Report from the Midyear Meetings: The Truth Behind Banks Entering Real Estate
For five years, the nation's news media has covered the issue of whether federally chartered banks should be allowed to enter the business of real estate brokerage. Rarely have they reached to the heart of the matter as clearly as a handful of REALTORS® at the Regulatory Issues Forum at NAR's Midyear Legislative Meetings in Washington.
After NAR President Tom Stevens spoke about the success three megabanks have had in circumventing the prohibition against developing and owning real estate -- the very thing at the heart of the savings and loan crisis of the 1980s -- Todd Harper of the House Financial Services Committee raised the issue of "Chinese Walls" that the banks and their regulator propose to build between their mortgage and prospective brokerage operations in order to keep banks from gaining an immense competitive advantage.
But how are they going to keep the Chinese walls from becoming Japanese screens made of paper where voices can be heard back and forth, Harper wondered.
REALTOR® after REALTOR® rose from the audience and recounted examples from their personal experience of banks using information gathered in commercial financing deals to compete against the very party that brought them the deals.
After listening to them and witnessing the hypocrisy inherent in the way the Office of the Comptroller of the Currency has not only approved but defended banks owning Ritz Carlton hotels, condos, and even a windmill farm, one can only wonder how--and whether--they will enforce separation between mortgage and brokerage divisions.
"If you want the home, you have to take my loan," the saying goes. It's a scary thought, and technically it's illegal to tie mortgages to brokerage. The federal authorities would never it let happen. Or would they?
Ah, if only more reporters had been present. Maybe they would get it.
