Since the beginning of the 111th Congress in early 2009, NAR has been working closely with the Members and staffs of the House Financial Services Committee and the Senate Banking Committee to ensure that Wall Street Reform legislation did not adversely affect Realtors. Below is a summary of the issues of particular interest to REALTORS®.

Provisions of Interest to REALTORS®

• Consumer Financial Protection Bureau (CFPB)
• Mortgages
• Commercial
• Appraisal
• 1031 Like Kind Change Intermediaries

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Consumer Financial Protection Bureau (CFPB)

• NAR secured an exemption for real estate professionals performing traditional real estate activities from the jurisdiction of the Consumer Financial Protection Bureau except to the extent they are governed by existing laws such as the Real Estate Settlement Procedures Act (RESPA) that will now come under the bureau’s purview.

Mortgages

Risk Retention - Qualified Residential Mortgage (QRM) Exemption

Please visit NAR's web page on QRM for more information on this issue >

Qualified Mortgage Safe Harbor/Ability to Repay

Please visit NAR's web page on QM for more information on this issue >

Seller Financing

Please visit NAR's web page on seller financing for more information on this issue > 

Commercial

Accounting Rules Study

• The Act requires the Federal Reserve to study the combined effects of the risk retention requirements with recent new accounting rules put in place by the Financial Accounting Standards Board (FASB) that represent dramatic changes in securitization accounting (FAS 166 and 167).

Accredited Investor

• The Act gives the SEC the authority to review the current standard and update it to reflect inflation and the characteristics of the modern economy. The bill excludes the investor’s primary residence from $1 million net worth standard. The SEC review may raise the threshold for defining a customer as an accredited investor, forcing companies that sell securities to them to register the products with the SEC.

Commercial End Users

• The Act appears to allow commercial end users – including owners, operators and developers of commercial real estate – to continue to engage in swaps used to manage commercial risk without being subjected to central clearing. However, regulators would now be authorized to impose initial and variation margins on these un-cleared trades.

Modified Crapo Amendment

• As for provisions governing securitization, the final language retained --with minor modifications-- an amendment by Senator Mike Crapo (R-ID), allowing “third party” (B-piece) investors to satisfy new risk retention requirements for commercial mortgage-backed securities (CMBS). This language also directs bank regulators to consider exemptions or different risk-retention requirements for CMBS.

Securitization

• The Act requires banks that package loans into CMBS to keep 5% of the credit risk on their balance sheets. Directs regulators to exempt low-risk mortgages that meet certain minimum standards. (See “Risk Retention – Qualified Mortgage Exemption” above.)

Swaps

• Financial firms, a class that likely includes mortgage real estate investment trusts (REITS), will be required to centrally clear their swap transactions and meet margin requirements.

Appraisal

• Appraisers are to be compensated at a rate that is reasonable and customary for appraisal services in the market area of the property being appraised.
• Home Valuation Code of Conduct (HVCC) sunsets when Consumer Financial Protection Bureau issues interim final regulations implementing the appraisal provisions of the Dodd-Frank Act.
• A subprime mortgage requires a written appraisal of the property to be mortgaged.
             • The applicant is entitled to one free copy of the appraisal.
             • The applicant must be notified that the appraisal is prepared for the sole use of the
               creditor.
• It is unlawful to coerce, extort, collude, instruct, induce, bribe, or intimidate an appraiser in an attempt to influence the independent judgment of the appraiser.
             • An appraiser may consider additional, appropriate property information including
              additional comparable sales to support an appraisal, provide further detail, or
              correct errors.
• Appraisal Qualifications Board (AQB) Qualification Criteria for licensed and trainee appraisers becomes mandatory for the states (currently voluntary).
• The Federal Housing Finance Agency (FHFA) and the new Consumer Financial Protection Bureau become members of ASC. The Office of Thrift Supervision is no longer a member of ASC because it is being merged into the Office of the Comptroller of the Currency.

1031 Like Kind Exchange Intermediaries

• NAR supported language requiring the SEC to conduct a study on how best to regulate 1031 Like Kind Exchange Intermediaries to end the fraudulent practices that have been taking place.