The National Association of Realtors is pushing lenders, including mortgage financiers Fannie Mae and Freddie Mac, to loosen underwriting standards so qualified buyers aren’t locked out of the housing market, the group says.
The group is simultaneously waging a public relations and lobbying campaign to protect subsidies for homeowners, such as the mortgage interest deduction, that NAR officials worry are threatened by political pressure to rein in the federal deficit.
A bipartisan deficit reduction commission — the National Commission on Fiscal Responsibility and Reform — is charged with examining areas in which the government might be able to cut spending and raise revenue.
The commission has heard testimony from critics of the mortgage interest deduction and other subsidies for homeownership.
The National Low Income Housing Coalition, for example, maintains that there are "extreme inequities" in the $300 billion a year the federal government spends to subsidize housing and mortgage markets, with only about 20 percent of that money directed at rental housing.
The mortgage interest deduction alone cost $86 billion in lost revenue in fiscal year 2009, the group said, and is projected to cost $135 billion by 2013.
Rather than boosting homeownership, the deduction primarily benefits the wealthy, the group claims. The National Low Income Housing Coalition and other critics say the deduction should be changed to a tax credit, with limits on the size of eligible mortgages.
The Congressional Budget Office has estimated that replacing the mortgage interest deduction with a 15 percent tax credit on mortgages up to $400,000 would have generated $418.5 billion between 2008 and 2017.
Similarly, the Obama administration proposed raising money for its health care proposal by limiting taxpayers’ itemized deductions for taxpayers with incomes over $250,000, in order to raise $318 billion over 10 years.
The goal of the "Home Ownership Matters" campaign is to convince the public that government subsidies for homeowners benefit the economy and society as a whole, so that lawmakers think twice about taking away from those subsidies, NAR President Vicki Cox Golder told Realtors at their annual convention.
NAR is also opposed to proposals to dismantle or privatize Fannie Mae and Freddie Mac, leaving the securitization of mortgages up to the private sector.
NAR advocates converting the companies into government-chartered, non-shareholder-owned authorities that would continue to purchase and guarantee mortgages. Regulating their products and investments more tightly would prevent a repeat of the events that led the government to place them in conservatorship in September 2008, NAR maintains.
Realtors have also launched a separate campaign to roll back what NAR views as overly restrictive lending practices.
A policy stance approved Monday by NAR’s board of directors argues that housing and mortgage markets "have over-corrected, and one of the problems holding back the recovery is excessively tight credit policy."
With the collapse of the secondary market for loans without government backing, Fannie, Freddie and FHA are involved in more than 90 percent of all mortgage loans, the group noted. The government-sponsored entities (GSEs) and FHA have tightened their lending standards to the extent that "there is little risk to making new loans."
These "pristine loans" are "the result of excessively tight underwriting, not sound business practices," NAR’s newly adopted credit policy asserts. "The GSEs and FHA have a public mission to provide mortgage liquidity to qualified homebuyers, including low- and moderate-income families and first-time homebuyers. This mission is being impaired by limits on the availability of credit."
NAR’s credit policy urges that:
- FHA, Fannie Mae and Freddie Mac conduct ongoing assessments of how they treat borrowers who have declared bankruptcy, been foreclosed on, or engaged in a short sale or deed-in-lieu of foreclosure. Research shows that when the waiting period to qualify for a new loan is reduced for borrowers who experienced extenuating circumstances such as the loss of a job, divorce or illness, those new loans are performing well.
- FICO amend its formulas so consumers who have had their credit lines reduced without a "risk trigger" such as a missed payment don’t dent their score because they are tapping a higher percentage of their available credit.
- Credit bureaus, lenders and federal regulators adopt reporting standards that help homeowners who have negotiated loan modifications to repair their credit. Borrowers making on-time payments on a loan modification should have those payments classified as "paid as agreed" rather than "not paid as originally agreed," so they can re-establish good credit and refinance their loan.
In other actions at Monday’s meeting of NAR’s board of directors, Realtors approved policies on data privacy and security, a first step down a path that the group hopes will keep regulators at bay.
Realtors should "recognize and respect" their clients’ privacy expectations by developing and implementing privacy and data security policies, collecting and using information about individuals only when it would be useful to providing products and services.
As a matter of policy, Realtors should not reveal personal information about their clients to unaffiliated third parties, unless it is needed to help complete a transaction initiated by the consumer, or the consumer has been given the opportunity to opt out.
NAR staff members are researching a possible self-regulatory program for data privacy and security that the group’s Business Issues Committee will consider at its May 2011 midyear meeting in Washington, D.C.
The board of directors also approved a recommendation by the Professional Standards Committee that Realtors be exempted from a requirement to display the name of their firm in brief electronic displays, such as text messages and tweets, as long as they are linking to a display that includes all required disclosures.
NAR’s Standard of Practice 12-5 bars Realtors from advertising services or properties "without disclosing the name of that Realtor’s firm in a reasonable and readily apparent manner."
The board of directors approved a recommendation by the Legal Action Committee that coverage under the professional liability insurance program for NAR and its member associations and MLSs be reduced from a $20 million annual limit to a $10 million annual limit.
Total annual claims have reached $3 million only once in the program’s history, and haven’t exceeded $2 million during the last 13 years.
NAR will pay $1.47 million for the new level of coverage, and be required to maintain a $500,000 reserve for payment of claims in a "loss corridor" of between $1 million and $1.5 million.
The board also approved $123,250 in funding in seven legal cases in which it received requests for assistance.
NAR is contributing $45,000 to help cover legal expenses incurred by Maryland-based Metropolitan Regional Information Systems, which is a defendant in a patent infringement lawsuit. MRIS must refund the money if it settles the case.
NAR is also providing $10,000 in assistance to cover legal expenses of Illinois-based Midwest Real Estate Data LLC, which is a defendant in a similar patent infringement lawsuit filed by the same plaintiff, CIVIX-DDI LLC.
NAR will pay one-third of legal expenses incurred by Michigan-based MLS Realcomp II, which is a defendant in a potential class-action suit claiming that Realcomp’s rules drove up commissions in the Detroit metro area. Realcomp II shareholders must pay the first $21,000 in expenses, and NAR is limiting its outlay in the case to $20,000.
Realcomp II is also challenging a Federal Trade Commission decision against it. NAR has provided $550,000 in assistance to help Realcomp pay $2.4 million in legal expenses through 2009, and has committed to pay half of Realcomp’s legal expenses in appealing the FTC decision, up to a limit of $175,000.
Also on Monday, NAR’s board installed Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., as 2011 president. Phipps was Rhode Island’s "Realtor of the Year" in 1995, and served as president of the Rhode Island Association of Realtors in 2000.
Maurice "Moe" Veissi, broker-owner of Miami-based Veissi & Associates Inc., was named 2011 NAR president-elect, meaning he is in line to serve as NAR president in 2012. Veissi serves as president of the Florida Association of Realtors in 2002, and the group named him "Realtor of the Year" in 2003.
Gary Thomas, founder and CEO of Orange County, Calif.-based Altera Real Estate, is the 2011 NAR first vice president. He has served on NAR’s board of directors since 1995 and was president of the California Association of Realtors in 2001.
