NAR: Keeping Banks Out of Real Estate Brokerage Essential

WASHINGTON – After lobbying members of Congress for the past five years to enact legislation prohibiting banks from being involved in real estate brokerage activities, the National Association of Realtors is applauding the actions of the 110th Congress for moving forward with key legislation the association says is essential to ensuring the country's real estate industry remains competitive.

H.R. 111, the Community Choice in Real Estate Act, was introduced Jan. 4 in Congress by Reps. Paul Kanjorski (D-Pa.) and Ken Calvert (R-Calif.). Fifty co-sponsors' names were added on the first day of Congress.

"Without passage of this legislation, we are concerned that national bank conglomerates will continue their attempts to enter into the real estate industry, putting both competition and the nation's economic health at risk," said Pat Vredevoogd Coombs, president of the National Association of Realtors (NAR).

Coombs emphasized that enactment of H.R. 111 would keep real estate brokerage and management clearly defined as commercial activities and not financial issues, consequently guaranteeing that the separation of banking and commerce continues, as mandated by the Gramm-Leach-Bliley Act.

"The U.S. economy depends on a strong real estate market and a healthy banking industry. However, attempts by the Federal Reserve and Treasury to redefine real estate as a financial activity would have harmful effects resulting in less competition, higher costs for consumers, and give competitive advantages to the banks," Coombs continued.

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As far back as 2002, in testimony before the Senate Banking, Housing & Urban Affairs Committee, NAR President Cathy Whatley asserted the association's opposition to "tampering with our real estate system."

"Allowing financial holding companies and subsidiary national banks to engage in real estate brokerage and management could put the safety and soundness of the U.S. economy at risk. We oppose such an untested regulation…," she stated then.

The American Bankers Association also had the opportunity to have their say before the Senate committee about The Community Choice in Real Estate Act (S. 1839) that was introduced in the Senate in Dec. 2001. In defending the bankers' position, James Smith, chairman and CEO of Citizens Union Bank and Trust, Clinton, Mo., and then-president of the ABA argued that, "If banking institutions offer real estate brokerage and management services there would be more choices available for everyone. By prohibiting bank involvement, S. 1839 would do just the opposite — consumers, real estate agents and real estate companies would have fewer choices…The Gramm-Leach-Bliley Act promotes competition and safety and soundness and enables Congress to avoid becoming embroiled in every competitive issue. S. 1839 would take out the flexibility built into this new system, and put Congress back in as referee for future competitive disputes. "

The bill was sent to the Senate Committee on Banking, Housing and Urban Affairs, but it didn't see any action there.

A companion bill was introduced in Congress — H.R. 3424. That measure was last referred in Dec. 2001 to the Subcommittee on Financial Institutions and Consumer Credit, and subcommittee hearings were held in July 2002.

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