinglyconducted online. Streaming video, virtual tours and voice-over-Internet-protocol are just some o thetechnologies that are commonly used by REALORS today. In the uture, new technologies will be adopted,

which will no doubt require unencumbered network access.

PATENT REFORM

On September 16, 2011, President Obama signed into law the America Invents Act. Tis comprehensivereorm o the nations patent laws is the most sweeping reorm o the patent system in more than 60 years.Te Act creates greater transparency in the patent application process and a more streamlined and eective

process or challenging patents outside the judicial system. NAR successully advocated or these reorms inorder to reduce the burden o patent litigation, like the recent CIVIX lawsuit, on REALOR associationsand members.

Reform


9/11

APPRAISAL INDEPENDENCE

In April, NAR released a statement regarding appraisers and appraiser independence on its appraisal Webpage. In the statement, NAR expresses concerns about recent attempts to interere with the appraisal processand the independence o the appraiser. Over the last 18-36 months, a host o rules, regulations and laws havebeen announced to urther protect appraiser independence, but appraisers continue to be pressured. NARbelieves this pressure unnecessarily adds risk to the mortgage transaction or lenders and consumers.

APPRAISAL MANAGEMENT COMPANY INDEMNIFICATION

On August 11, 2011, NAR sent a letter to ederal regulators calling or a ban on the use o indemnicationclauses used by appraisal management companies (AMCs). Te letter was sent to Federal Financial InstitutionsExamination Council (FFIEC), the U.S. Department o Housing and Urban Development, the FederalHousing Finance Agency, and the U.S. Department o Veterans Aairs.

Indemnication clauses are becoming more common in service contracts used to engage AMC panelappraisers. In many cases, appraisers are asked to sign contracts that include language to indemniy and holdharmless the AMC against any suit, threat or claim on any work product or service provided as part o thecontract agreement. In some instances, the appraiser is even required to indemniy the lender and the AMCor amounts equal to their costs in repurchasing a mortgage loan, regardless o any proo o culpability on thepart o the appraiser. Te AMC is ree rom any legal obligation and the appraiser bears all responsibility.


10/11

APPRAISER FIDUCIARY RESPONSIBILITIES

NAR submitted comments on a proposed Labor Department rule that would require appraisers to have aduciary responsibility to retirement plans in cases where the plan is involved in the purchase or investmento real property. NAR argued that appraisers are required to be independent and should not be considereda duciary.

On September 19, 2011, in response to comments submitted, the Department o Labors (DOL) EmployeeBenets Security Administration (EBSA) announced it will re-propose its rule on the denition o a duciary.Te announcement states that the agency is revising provisions o the rule including the application o theregulation to appraisers. Te rule was proposed to protect business owners who oer retirement plans and those

who invest in these retirement plans and IRAs. Te proposed rule dened a duciary as giving investmentadvice to an employee benet plan or a plans participants and imposed a number o duties including a duty oundivided loyalty, a duty to act or the exclusive purposes o providing plan benets and deraying reasonableexpenses o administering the plan, and a stringent duty o care.

HUD REO CLOSING ISSUES

In June, members reported issues in several states with closings on REO property owned by the U.S.Department o Housing and Urban Development (HUD). NAR sent a letter to HUD asking or a quick

solution to this problem, which was delaying or denying the dream o homeownership to amilies acrossthe country. HUD contracts with attorneys or closings in the disposition o their REO property, and therewas an unexpected issue with these contracts. Ater working closely with senior sta and HUDs REODepartment, the issue was resolved and closings or HUD REO properties now occur on a normal schedule.

SHORT SALES

REALORS continue to inorm NAR about issues that their clients have when trying to get an answeron the approval o a short sale. o bring relie to distressed homeowners that want to execute a short sale inlieu o a oreclosure, NAR supports H.R. 1498, the Prompt Decision or Qualication o Short Sale Act o2011 that requires servicers to decide whether to approve a short sale within 45 days o completion o thele. Tis legislation, developed based on direct NAR input, was originally introduced in the 111th Congress.Based on continuing need expressed by REALORS, NAR encouraged the sponsors to reintroduce the bill in

this Congress, the 112th. NAR is pleased that there is an eort aoot to have a companion bill introduced inthe Senate, thus increasing the visibility o the issue and placing additional pressure on lenders to streamlinethe short sales process.

www.realtor.org/shortsales

TREASURY DEPARTMENT HAFA OUTREACH EVENT

In an eort to increase participation in the Home Aordable Foreclosure Alternatives (HAFA) program toexpedite short sales, NAR encouraged the reasury Department to engage real estate proessionals at MakingHome Aordable community outreach events. On October 12, the reasury Department, in collaboration

with the Arizona Association o REALORS and NAR, held a Making Home Aordable Help or Home-owners outreach event in Phoenix, Ariz. and piloted a session or real estate agents wanting to learn moreabout the reasury Departments HAFA program. In additional to inormational sessions or real estate

proessionals wanting to learn more about the program, agents and brokers had the opportunity to work onsolutions to difcult HAFA transactions with loan servicers ace-to-ace. NAR continues to collaborate withthe reasury Department on HAFA improvements and promoting the development o a streamlined shortsale process beyond the expiration o the program scheduled or the end o 2012.


11/11

LEARN MORE ABOUT GOVERNMENT AFFAIRS:

WWW.REALTOR.ORG/GOVERNMENT_AFFAIRS

ACCESS INFORMATION ON CURRENT INITIATIVES

2011 NAR Legislative and Regulatory Year in Review

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