The Real Deal
Banks now want piece of the real estate pie
Some of the nation's largest, most aggressive banks have talked regulators into considering a proposal that could spell real disappointment for consumers who are considering the largest purchase of their lifetime--a home of their own.
The idea, now being considered by the Federal Reserve Board and U.S. Treasury Department, would permit financial holding companies and national bank financial subsidiaries to engage in real estate brokerage and management services. For nearly 20 years, banks have lobbied Congress for the right to engage in real estate and other nonfinancial activities. Three times in the last three years, Congress has said "no." Now, bankers are trying to accomplish, through regulation, what they could not get through the legislative process.
"If this proposal becomes final, it could be the beginning of one of the biggest concentrations of market power, complete with conflicts of interest and limits to customer choices, this country has seen," said Jeff Barnett, president of Silicon Valley Association of Realtors.
Today, homebuyers have thousands of choices for mortgage loans, and every deal is different. Professional real estate brokers educate their clients and work with them to find the best deal. They get lenders to compete with each other.
Banks, on the other hand, would not be motivated to get the best deal, but would try to sell buyers their own loans and to get the best terms for their parent companies, not the consumer, said Barnett.
"America's broker-centric real estate industry is the envy of the world and has been a major contributor to our record national homeownership rate," Barnett said. "Real estate brokerage is highly competitive, widely available, efficient and structured to provide a high level of personal service to buyers and sellers, while banks' expertise and vested interest lie in making loans, not providing real estate services. Even the banks admit that their primary goal in requesting this foray into real estate brokerage is to diversify their product line."
The Silicon Valley Association of Realtors and the National Association of Realtors are engaged in a fierce battle to fight this proposal with a comprehensive letter-writing and lobbying campaign. The Fed and Treasury are soliciting comments on the proposal until March 2, 2001. Realtors from all over the country are writing letters to these two government agencies, as well as to Congress, voicing their disapproval.
If you would like to send an email to the Federal Reserve Board and the Treasury Department about their proposal to allow banks into the real estate brokerage business before the comment period ends on March 2, refer to docket number "R-1091," and be sure to send copies to your U.S. Representative and Senators.
Send your comments to Federal Reserve at regs.comments@federalreserve.gov or to the Treasury Department at financial.institutions@do.treas.gov.
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