On February 12, the Office of the Comptroller of the Currency, a division of the U.S. Treasury, has adopted a regulation that "preempts state banking laws and exempts national banks from having to comply with state banking laws, including those protecting consumers from predatory lending and other abusive banking practices," says the National Association of Realtors.

NAR fears that the new regulation opens a back door for banks to not only get into real estate, but to avoid the expense and trouble of state licensure. If national banks are allowed by the Treasury and by Congress to broker real estate, the OCC could easily exempt them from state real estate licensing laws as well. Real estate brokers and agents employed by bank-owned brokerages might not be required to obtain state real estate licenses to broker real estate. If banks aren't required to be state-licensed, that means they can sell and manage real estate with virtual impunity, actions the NAR has lobbied the Federal Reserve and Congress for over two years to prevent.

In the worst-case scenario, state-licensed Realtors would compete with non-licensed lenders for some or all of their business. Just the expense of education, licensing, and other requirements would be a tremendous disadvantage to state-licensed Realtors, not to mention the impossibility of competing with the lower cost of services that banks could charge for services that currently require licensure by the state.

As NAR sees it, that's like getting into a fistfight with both hands tied behind your back.

What is driving the new regulation is the belief by the OCC that federal law preempts state law in governing banking activities of national banks and their subsidiaries. This interstate quality, held by large banks such as Bank of America, Wells Fargo and others, means that national banks will enjoy the same pre-emptions that federal savings and loans have had for decades.

These are also the same banks that have lobbied the Federal Reserve and Congress to allow banks to broker and manage real estate sales and rentals, a notion that the NAR has fought for over two years because of the inability of small business brokers to compete with federally protected banks.

Looks like they found another way in, according to NAR president, Walt McDonald, who says that national banks' "agents and employees would not need real estate licenses to buy or sell property. They would not have to pass licensing exams or pay licensing fees. They could ignore state laws or regulations governing the business of real estate such as consumer disclosure, environmental protection, and dual agency. Nor would these banks have to comply with state banking regulations, including those covering predatory lending."

"Realtors who operate mortgage, title, appraisal and other businesses," warned McDonald in a Realty Times op-ed, "now will have to compete with federally chartered banks that don’t have to comply with the same state laws that they do."

According to the NAR, thousands of Realtors have filed formal comments opposing the OCC preemption regulation. State banking officials, state attorneys general, consumer groups and other real estate industry organizations also oppose the rule, says NAR, which was the subject of congressional hearings January 28.

NAR says it would support legislation in Congress to rescind it.

This is yet another volley in the ongoing battle between the real estate industry and banks, with the NAR on the front lines.

In January 2001, the Federal Reserve and the Treasury Department proposed and published a rule allowing federally chartered banks to enter real estate brokerage and property management. The NAR, among other lobbyists, fought bitterly to have adoption of the rule postponed.

The NAR won a temporary victory. "Until at least October 1, 2004, the Treasury Department is precluded by law from enacting another regulation promulgated by the Federal Reserve Board and Treasury that would allow federally chartered banks to enter real estate brokerage and property management."

But if the OCC prevails, then banks will have what they wanted all along - without having to fire another round. NAR would have no choice but to lobby Congress.

In a letter last week to Comptroller John Hawke, NAR Senior Vice President and Chief Economist David Lereah asked the OCC to enact a regulation that would prohibit national banks that are exempt from state control to enter real estate brokerage and property management.

In his February 13 letter, Lereah said such a rule "would provide the real estate industry with the assurance it needs that the issue of banks' involvement in real estate brokerage activities will not be decided unilaterally by administrative fiat."

Said McDonald, "Taken together, these two regulations could create the real estate industry's worst nightmare. The largest banks in the nation could control large segments of the real estate industry, both brokerage and finance, with no state regulation. The OCC rule gives a competitive advantage to those who need it least, the big banking conglomerates. The result will be less competition, less service, more consolidation and higher prices in real estate transactions. If the regulatory agencies choose to side with the big banks rather than with homeowners and homebuyers, we will have no choice but to seek support in Congress to stop this rule."

Published: February 19, 2004

Use of this article without permission is a violation of federal copyright laws.

Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.