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Dodd-Frank Wall Street Reform and Consumer Protection Act: Provisions Relevant to REALTORS®

Dodd-Frank Wall Street Reform and Consumer Protection Act: Provisions Relevant to REALTORS®

Since the beginning of the 111th Congress in early 2009, NAR has been working closely with the Members and staffs of the House Financial Services Committee and the Senate Banking Committee to ensure that Wall Street Reform legislation did not adversely affect REALTORS®.  President Obama signed this legislation into law on July 21, 2010. 

Below is a summary of the issues of particular interest to REALTORS®.

Consumer Financial Protection Bureau (CFPB):
• NAR secured an exemption for real estate professionals performing traditional real estate activities from the jurisdiction of the CFPB except to the extent they are governed by existing laws such as the Real Estate Settlement Procedures Act (RESPA) that will now come under the bureau’s purview.

Appraisal:
• Appraisers are to be compensated at a rate that is reasonable and customary for appraisal services in the market area of the property being appraised.

• Home Valuation Code of Conduct (HVCC) sunsets when CFPB issues interim final regulations implementing the appraisal provisions of the Dodd-Frank Act. [Note: The regulations are to be drafted within 90 days of the bill’s signing, superseding the Home Valuation Code of Conduct]

• A subprime mortgage requires a written appraisal of the property to be mortgaged.

  • The applicant is entitled to one free copy of the appraisal.
  • The applicant must be notified that the appraisal is prepared for the sole use of the creditor.

• It is unlawful to coerce, extort, collude, instruct, induce, bribe, or intimidate an appraiser in an attempt to influence the independent judgment of the appraiser.

  • An appraiser may consider additional, appropriate property information including additional comparable sales to support an appraisal, provide further detail, or correct errors.

• Appraisal Qualifications Board (AQB) Qualification Criteria for licensed and trainee appraisers becomes mandatory for the states (currently voluntary).

• The Federal Housing Finance Agency (FHFA) and the new Consumer Financial Protection Bureau become members of ASC. The Office of Thrift Supervision is no longer a member of ASC because it is being merged into the Office of the Comptroller of the Currency.

Mortgages:
Risk Retention – Qualified Mortgage Exemption
• At NAR’s request, Congress included a qualified mortgage exemption from potentially costly (for both lenders and consumers) risk retention requirements.

• Congress gave the regulator flexibility in determining what a qualified mortgage is, but it must be no less than the standards laid out in the predatory lending portion of the bill which includes such concepts as underwriting based upon full documentation, ability to repay, and limitations on fees among other things.

• NAR will work with the regulators to ensure that the regulatory framework maximizes access to affordable mortgages for consumers.

Qualified Mortgage Safe Harbor
• A safe harbor from the “ability to repay” requirement was created that limits the total points and fees collected by lenders and their affiliates to 3 points was included over NAR’s strenuous and repeated objection.

• However, we believe there is some regulatory flexibility in this provision including flexibility for smaller loan amounts with smaller being left undefined.

• NAR will work diligently to ensure this provision is interpreted in a manner consistent with the best interests of real estate professionals, their lender partners, and their clients and customers.

Seller Financing
• NAR was successful in getting the legislation amended to allow an individual to conduct three seller financed transactions in a 12 month period without being subject to the complicated mortgage rules in the new Act. NAR has asked HUD to adopt a similar approach to exempt seller financing, up to three transactions in a 12 month period, from loan originator licensing requirements under the S.A.F.E. Act.

Even more provisions of the legislation may be found on www.realtor.org.

Source: National Association of REALTORS®

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