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Banks In Real Estate - Issue Summary
What is the fundamental issue? |
| In early 2001 the Federal Reserve Board and the U.S. Treasury Department proposed rules to expand the powers of national bank conglomerates. The agencies proposed allowing national bank conglomerates to engage in real estate brokerage and management, reclassifying these activities as financial in nature. NAR strongly opposes the proposal, arguing that the Bank Holding Company Act of 1956 and the Gramm-Leach-Bliley Act (GLB Act) of 1999 do not authorize banking firms to provide real estate brokerage and property management services, as these are nonfinancial, inherently commercial activities. |
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| I'm a Realtor®. What does this mean to my business? |
| If banks are allowed to engage in real estate brokerage, it would create anti-competitive and anti-consumer concentrations of power within the financial services sector, which would ultimately increase costs for homebuyers. Financial holding companies and bank subsidiaries with direct and indirect federal subsidies will compete unfairly with real estate firms and their affiliates because they have access to cheap sources of capital (thanks to federal deposit insurance and loans from the Federal Home Loan Bank System) and will cross-subsidize their commercial operations. Permitting banks to engage in commerce will compromise bank lending decisions and create conflicts of interest while restricting consumer choice and competition among mortgage lenders. |
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| NAR Policy: |
| NAR strongly supports enactment of the Community Choice in Real Estate Act, H.R.111/S.413, which removes the powers of the Fed and the Treasury Department to regulate these real estate activities. NAR believes that, if permitted to engage in real estate brokerage and management, national bank conglomerates would have an unfair competitive advantage and inherent conflicts of interest would result. |
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| Legislative/Regulatory Status/Outlook: |
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On January 4, 2007, Representatives Paul Kanjorski (D-PA) and Ken Calvert (R-CA) reintroduced H.R. 111, "The Community Choice in Real Estate Act," which clarifies Congressional intent that real estate brokerage and management are not banking activities. Currently, 263 House members have signed on as cosponsors of H.R. 111. On January 26, 2007, Senators Hillary Rodham Clinton (D-NY) and Wayne Allard (R-CO) introduced a Senate version of "The Community Choice in Real Estate Act," which has 21 cosponsors.
On June 29, 2007, the U.S. House of Representatives passed the FY2008 Financial Services and General Government Appropriations bill, which includes an NAR supported provision prohibiting the Federal Reserve and Treasury Department from finalizing a rule allowing banks to engage in real estate brokerage and management. The final vote on passage of the appropriations bill was 240 in support and 179 against. |
Related Information:
NAR's page on Banks in Real Estate
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Link to Thomas |
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