Big Wins in a Tough Climate

September 18, 2013

We’re working through some of the toughest threats to our business right now, and it will be years before we have real clarity on many of the federal issues we’re dealing with. But your association has chalked up an array of impressive victories that shouldn’t go unnoticed. Our success this year has been thanks in no small measure to the power you show every time you write a letter to your members of Congress or meet your representative or senator in person, whether at home or in Washington.

Let’s look at our latest victory: the qualified residential mortgage rule, which regulators released in late August. The rule largely tracks the qualified mortgage rule that regulators released last year. Both rules set parameters that lenders must follow to have their loans considered qualified. “Qualified” in the case of QRM means lenders don’t have to hold back 5 percent of the loan amount in capital reserves; in the case of QM, it means the loan is eligible for purchase or guarantee by Fannie Mae and Freddie Mac. These standards seem like a simple matter. But had the rules not gone our way, they would have had enormous implications on the availability of affordable, long-term financing for your customers.

The QRM rule, which applies to loans that are packaged into securities and sold on the secondary market to investors, adopts the reasonable QM approach that NAR sought. That represents a huge victory; the original proposed rule included a minimum down payment requirement, which could have been catastrophic for affordable mortgage availability. Although banking regulators left open the door for more feedback on the minimum down payment approach, that approach is unexpected to gain currency.

Between the QM and QRM rules, we had another victory: the Basel III capital accords, which are international bank capital standards. Originally, the Basel III standards were going to impose what amounts to a surcharge on banks that make residential mortgage loans by requiring them to hold extra capital in reserve for those loans. But NAR and other organizations, including consumer groups, worked hard to show how problematic this approach would be, and when the U.S. version of the accords was released in July, the surcharge was taken out.

In the months ahead, reforms of Fannie Mae, Freddie Mac, and the FHA will be debated, and we can expect to have some tough fights. Likewise, the mortgage interest deduction remains a target for lawmakers pursuing tax reform. But you’ve shown again and again that when you get involved and stay engaged with your members of Congress, common sense prevails. So don’t stop. Please take the time to follow the issues and respond to our Calls for Action. It’s your involvement—all of us working together on behalf of the REALTOR® Party—that brings 
legislative and regulatory success for our industry.

Gary Thomas

Gary Thomas was 2013 president of the NATIONAL ASSOCIATION OF REALTORS®.