The U.S. Department of Treasury issued the latest in a series of reports aimed at improving regulation of the U.S. financial system. The report focuses on recommendations for non-bank financials, fintech, and innovation. NAR provided feedback to Treasury earlier this year on this initiative, highlighting a number of topics of importance to REALTORS®.
Alternative credit scoring – Treasury recommends that the Federal Trade Commission (FTC) maintain its rulemaking and enforcement authority for non-bank financial companies under the Gramm-Leach-Bliley Act and better coordinate with other federal regulators, such as the Bureau of Consumer Financial Protection, on oversight over the credit bureaus with the intent of improving consumer protections. Treasury also recommends that regulators increase flexibility within their regulatory frameworks to accommodate and support the testing of new credit models and alternative credit data. NAR specifically advocated for such flexibility and non-traditional considerations for credit scoring to facilitate more borrowers into the market.
Appraisals – Treasury recommends that Congress review Title IX of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) for possible appraisal updates including sanctioning the use of automated or hybrid appraisals for certain transactions. Treasury also recommends that the government loan programs, such as those provided by the Federal Housing Administration (FHA), develop technology and procedures to allow for automated valuation methods, including appraisal waivers similar to those provided by Fannie Mae and Freddie Mac, for certain properties. Treasury views automation of some appraisal capabilities as a way to improve efficiencies in the federal loan programs while reducing cost to consumers. NAR agreed with Treasury that technological advancement could be beneficial to reducing appraisal times and costs for certain transactions, but urged caution in advancing too quickly with these methods given potential risk to homeowners and the secondary markets.
Electronic Notarization – Treasury recommends the digitization of property records, state authorization of electronic and remote online notarization, increased acceptance of electronic notes, and adoption of unified standards for states’ recognition and adoption of these electronic processes. As NAR explained to Treasury, there is an ongoing demand for a more efficient closing process, and technology to implement a fully electronic transaction should have adequate consumer protections in addition to an accommodating state regulatory environment to be successful at meeting this demand.
NAR previously met with Treasury in May of last year regarding their work on the first report focused on depository institutions that resulted in recommendations included in the regulatory relief reform bill (S. 2155). NAR will continue to engage with the Administration and Congress on these important issues.