by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Assemblyman Pedro Nava sponsored a bill (CA-AB33) to reorganize our state’s financial services’ regulators to be under one umbrella, the newly created Department of Financial Services. The idea is to save a bunch of money for the State.
Of course, CAR is going nuts. Amy Steele reports via ActiveRain.com:
AB 33 (Nava), which C.A.R. opposes, was approved yesterday in the Assembly Banking Committee. This bill would abolish the Department of Real Estate, the Department of Corporations, the Department of Financial Institutions, and the Office of Real Estate Appraisers. AB 33 proposes to transfer the powers, duties, purposes, jurisdiction and responsibilities those departments to the Department of Financial Services, which would be a newly created overarching department. C.A.R. opposes AB 33 because the function of a real estate licensee is not to provide financial services, but to list and show houses for sale, sell or manage investment properties and raw land, and manage and oversee residential rental properties. Real estate licensees, regulated by the DRE, should not be blended in with the banks, credit unions, consumer finance lenders, residential mortgage lenders and pawnbrokers because, unlike these other licensees, real estate licensees are individually licensed agents that have a fiduciary agency relationship with their clients.
Pawnshops and lenders and banks, Oh MY! Pawnshops and lenders and banks, Oh MY! Pawnshops and lenders and banks, Oh MY!
What CAR (and Amy) conveniently left out is the subsequent bill (also sponsored by Nava); AB 34- Licensing of Individual Loan Originators:
Requires all mortgage loan originators to be individually licensed. Also requires all loan originators to register with a national database and submit criminal history background checks.
CAR has been calling for a bill like AB34 for a number of years but only if it fell under the Department of Real Estate. California was one of the first states to license individual originators, under the California Department of Real Estate. Let me re-highlight a key phrase to the opposition of AB 33:
Real estate licensees, regulated by the DRE, should not be blended in with the banks, credit unions, consumer finance lenders, residential mortgage lenders and pawnbrokers because, unlike these other licensees, real estate licensees are individually licensed agents that have a fiduciary agency relationship with their clients.
Ahem. We’ve been doing that for at least 15 years, in California, under the current regulatory oversight. Now, I’m no fan of ANY occupational licensing but if it is in the cards, separating the two licenses, with ultimate accountability to a streamlined oversight board, would appear to benefit California consumers.
Pawnshops and lenders and banks, Oh MY! Pawnshops and lenders and banks, Oh MY! Pawnshops and lenders and banks, Oh MY!
Read the comments in The Active Rain post if you want to chuckle.The big fear is, of course, banks in real estate brokerage; that’s the Wicked Witch of the West.
Here’s what I’ll never understand; If banks suck at everything, especially the business of listing and selling real estate, what the heck is there to fear if they want to be in the real estate brokerage business?
AB 33 doesn’t necessarily open the door for lenders to enter real estate brokerage but AB 34 DOES shut the door for real estate brokers to stay in lending…and THAT is the man behind the curtain.
Carol Pease says:
Banks is real estate scare the heck out of me. Yeah they suck but they could cut us out of the picture completely with their own proprietary MLS. Everyone hates banks right now but they also hate car salesmen and they don’t rank us much higher than that.
April 14, 2009 — 10:08 pm
Brian Brady says:
“Yeah they suck but they could cut us out of the picture completely with their own proprietary MLS.”
BofA is already starting that:http://realestatecenter.bankofamerica.com/REPORTAL/PreferredBroker.aspx
April 14, 2009 — 10:21 pm
susan kelly says:
Fantastic idea, why, this solves all the Banks problems; since all these fine mortgage and financial institutions have been barred from direct marketing of their newly gotten assets.
They will of course be out searching verily for such divine independently contracted and liscensed Real Estate Agents to come hither and do their bidding.
Agents can still talk to both the Brokers & the Appraisers, and as such they hold the golden ticket; I do fear any Real Estate Boards left standing, after this, should expect more government control, and we will thus see fewer old brokerage signs….
And this is a Good Thing!!!!
April 15, 2009 — 5:10 am
Mark Green says:
Georgia initiated a similar type of “cost cutting” move a couple years back. Here, the same agency that regulates mortgage firms also oversees those payday loan sharks.
Interesting to note, the Ga Dept. of Banking and Finance was in no position to regulate effectively BEFORE taking on more responsibility. Until very recently, Georgia actually led the nation in mortgage fraud. The fact that we’re not #1 in this category anymore has a lot less to do with the GDBF cleaning things up than other states’ (like Florida) raising their mortgage fraud game!
Brian, there’s only one solution that scales IMHO… we need to self-regulate. The bar needs to be WAY higher to become a mortgage professional. Great, now I need to have my fingerprints taken and there’s a national registry. What baffoon can’t clear that bar?
I say, minimum requirement for a mortgage professional needs to be a series 6. Now THAT creates a nice barrier to entry, and assures that a mortgage professional at least has some semblance of an education in how money works.
Great article by the way.
April 15, 2009 — 6:26 am
Michael Fisher says:
ALL loan originators should be licensed under the Dept. of Insurance and not the Dept. of Real Estate.
April 15, 2009 — 9:25 am
Amy Steele says:
Hi Brian,
I was passing along the CAR legislative alert to inform everyone of what is going on that affects Realtors and licensees. I wasn’t aware of AB34 and so therefore did not “conveniently” leave anything out, and now that it is brought to my attention, perhaps I will blog about it also.
SInce you have, I agree with it 100%. I think that the mortgage brokers and loan originators should be licensed and even more highly regulated than the DRE is. With a huge portion of this mess we’re in directly caused by many unscrupulous lenders allowing people to believe they could afford a $400,000 home on a $40,000 salary, taking false applications, and working it so these people could pretend to own a home for 2 or less years, I think that they should be one of the highest regulated industries. These are the people who are dealing with hundreds of thousands of dollars of OPM. With the way the mortgage industry is complicated with all of the different programs and interest rates and essentially the next 30 years of someone’s life, they should have an even higher fiduciary duty, such as how securities brokers do and how they are licensed. I don’t even attempt to try to get into that field. I have been propositioned I don’t know how many times in the last 4 years to originate my own loans. No. That’s not what I got my license for and not what I do for my profession. I am not going to do something out of my expertise.
As far as banks in real estate, heck no, keep them out. Realtors have a difficult enough time to keep our reputations clean from the unscrupulous agents that are out there, and banks during this mess right now are certainly showing their true colors and the way they deal with the consumer. They do not help the consumer. They do not return calls if you can even get to a live person, they have no interest in saving people’s credit,they do not have an interest in trying to actually save their bank money. They do not listen to the Realtors who are here locally on the front lines when they are in Texas or RHode Island or Georgia or anywhere else and we’re giving them comp after comp that shows they’ll make more money on the sale in front of them. If banks did care instead of taking billions of our tax dollars and just foreclosing and selling the home again at a discount, they would probably keep this problem from getting worse. If they hadn’t been bailed out, maybe they would have tried to solve this problem a different way. They wouldn’t need our tax dollars because they would get more for the home. ONce it forecloses it’s like placing a “NEarly Free” sign on it. THe values plummet, taking everyone around them down with them.
As a Realtor, I find people a home to purchase. I will show people hundreds of homes if they don’t find one that they love or that will work for their portfolio(up here every house is different). I provide a true market value of what they should pay for that home and not a penny more, walk them step by step through contracts, taking legal liability for those contracts onto my shoulders, helping with inspections and getting local service providers to help iron out problems and repairs, saving money. I am a problem solver if issues arise during an escrow, using my contacts in the industry. I am a sounding board and a shoulder to cry on(which hasn’t happened all that often) and I am a neighbor once I help someone move up here. I am an active member of CAR and NAR, I fight for the consumer and their rights to own a home and to not have it be more expensive because assemblymen dream up various bills to add on to the amount to purchase a home.
I fight for my right to have my own business, to be a professional, to not have to work for a large conglomerate 9-5 where I am not allowed to take an interest or care about who I work with and to only have 2 10 minute breaks and a half hour lunch. No, instead I fight for my right to work 7-7 in my pajamas, out of my home, or in a small office, here in the beautiful mountains, taking lunch if I get a chance but being able to go and eat it outside at a lake if I choose. I fight to be able to work with whomever I choose, and whenever I choose. I am like so many other small business owners in America who are struggling to survive as government tries to tax us out of existence while billion dollar companies are allowed to bend the rules, have absolutely no ethics, and then on top of that, get billions of dollars and a slap on the wrist. This is America, and I believe that we are better than that.
Oh, and there is no way EVER that I would want to be lumped together with pawnbrokers…sheesh…
April 15, 2009 — 9:57 am
Brian Brady says:
Nice speech, Amy but you’re missing the point.
What CAR is doing is increasing regulatory costs to the California taxpayers by demanding a separate department. The only reason you suggest this is worthy is a potential threat from the “Bankey-Man”; that’s protecting an industry from a competitive threat, that doesn’t exist, and never will (Federal legislation outlawed banks from EVER entering real estate brokerage, last month).
Let CAR protect the REALTOR brand with its own money, not the taxpayers’ of California.
April 15, 2009 — 12:01 pm
Doug Quance says:
In Georgia, the game is once again changing for mortgage brokers.
A few years ago, the bankers lobbied and got a change that required mortgage brokers to disclose yield spread – but banks were exempt from such disclosure.
Now, at the end of the year, loan originators will have to be licensed and yield spread is prohibited – unless, of course, you are a bank. A bank can make yield spread – not disclose yield spread – and the LO does not need to be licensed.
To top it off – if you have collections, a foreclosure or a bankruptcy in the last three years – you are ineligible to be licensed as an LO.
I don’t see this as an improvement.
April 16, 2009 — 7:25 am