National REIA - Despite the ardent opposition from National REIA, many state associations across the country and other industry organizations, the Anti-Predatory Lending laws that we have been fighting are now closer than ever to becoming the law of the land after the recent passage of HR 4173 in the Senate on May 20, 2010.
To fully grasp the impact that this legislation could have on the Real Estate investing industry, as well as the economy as a whole during this fragile recovery process please see the Economic Impact of Seller Financing graphic.
*This flow chart, based on a study conducted by RealTrends and Harris Interactive, commissioned by Personal Real Estate Investor Magazine and other partners explains that for every one percent of homes sold by investors each year that $3.2 Billion dollars in Seller financing transactions occur. The one percent is a very low estimate and some industry professionals would estimate that more than 5% of homes sold by real estate investors are sold via seller financing. This would mean that $16 Billion dollars in real estate transactions are going to be eliminated.
History of our fight
On March 26, 2009 Rep. Brad Miller (D-NC) introduced HR 1728, the Mortgage Reform and Anti-Predatory Lending Act which passed the House on May 7, 2009. After speaking with Rep. Miller’s staff during our 3rd Annual Day on the Hill event, even he was unaware of where the language referring to individual property owners came from. According to his staff it had not been his intent to negatively impact property owners in such a way, but we’ve all heard the term, unintended consequences.
Despite its rapid movement in the House, HR 1728 died in the Senate Committee on Banking, Housing, and Urban Affairs, which we were very happy about. Our sense of comfort was short lived, however, when we learned that the exact wording from HR 1728 had been cut and pasted into HR 4173 the Wall Street Reform and Consumer Protection Act which was introduced in the House on December 2, 2009 by Barney Frank (D-MA) and passed on December 11, 2009. The passage of a bill that would seek to reform the entire financial system (the bill is over 1,400 pages in length) in less than two weeks is unheard of, but this is what we’re up against.
Unlike HR 1728, which had no companion bill in the Senate, HR 4173 was tied to S 3217, Restoring American Financial Stability Act, and we knew we’d have to fight to have the language we have been concerned with all along removed. Considering Senate Bill 3217, introduced by Senator Chris Dodd (D-CT) did not contain the same harmful language we were optimistic that we may have a chance to have the section pertaining to individual property owners removed if the bills required a conference committee. In a surprising and unfortunate move, however, the Senate dropped debate on S 3217 after repeated attempts by Senate leader Harry Reid (D-NV) to force cloture, and passed an amended version of HR 4173 which contained the same language requiring all sellers who finance more than one of their own deals in every 36 month period to become licensed as Mortgage Loan Originators.
What’s Next?
As the Senate version and the House version of HR 4173 are different they will require a conference committee hearing, but because the language in Title VII does not differ, the committee will not even address our concern. The final bill has not yet been passed by either chamber or signed by President Obama, but these are just formalities now that the real work has been completed.
Our next move is to continue our advocacy efforts regarding HR 3440, the Installment Sales bill that we have been supporting since its introduction in 2008. This legislation if passed may be a vehicle for an amendment to HR 4173 that would clarify an exemption for individual property owners and it is now our mission to identify a legislator who will be willing to introduce and support this type of amendment.
Despite the feeling that we have been dealt a direct blow, it is important to remember that our industry was not the specific target of the financial reform efforts. We must continue to clarify our intentions to professionally rebuild communities, and point to the positive impact that real estate investors can have on communities across this country.
As we again push the reset button in the wake of another hard fought battle lost, we must reassert our dedication to our businesses, and take aim at initiatives that will enable us to continue playing our role in the ongoing economic recovery process.
If you have questions about how you can help, please do not hesitate to contact your local Real Estate Investors Association which you can find at http://www.nationalreia.com/.
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