Washington Report: REALTORS® Win Bank Victory, Speak Up for Competitive FHA and Mortgage Liquidity

May 1, 2007

NAR Victory: Wal-Mart Nixes Bank Attempt

Saying the process was taking too long, Wal-Mart pulled the plug on its effort to launch an industrial loan corporation, a state-chartered bank that receives federal deposit insurance through the Federal Deposit Insurance Corp.

The giant retailer’s withdrawal of its ILC application, after the FDIC imposed a moratorium on ILC requests, represents a big win to preserve the firewall between banking and commerce by the NATIONAL ASSOCIATION OF REALTORS®, which asked for the moratorium.

As a next step, NAR hopes to see passage of the Industrial Bank Holding Company Act of 2007, H.R. 698, which would permanently ban certain commercial businesses from opening banks. “We thank House Financial Services Chairman Barney Frank (D-Mass.) and Rep. Paul Gillmor (R-Ohio) for their relentless pursuit of this important issue,” says NAR President Pat Vredevoogd Combs. A permanent ban is needed because other commercial businesses that could create a conflict of interest as a lender, including Home Depot, are looking to open ILCs.

Competitive FHA Needed, NAR says

Delinquencies near 14 percent among subprime borrowers point to the need for Congress to pass reforms that would reignite the FHA as the safe yet innovative force in the mortgage market it once was, a REALTOR® from Glen Burnie, Md., told a congressional committee.

JoAnne Poole, CRS®, GRI, broker-owner of Poole Realty, went before the Senate housing appropriations subcommittee in late March to urge Congress to pass legislation that would let borrowers obtain FHA-backed mortgage financing with competitive terms like 100 percent financing, risk-based pricing, and 40-year loans. Higher loan limits are also needed to reflect increased housing costs.

“Because FHA hasn’t changed with the times, a growing number of home buyers are being forced to use nontraditional mortgages,” Poole said at the hearing.

NAR is calling for passage of Expanding America’s Homeownership Act, H.R. 5121 and S. 3535, which would incorporate industry-backed reform provisions. The bills will be taken up on the floor of their respective houses once they’re passed at the committee level, which NAR hopes could happen before fall.

Mortgage Liquidity at Stake

It’s time for Congress to rally around creation of an independent regulator for secondary mortgage market players Fannie Mae, Freddie Mac, and the Federal Home Loan Banks, REALTORS® said in more than 5,000 letters sent in March to House Financial Services Committee members.

The letters supported legislation by Committee Chair Barney Frank (D-Mass.) to create such a regulator. The bill has several hurdles before passage by Congress. REALTORS® say action’s needed to ensure stable liquidity for mortgages.

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