Help For Understanding Wall Street Reform

By Robert Freedman, senior editor, REALTOR® Magazine

The Wall Street reform law that President Obama signed several weeks ago is huge but only a portion of it directly impacts your business as real estate brokers and sales associates. Right before it passed into law I sat down with NAR analyst Tony Hutchinson for a video interview to explain what’s in its 2,300 pages.

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We were able to talk about many of the important provisions for real estate but not all of them and there was only so much detail Hutchinson could cover. In a seven-minute video, you can only go into limited depth. So, to help provide a more thorough accounting of what’s inside the new law, Hutchinson will be walking us through the new law in an hour-long webinar on Thursday, August 26, at 3 p.m. Eastern Time. Jerome Nagy, an NAR regulatiory analyst, will participate, too, to talk about some appraiser-selection issues the new law covers. Among other things, it will set Fannie Mae and Freddie Mac on a new course on matters relating to the Home Valuation Code of Conduct (HVCC), the controversial agreement they entered into with the state of New York to govern appraiser selection.

The appraiser issue is just a tiny piece. More broadly, the new law imposes restrictions on lenders that offer subprime and other non-standard loan products. Since few non-standard products are available today, that portion of the law seems beside the point. But as the market improves, non-standard products will become attractive again to lenders, so the new restrictions could help ensure that lenders don’t go overboard like they did during the boom. Among other things, lenders will have to validate that borrowers have the resources to make payments on any stated income loans they make.

Importantly, lenders that package non-standard loans into securities for sale to investors on Wall Street will have to hold a certain percentage of the securities amount in reserve. This is intended to get lenders out of the business of making, and then quickly getting off their books, poorly underwritten loans. The idea is that, if they’re required to keep a reserve on these loans, they’ll think twice about making loans to borrowers who aren’t good candidates for the loans over the long haul.

There’s a lot in the law, and the webinar is intended to help you understand the important things that are in it from a real estate sales standpoint. One of the things that is good about webinars is they provide you an opportunity to write a question and send it to the presenter while the webinar is going on. The presenter might not be able to answer your question. There just might not be enough time. But knowing what questions you have can be of enormous value because it lets NAR analysts know what’s concerning you or what you find confusing. And some questions might get answered later.

Here’s a link to the webinar, which is free:

Wall Street Reform: What It Means to You

You can also watch the video interview with Hutchinson:

Financial Services Reform: Will It Impact REALTORS®?

The jury will be out on the new law for quite some time. It will take years for it to be fully implemented. We’re hoping the webinar will give you enough information so you’ll have a better handle on what’s working and what’s not working as the provisions take effect. It’s important to know what aspects of the law aren’t working so lawmakers can get an accurate picture of how the law is working in the real world.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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