5 to Watch: November/December 2011

News and trends that we're keeping an eye on this month.

November 1, 2011

1. FTC: Don’t Mislead on Loan Talk

The federal government is cracking down on misrepresentation of mortgage loans, so if you provide a consumer with a lender’s rate sheet or otherwise talk about a mortgage product, be careful not to say anything that could be misleading, a federal rule says. You also must keep a record for two years of what you say or write. The requirements are in the Federal Trade Commission’s “Mortgage Acts and Practices” rule that took effect ­Aug. 19 and applies to lenders, mortgage brokers, and home builders. It also applies to real estate practitioners when they communicate specifically about mortgage products. Simply referring customers to lenders or suggesting they speak with a lender for loan information doesn’t run afoul of the rule. When talking about a product, practitioners gain protection by including a disclaimer that makes clear they’re not mortgage professionals and directs consumers to the lender, but such disclaimers aren’t required. This is the first time the Federal Trade Commission has written such enforcement rules and can now impose civil penalties on offenders.

2. Loan Limits Drop: 16% of Buyers Walk

Sixteen percent of home buyers have left the market because Congress allowed FHA and conforming loan limits to drop to 115 percent from 125 percent of the area median home price and the loan-limit cap to drop to $625,500 from $729,750, NAR data show. Fifty-two percent of buyers have had to come up with a higher down payment and 32 percent have had to look for a lower-cost house. Twenty-one percent are facing higher interest-rate payments. The data is based on responses from 1,302 practitioners surveyed this fall by NAR Research. NAR has been urging Congress to take up the loan-limit matter again. 

3. Home Equity Drop Slams Business Growth

About a quarter of small-­business owners and entrepreneurs hoping to start a business rely on the equity in their home to get capital, research shows. Given the slow pace of home price recovery in many markets, it’s little surprise that business launches are at one of their lowest levels in decades. Data from the U.S. Census Bureau show that business start-ups from 2006 to 2009 were down by more than a third, providing yet another reason real estate professionals need to stay vigilant against government actions that could hurt the housing recovery, NAR Chief Economist Lawrence Yun says. At the federal level, that means any changes to the mortgage interest deduction or proposals like the qualified residential mortgage rule that would require a 20 percent down payment. At the local level, it could mean transfer fees or fees on commissions.

4. Long-term Flood Extension Still Sought

Congress has extended the National Flood Insurance Program for the short term, leaving the door open to pass an NAR-supported five-year reauthorization. Action on the long-term extension is expected to come as part of budget legislation that Congress was slated to take up before the end of the year. NAR’s Call for Action on flood insurance remains in effect until long-term reauthorization passes. About 8.3 percent of NAR members have sent flood insurance letters to their members of Congress.

5. More Inventions, Fewer Lawsuits?

NAR is hoping associations, MLSs, and others in the industry will see fewer patent infringement lawsuits as a result of sweeping reforms President Obama signed into law in September. “The America Invents Act” takes steps to make it harder for companies to file, and then sue, on the basis of overly broad patents that can ensnare unsuspecting companies. NAR settled one such suit earlier this year on behalf of the real estate industry. The suit involved online search technology.

Robert Freedman

Robert Freedman is the former director of multimedia communications at NAR.