WASHINGTON – The National Association of Realtors is not relenting in its efforts to block attempts by banks to participate in real estate sales. Among its latest moves, NAR has commissioned two more studies that examine the possible consequences of a proposal before the Federal Reserve and the U.S. Treasury to allow banks to participate in the real estate brokerage and management business. The first study, "Economic Analysis of the proposal to Allow National Banks to Compete in the Real Estate Brokerage Market" was published in April and conducted by Capital Economics in Washington, D.C. Among the conclusions drawn in that study, it found that the proposal to amend the Gramm-leach-Bliley Act of 1999 and allow banks into the real estate business would harm consumers and increase predatory lending. It referred to integrated real estate agents/lenders-"IALs"-who would alter the industry's existing incentive structure and be a detriment to homeowners and borrowers. According to Inman News Features, "Currently, traditional lenders stand to gain only if a borrower repays his or her loan, yet the Fed's proposal would encourage lenders to foreclose on homes faster.because IALs would not only get a commission for selling the property, but also likely would provide a new mortgage for the buyer." "The present value off the new loan is higher, of course, due to the fact that there are more years remaining (on its term) compared to the partially paid down existing loan. Therefore, the IAL bank not only replaces the lost mortgage with one of equal value, but also replaces it with one of greater value." The study also claims that, "Allowing banks to serve as both lender and agent creates the dangerous incentive structure where the lender has a vested, positive financial interest in seeing the borrower default on the loan. For example, the IAL bank would find it profitable to grant a loan to a customer, knowing that they could not pay for it and would default in just a few years," thus creating an environment ripe for predatory lending. In addition, the study states, "In the majority of late payment cases, the lender is often willing to work extensively with the customer in order to get the payments current and stave off default. An IAL would have no such incentive and would benefit by cutting the borrower loose as fast as possible." NAR's commissioned studies are only part of the ammunition the association is using to defeat the proposal to allow banks into the real estate and property management businesses. The association and its members have also barraged the Treasury and the Federal Reserve Board with formal comment letters against the measure. NAR president Richard Mendenhall also testified before the House Subcommittee on Financial Institutions and Consumer Credit hearings. Allowing federally chartered banks to enter real estate brokerage and property management would enable bank-owned real estate firms to benefit unfairly from government subsidies, distort the real estate marketplace to the disadvantage of consumers, and contradict Congressional intent and the barrier between banking and commerce, NAR wrote. -

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