While it would like to enjoy basking in the afterglow of victory to retain its servicemarks Realtor and Realtors against a petition to cancel filed by a California lawyer and his client, the NAR never really gets a chance to rest on its laurels.

The trade organization is still battling the Office of the Comptroller of the Currency, a division of the U.S. Treasury which has tried to allow banks into real estate through the issuing of "rules." While that door is temporarily closed, the NAR has spotted a window where the OCC has issued a rule to exempt banks from state law oversight.

On January 7, 2004, the OCC issued a final rule identifying types of state laws that are preempted for national banks, explained the NAR, including mortgage lender/broker licensing laws, escrow account laws, credit score disclosure laws, and anti-predatory lending laws. "In addition, the OCC has reserved for itself enforcement of all rules against national banks and their operating subsidiaries. State regulators no longer have authority to pursue wrongdoing in this area against these entities."

On February 13, 2004, the NAR sent a letter to the OCC to explain its "continued opposition to the rule on applicability of state law to the operations of national banks and their operating subsidiaries. "As noted in our comment letters to the OCC," wrote the NAR, "it is our belief that the OCC has ignored congressional intent and overstepped their authority in granting broad preemption of state real estate lending related laws and consumer protections. We ask that you urge the OCC to rescind this rule.

The NAR says that the OCC argues that REALTORS® are unaffected by this rule, but NAR counsel says members are involved in mortgage and title services, appraisal, and home inspection and "remain obligated to apply for licenses and register their businesses, while national banks and their operating subsidiaries are now exempt from these requirements. That will lead to increased costs for our members, and further consolidation within a few large national banks and their operating subsidiaries, which have the added benefits that come with their federal charter."

The trade organization hopes to galvanize Congress against this rule, the way it did previously by lobbying for the Community Choice In Real Estate Act whose supporters in Congress were largely responsible in getting the banks in real estate issue shelved for another year.

To that end, NAR President Walt McDonald testified yesterday before the U.S. Senate Committee on Banking, Housing and Urban Affairs.

"The OCC is helping to create an industry that is dominated by a few large mega-banks, leaving consumers with fewer choices and higher rates," said McDonald, broker-owner of Walt McDonald Real Estate in Riverside, California, "and it sends a clear message to consumers that the federal government cares more about corporate America than about America's consumers."

Banks, insists the NAR, by virtue of their federal charter should not be allowed to "ignore an assortment of state banking, advertising, licensing, privacy and insurance laws designed to protect consumers from predatory lending and other abusive banking practices."

Pointed out McDonald, "It's simply not fair that local mortgage companies will be required to pay various state fees and comply with numerous state regulations, while the local branch for the mega-bank next door will be exempt.

"At a time when state consumer protection laws have not kept banks from enjoying the largest profit margins they've earned in decades and the housing sector has been the pillar of our economy, why does the OCC need to fix a regulatory system that's obviously working? NAR believes policy decisions like this that have such a profound effect on whole industries, states rights and consumers should only be made by elected officials in Congress. We're firmly committed to ensuring that Congress carefully scrutinizes the implications of the Comptroller's actions and takes the appropriate legislative action," McDonald testified.

United in opposition to the new rule are all 50 governors, 50 state attorneys general, 50 state banking supervisors, state real estate commissioners, AARP, the Consumer Federation of America, the National Conference of State Legislatures, the National Association of Homebuilders, the National Association of Mortgage Brokers and the NAR, says the NAR.

"NAR is also concerned that the OCC rule is yet another link in the chain that will lead to national banks' engaging in new activities, such as real estate brokerage, while remaining unconstrained by state consumer protection safeguards and licensing requirements. Clearly the expansion of national bank activities at the expense of state consumer protections is bad for consumers and it's bad for the community-based businesses that serve them best," McDonald told the panel.

McDonald's testimony is also supported by the Center for Responsible Lending and Self-Help, which plans to have its CEO Martin Eakes testify that:

• the OCC regulation rolls back existing state legislation that has curbed abusive lending;

• the regulation has essentially eliminated the role that states play in enforcing laws against predatory lending by national banks;

• the OCC has ignored Congressional directives to refrain from interfering with state efforts to protect their citizens from predatory lending; and

• OCC actions will make national bank charters a safe haven for predatory lenders.

For more information about this issue, visit www.realtor.org.

Published: April 8, 2004

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