NAR Board Wants Consumer Financial Watchdog Restructured

The CFPB, created after the financial crisis to protect people against bad loans, should not rely on a single director.

The federal agency that protects consumers from risky or fraudulent lending practices should be restructured as a commission and not rely on a single director, the NAR Board of Directors voted at its May 20 meeting.

NAR supports the mission of the Consumer Financial Protection Bureau, which was created after the financial crisis to help protect against the kind of bad loans that left many households in financial distress, but its structure has been under scrutiny in Congress and challenged in court for concentrating too much authority in the hands of one individual. The CFPB’s head since its creation is Richard Cordray, a former Ohio attorney general. 

To position NAR for any debate over the agency’s structure in the years ahead, the policy recommends the agency be restructured as a five-person board whose members serve staggered, five-year terms. The number of board members with the same party affiliation would be limited to three. They would be appointed by the president and confirmed by the Senate.

Anthony Lamacchia, chair of NAR’s Dodd-Frank CFPB workgroup discussed the proposed reorganization at the Business Issues Committee meeting several days before the board vote. “We want to do what is truly right for members.” said Lamacchia, broker-owner of Lamacchia Realty. In describing the workgroup’s objective, he added, “I wanted people to try to stay away from politics as we debated it. I certainly moved my initial position a bit as people brought things up.”

Lamacchia said a five-member board would help reduce the potential for arbitrary decision making that can occur under a single leader, providing the agency with greater accountability.

The action was one of several the NAR board took in preparation for what’s expected to be a busy and consequential next few years in the public policy arena.  Among the other actions, the board voted to reaffirm the importance of having an explicit federal guarantee available to borrowers in the conventional mortgage loan market, as Fannie Mae and Freddie Mac provide now. That way safe and affordable mortgage financing would be available in good markets and bad no matter how the two secondary mortgage market companies are restructured or even if they’re replaced. What to do about these two companies is high on the to-do list of Congress, although whether lawmakers will get to the issue this year is unclear.

The policy would also direct NAR to advocate for making the federally backed loans assumable. Should interest rates continue to rise, this would encourage home owners not to let rates discourage them from putting their house on the market and buying something new. The average interest rate on a 30-year, fixed-rate loan today is about 4 percent, still historically low. However, rates have been inching up over the past year and NAR Chief Economist Lawrence Yun predicts they’ll rise to more than 5 percent by the end of 2018.

The board adopted changes to the association’s policy on FHA, too. The policy directs NAR to encourage Congress to remove reverse mortgages from the calculation of the capital reserves. FHA is required to maintain to help ensure the solvency of its main insurance fund. The loans, called home equity conversion mortgages by the agency, are more volatile than regular mortgages and have been weighing down the performance of the agency’s insurance fund. Were the loans to be removed from the requirement, the agency’s reserves would be well above the statutorily required level. Today, they are over the required level but not by much.

Rental policy changes

The board also took aim at the rise in proposals at the state and local level that would impose rent control in some form on rental property owners. The board updated the association’s statement on rent control policy that has been in place since 1997. The new statement reiterates NAR's position that government programs that limit rent increases or impose other rent-related restrictions on landlords unfairly restrict private property rights and it encourages local and state associations of REALTORS® to oppose legislative measures that allow for rent control or rent stabilization programs.

The board also adopted a position on possession and eviction that reinforces the right of rental property owners to use the property as they see fit. The move comes at a time when jurisdictions are increasingly trying to impose restrictions on property owners. NAR’s position is that owners should be free to evict tenants as long as they stay within the terms of the lease; inspect property at their discretion as long as they give tenants proper notice; and convert the property to their own personal use or to put it on the market as a for-sale unit.

NAR also says owners shouldn't be required to pay for tenant relocation if they’re removed from the property.

Other board actions

In addition to the public policy actions, the board addressed a wide array of issues facing the association and the industry. In one of its biggest actions, the board approved funding for the next stage in development of a technology platform to make it simpler and faster for brokers to upload listing data to their MLS and better manage how the data will be used and distributed. The technology is called Upstream and the first phase will deploy later this year.

The board also directed NAR to seek legislation requiring parties that claim violations of the Americans with Disabilities Act to give alleged violators a chance to correct the problem before filing a lawsuit.

—Erica Christoffer contributed to this article.