How the financial services bill affects Realtors
Updated July 21, 2010: President Obama has signed this piece of legislation into law.
The effectiveness of Realtor® lobbying is sometimes better measured by what didn't happen, rather than by what did happen. Such is the case for the financial services reform bill which was passed by the US Senate last week and signed by the President on July 21.
Real estate is a significant part of our country's financial services sector. Sweeping and potentially onerous new regulations could have been heaped upon an already troubled national real estate market, but NAR was successful in exempting real estate firms from many of the financial services reform bill's provisions.
If the bill passes as expected, there are four things you and your clients will need to know about, according to NAR. In a nutshell, they are:
- Administration of the Real Estate Settlement Procedures Act (RESPA) will move out of HUD and into a new agency in the Federal Reserve called the Consumer Financial Protection Bureau. This isn't expected to have any significant effect in the short term, but NAR will closely monitor the situation because the Federal Reserve and HUD have different cultures that could produce subtle changes in the way RESPA is administered.
- Exotic loans that are widely recognized for their destabilizing effect on mortgage markets several years ago will face a much different regulatory environment in the future. These changes will lead to slightly longer processing times for subprime and other exotic mortgages but the increased time shouldn’t be an issue for most buyers or your business. Importantly, there’s nothing in the bill that would impact plain vanilla fixed and adjustable-rate mortgages.
- Investors and homeowners who want to provide seller financing to buyers will be able to do so as long as they limit those transactions to three times a year.
- Although the legislation leaves reform of secondary mortgage market companies Fannie Mae and Freddie Mac for later, it requires regulators to come up with some initial planning by certain deadlines, the first being in early 2011. In other words, legislators insist that the process for reforming Fannie, Freddie and the Federal Home Loan Banks must start in earnest next year.
This video from NAR provides much more detail.