Home buyers will still be able to request a concession from sellers that includes funds to help cover buyer agent compensation, but this will be after they have had the opportunity to comparison shop and negotiate buyer agent rates.  The settlement will also encourage more sellers to negotiate the compensation of their listing agents.

Required buyer agent contracts will demand that buyer agents discuss their compensation with their buyer clients.  These discussions alone will tend to lower buyer agent compensation.  But as CFA’s February 15, 2024 report on these contracts explained, they have been written mainly by attorneys for state Realtor associations for the benefit of agents and brokers, and contain many anti-consumer features.

The residential real estate marketplace will take some time, perhaps several years, to fully process the implications of this settlement.  But over time more agents will feel free to offer different types of compensation, and more consumers will comparison shop and negotiate commissions in a more transparent marketplace.

The industry has raised concerns about first-time home buyers.  They will have the opportunity to request a concession from home sellers that helps cover buyer agent compensation.  But the real solution is for the industry to work to remove regulatory barriers that make it difficult for buyers to include this compensation in their mortgages.  We are fairly confident that the industry will pursue this issue in part to preserve buyer brokerage.  Without the option, more buyers will contact listing agents, losing fiduciary representation though also potentially lowering their costs.

The post CFA COMMENT ON THE SETTLEMENT OF MAJOR LAWSUITS BY THE NATIONAL ASSOCIATION OF REALTORS appeared first on Consumer Federation of America.

The Congressional Budget Office is a non-partisan agency within the U.S. Congress that provides objective budgetary and economic information. Their report puts a dollar amount on the estimated government subsidies that the FHLBank system receives as a Government-Sponsored Enterprise (GSE). The FHLBank system comprises 11 regional banks that extend cheap advances to their membership of banks, credit unions, and insurance companies with the intended purpose of supporting housing and community development. As a GSE, this system receives special benefits (including exemption from taxes) in exchange for providing public benefits such as helping meet unmet credit needs, facilitating financial products for underserved groups, and supporting community development.

“The new Congressional Budget Office report put a number – to the tune of $7.3 billion a year – to the public subsidies that FHLBanks receive,” Sharon Cornelissen explains, who is the chair of the Coalition of FHLBank Reform and the Director of Housing at the Consumer Federation of America. “The bulk of these billions in public funds subsidize corporate profits rather than Americans’ ability to afford a house. Consumers deserve much more from the FHLBanks, especially as we find ourselves in the middle of a national affordable housing crisis.”

Key highlights from the report include:

1. Multi-billion Dollar Subsidy. The CBO estimates that in fiscal year 2024, the FHLBank system will receive a total gross government subsidy of $7.3 billion.
2. These Subsidies Mostly Support Profits Rather Than Offer Public Benefits. The Congressionally-mandated 10% of FHLBank net income toward Affordable Housing Programs, which support affordable housing construction and downpayment assistance across the nation, is tiny compared to the profits realized by the Banks and their members. In 2023, FHLBanks paid $355 million to Affordable Housing Programs (AHP) but paid out $3.4 billion to members as dividends. Through these payouts, the FHLBanks are distributing a public subsidy as profit to banks and insurance companies.
3. CBO Questions “Trickle-Down Economics” Model of FHLBanks in Today’s Mortgage Markets. The CBO report also raises serious questions about the extent to which this public subsidy gets passed on to the public through other indirect benefits that FHLBanks provide, questioning whether consumers see lower mortgage rates as a result of FHLBank subsidies. Over 40% of members of FHLBanks have not originated a single mortgage over the last five years.

George Collins, an advisor for the Coalition for FHLBank Reform and former executive vice president and chief risk officer at the Federal Home Loan Bank of Boston, noted: “Our Coalition’s initial impetus was the skewed and unfair distribution of the FHLBank profits. This report affirms our concerns and further energizes our efforts.”

For more information or inquiries, contact:

Sharon Cornelissen at scornelissen@consumerfed.org

George Collins at ghcoll25@gmail.com

About the Coalition for Federal Home Loan Bank Reform:

The Coalition for Federal Home Loan Bank Reform is a non-partisan organization dedicated to bringing together a wide variety of stakeholders to discuss, educate and shape reforms aimed at enhancing the ability of the FHLB system to address the nation’s unmet housing and community development needs.

The post New Report Shows Federal Home Loan Banks Received $7.3 Billion in Subsidies, but Offered Little Public Benefits in Return appeared first on Consumer Federation of America.

introduced by Senators Jack Reed (D-RI) and Bill Hagerty (R-TN) and Representatives John Rose (R-TN) and Ritchie Torres (D-NY). If enacted, this pro-consumer legislation would curb the abusive use of mortgage credit “trigger leads” to all but a very limited set of circumstances. Trigger leads happen when consumers apply for a mortgage, and the lender puts in an inquiry to a credit reporting agency to pull their credit. Under the Fair Credit Reporting Act, credit reporting acts are currently allowed to resell consumer information to prospective creditors, if they are ready to make consumers a “firm order of credit.” As a result, though, many consumers have been inundated with hundreds of phone calls, texts, and mails, just moments after they applied for a mortgage: adding confusion and stress during an already very stressful time. This law would stop this practice, allowing credit reporting agencies to pass on consumer information only in a very limited set of circumstances, in cases where potential lenders already have a firm relationship with the consumer (for instance, as their current bank or credit union where they hold deposits).

The post CFA Joins Coalition of Financial Services Industry and Advocates to Express Strong Support to Curbing in Mortgage Credit “Trigger Leads” appeared first on Consumer Federation of America.

“Being uninsured poses a potential threat not only to individual homeowners but also to communities and our national housing stock,” CFA explains in EXPOSED: A Report on 1.6 Trillion Dollars of Uninsured American Homes. “Being uninsured can foster deeper economic precarity for millions of homeowners across the country, especially those with lower incomes, and it is an important contributor to racial inequality. Inequalities in who has homeowners insurance will likely widen the long-standing racial wealth gap, as uninsurance disproportionately impacts Hispanic, Black, and Native American homeowners. Over time, insurance access is likely to become a key decider of who can fully reap the benefits of homeownership, including maintaining their home and building wealth.”

Using data from the American Housing Survey and American Community Survey, CFA found:

• One in thirteen American homeowners are uninsured—approximately 7.4% – living in about 6.1 million homes.
• Homeowners earning under $50,000 per year are twice as likely to lack insurance compared to homeowners in general. Among lower-income homeowners, 15% are without coverage.
• Certain demographics of homeowners are disproportionately at risk. 22% of Native American homeowners, 14% of Hispanic homeowners, and 11% of Black homeowners have no insurance.
• 35% of owners of manufactured homes and 29% of homeowners who inherited their homes lack coverage.
• Rural homeowners, those living in the metropolitan areas of Houston and Miami, and in Mississippi, New Mexico, and Louisiana are most likely to not have homeowners insurance.
• In 2021, an estimated $1.6 trillion in property value of homes lacked coverage. This includes $339 billion of uninsured Hispanic-owned homes and $206 billion of uninsured Black-owned homes.

“Many consumers are struggling to afford rising premiums and must go without homeowners insurance,” said Sharon Cornelissen, PhD, CFA’s Director of Housing and co-author of the report. “That puts them at risk of losing everything. One storm or wildfire means they have to go into deep financial debt to repair their home, live with unsafe and inadequate housing, or even become homeless.”

The report concludes with the following recommendations:

• State insurance regulators should collect more data to track homeowners insurance gaps and inequalities in insurance markets. Despite decades of proposals, regulators have consistently failed to collect granular and timely data needed for research, and so information and analysis about homeowners insurance is in its infancy.
• Problems in the homeowners insurance market pose a systemic threat to housing markets, and solving them will require extensive investments in mitigation. States and the federal government need to substantially increase investments in community risk reduction, home fortification and loss mitigation, and develop strategies to reduce insurers’ overreliance on unregulated, global reinsurance.
• Regulators should collect more information about racial homeowner insurance gaps. Historical work about racial discrimination in insurance markets has demonstrated the broad incidence of insurance “redlining,” similar to the denial of mortgages in Black and Hispanic communities. Insurance companies have not been held accountable for this; more research should be done and regulators should use existing Fair Housing laws to investigate these gaps, and if needed, to correct them.

“Insurance is an essential part of homeownership, financial security, and community resilience. When millions of American families simply cannot find or cannot afford insurance coverage for their home, we are all exposed,” said Douglas Heller, CFA’s Director of Insurance. “Not only are uninsured families unprotected, but the economic fabric of entire communities is also at risk if significant portions of residents cannot rebuild after a disaster. Our study should be a wake-up call for lawmakers, insurance and housing regulators, and the nation’s emergency management agencies.”

The post Millions of Consumers Lack Vital Homeowners Insurance, Resulting in $1.6 Trillion in Unprotected Market Value appeared first on Consumer Federation of America.

Today many consumers struggle to afford steeply increased premiums, while others find it difficult to obtain insurance in the private market altogether. Concerns are growing that many American homeowners are forced by financial realities to forego homeowners insurance, sometimes called “going bare.” But going bare puts consumers at risk of accruing significant financial debt to repair their homes, having to live with unsafe and inadequate housing conditions, or moving from homeowner to homeless after disaster strikes.

Based on an analysis of 2021 American Housing Survey data from the US Census Bureau,
this report finds that:

• One in thirteen homeowners across the United States are uninsured (7.4 percent),
equivalent to 6.1 million homeowners.

• Homeowners making under $50,000 a year are twice as likely as the general
population to be uninsured (15 percent).

• Homeowners of color are disproportionally at risk, with an estimated 22 percent
of Native American, 14 percent of Hispanic, and 11 percent of Black homeowners
having no homeowners insurance.

• Over one third (35 percent) of owners of manufactured homes, as well as 29 percent
of those who have inherited their homes, have no homeowners insurance.

• Homeowners living in rural areas and those living in the metropolitan areas of Miami
and Houston are most likely to not have homeowners insurance.

• Even with conservative estimates, an estimated $1.6 trillion in property value of
uninsured homes was at risk in 2021: this includes $339 billion of uninsured Hispanic owned homes and $206 billion of uninsured Black-owned homes.

We conclude by offering research and policy recommendations:

1. More data are needed to track insurance gaps and pre-existing and emerging
inequalities in insurance markets.

2. The precarity of the homeowners insurance market poses a systemic risk to our
nation’s housing markets. Fixing this will require both investing in risk reduction and
reducing insurers’ overreliance on unregulated reinsurance.

3. Unavailable and unaffordable homeowners insurance continue to impact the racial
wealth and homeownership gaps. We need more research that examines racial
discrimination in insurance markets

The post EXPOSED: A Report on 1.6 Trillion Dollars of Uninsured American Homes appeared first on Consumer Federation of America.

The nonprofit, nonpartisan consumer organizations issued the following statements:

Birny Birnbaum, Executive Director of the Center for Economic Justice, said:

 “Reforming the title insurance industry is an essential component of addressing home buying and homeownership affordability.  Iowa is the only state that has created a low-cost alternative to title insurance.  While a few states have made some efforts to address the anti-competitive practices in title insurance, state insurance regulators have failed to rein in excessive title insurance premiums.  We’re hopeful that these new federal initiatives will jump start action at both the federal and state level.”

Douglas Heller, Director of Insurance for Consumer Federation of America said:

 “The title insurance market has been broken for decades, and homeowners and new homebuyers have paid the price. At the moment when consumers are finalizing a consequential financial decisions – buying or refinancing a home – they are forced to purchase title insurance to protect the lender in a market built on kickbacks to the agents who direct consumers toward an overpriced title insurance policy. The insurance industry and the agents who steer consumers to these insurance companies have lobbied relentlessly to block reforms that would create substantial savings for consumers, so we are very encouraged that the President is shining a light on this broken system.”

Sharon Cornelissen, CFA’s Director of Housing said:

 “It is encouraging to see the White House look at potential reforms of the title insurance industry. Unnecessarily expensive title insurance has added to the upfront costs of buying a home, creating barriers for first-time homebuyers. Excessive costs like this have no place in a housing market that is facing its worst affordability crisis in decades.”

As a background on problems in the title insurance market, the consumer groups highlight CFA’s 2013 testimony to the New York Department of Financial Services and Birny Birnbaum’s 2005 Analysis of Competition in the California Title Insurance and Escrow Industry.

The post Consumer Groups Applaud President Biden’s Announcement of Steps to Address Homebuying Closing Costs and Excessive Title Insurance Charges appeared first on Consumer Federation of America.

Citing research from the Consumer Federation of America (CFA) and other sources, the DOJ opinion rejected a proposed settlement, calling the proposal neither fair, reasonable, or adequate.  “It makes insignificant and largely cosmetic changes to the [MLS] Rule, while perpetuating the existing structure that drives supra-competitive commissions.  There is no reason to believe that the settlement will reduce broker commissions for the class.”

“This DOJ opinion virtually guarantees that buyers will eventually be able to negotiate buyer agent commissions that are currently fixed through industry collusion,” said Stephen Brobeck, a CFA senior fellow.  “It is also likely that there will be greater variation of agent compensation depending on factors such as agent experience and time spent on the sale,” he added.

The DOJ opinion represents a major watershed in efforts, over the past 80 years, to introduce more price competition in agent and broker compensation.  These efforts include:

• DOJ litigation begun in the 1940s against industry adoption of “standard rates of commissions” with a notable U.S. Supreme Court decision in 1950 favoring DOJ.
• A massive 1983 report by the Federal Trade Commission that explained and documented how the industry uses informal collusion, and coupled rates, to set these rates.
• A 2006 congressional hearing at which DOJ, FTC, Redfin and CFA criticized industry price-fixing.
• A 2018 DOJ-FTC public workshop at which several participants, including industry members, criticized industry price-fixing.
• A 2019 lawsuit (Moehrl v. NAR et al.) filed in Chicago by some of the largest, most successful class action firms in the country, quickly followed by a similar lawsuit (Sitzer v. NAR et al.) filed in Kansas City.
• An October 2023 jury decision in the Sitzer lawsuit that found the industry guilty of price-fixing and awarded damages that could exceed $5 billion.
• More than 20 recent class action lawsuits filed representing sellers or buyers that are increasing current and potential legal costs, jeopardizing not only NAR, MLSs, and big companies but also all residential brokers.

“The industry will be foolish if they do not seek to consolidate the lawsuits, agree to pay affordable damages, and decouple seller and buyer agent compensation,” noted CFA’s Brobeck.

DOJ does not envision a compensation system in which buyers must come up with additional cash to pay their agents.  The agency agrees that sellers could provide dollar concessions to be used for this compensation and other buyer expenses.  However, DOJ stressed that buyers must have the ability to negotiate these commissions then decide what, if any, concessions to seek from sellers.  Similarly, sellers would have the ability to decide whether to offer any concessions and, if so, their amount.

Some of the details of this decoupled system need to be worked out.  “It is critically important that buyers negotiate buyer agent commissions before their agents search for properties,” said CFA’s Brobeck.  “Otherwise, buyer agents could steer buyers to properties with the highest dollar concessions and potential agent compensation,” he added.

It is also important that buyer agents be prohibited from being compensated by both buyer and seller, a practice the NAR Code of Ethics disapproves of.  Otherwise, buyer and listing agents could easily collude to maintain existing commission levels.

It appears that the DOJ opinion was influenced by separate proposals made by CFA and by a group of attorneys representing major multiple listing services, both of which are cited in footnotes.  CFA supports the MLS proposal but only as a package deal.  “By eliminating one or two key requirements, the proposal would allow the existing collusive system to continue,” said CFA’s Brobeck.

CFA emphasizes that it is not easy to completely eliminate price-fixing.   “Significant asymmetries between consumers and agents provide opportunities for continued price-fixing within a decoupled system,” said CFA’s Brobeck.  “Agents could tell buyer and seller clients that 2.5-3.0 percent rates [5-6% total] were normal, and agents could refuse to negotiate these rates, as many listing agents currently do [around three-quarters, CFA research has found].”

“To ensure significant price competition, both buyers and sellers would need to discuss and try to negotiate compensation of their agents,” Brobeck said.  “Even then, rates would be unlikely to fall immediately, yet over time could decline to an average of 3-4 percent level, saving consumers an estimated $20-$30 billion annually, with much greater variation in types of compensation and rates charged by different agents.  No longer would inexperienced agents be able to charge the same rates as highly competent agents with years of experience,” he added.

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The FHLBank system was founded in the 1930s to help address the acute housing crisis during the Great Depression and its members today include banks, credit unions, insurance companies and community development financial institutions. Unfortunately, it has since evolved to focus on best serving the financial interests of its members rather than on addressing the dire housing needs of our country.

One reason that the FHLBank system has long evaded critical scrutiny (it was last reformed in 1989), is that it has historically kept a low-profile. The operations of this system are often shrouded in technical language and limited public data is available on its financial workings. This blog answers some commonly asked questions, to help people better understand what is at stake and why the Federal Home Loan Bank system demands reform.

How do FHLBanks make money?

This seems like a simple question, but FHLBanks have not been forthcoming about their financial model. Researchers at the Coalition of FHLBank Reform collected data for all 11 regional banks and made available financial information on the system. We found that FHLBanks operate on a very simple business model: they make their money by making loans (advances) to their members and through returns on their short- and long-term investments.

As a government-sponsored enterprise (GSE), the FHLBanks can borrow cheaply in the global capital market: investors see very low risk, knowing that the US government will stand for FHLBanks debt in case of default. This is also called an “implied guarantee” and translates to an estimated 40 basis points (0.4%) discount on FHLBank-issued debt (close to what the Treasury itself pays for its debt). FHLBanks pass this discount on to their members, by offering them discounted advances. Members, who include commercial banks and insurance companies, must purchase FHLBank stock and post collateral when they borrow.  They can use these below-market-rate loans for any business purposes they see fit. This often results in higher profits for the member but does little to support affordable housing.

FHLBanks also make money by investing their member stock capital plus earnings they have retained over the years into short-term and long-term investments. Indeed, 2023 will likely be the most profitable year for FHLBanks on record, with a projected $7 billion annual earnings, shaped in part by the high-interest rate environment.

What does it mean that FHLBanks are a government-sponsored enterprise (GSE)?

GSEs are congressionally chartered and privately owned institutions that are founded to fulfill a public mission. Fannie Mae and Freddie Mac are also GSEs although much larger and under much more scrutiny.  These latter two GSEs are also different as they have been under conservatorship since 2008 and remain under direct control of the US government. GSEs are backed by the financial strength of the US government, even though their (potential) costs do not directly show up on the government’s balance sheet. In addition to their implicit guarantee which enables them to raise funds very cheaply, they are tax exempt.

FHLBanks are very focused on their fiduciary responsibilities to their member stockholders (who get cheap funding and high dividends) but they largely ignore their duty to serve the broader economic needs of the country. Mission-driven business is at the center of FHLBank reform. There is no reason why FHLBanks should exist as vehicles to funnel government subsidies to buttress the profits of banks and insurance companies.

What are FHLBanks currently doing to help alleviate our nation’s housing crisis?

Many of FHLBank members, including commercial banks, are not even in the mortgage business anymore, despite benefiting from Home Loan Bank advances. A recent Bloomberg investigation found that 42 percent of FHLBanks’ 6,400 members had not originated one single mortgage in the last five years. Currently, while larger bank members face minimal requirements to support housing, many members, including some of the largest insurance companies in America, face no test at all. There is no ongoing membership test to assess whether financial institutions indeed use their membership to advance affordable housing and community development goals.

Members do post housing-related collateral to secure cheap advances from the FHLBanks, most notably residential and commercial mortgages and mortgage-backed securities (MBS) – which are packages of mortgage bundled and sold on the secondary market. One could make the argument that members’ need for housing-related collateral could drive up members’ demand for mortgages and MBS, and so may drive down mortgage costs for consumers downstream. But this pathway is indirect at best. Even without FHLBanks, and with the strong foundation of Fannie Mae and Freddie Mac alongside Dodd-Frank regulations, the market for mortgages loans is many multiples of FHLB collateral and there is widespread, global interest in buying American mortgage-backed securities as an investment instrument. This minimal FHLBank “involvement” in housing does not move the needle on mortgage affordability or housing supply.

Finally, since they were last reformed in 1989, FHLBanks are required to allocate 10 percent of their net income every year to affordable housing programs (AHP). The majority of AHP grants are awarded as gap financing for the new construction of affordable, multifamily rental properties, usually Low-Income Housing Tax Credit (LIHTC) projects. AHP also supports downpayment assistance programs. Some of the FHLBanks also engage in “voluntary programs,” which they call affordable housing and community development contributions that exceed the 10 percent minimum that Congress set. We found, however, that these voluntary programs are very small, while being heavily advertised: until just this year most FHLBanks have spent less than 1 percent of their net income “voluntarily” every year – with 2023 generosity undoubtedly the result of increased FHFA and Congressional scrutiny.

How can FHLBanks be reformed to better support affordable housing?

There is unique momentum today to bring this system back to its founding mission of supporting affordable housing and community development. Some of the most promising proposals include:

• Raise the percentage of net income that each FHLBank needs to contribute to Affordable Housing Programs (AHP) every year from 10 percent to at least 20 percent. Historically, FHLBanks have shown that they can sustain themselves profitably with a 30 percent annual deduction from their profits (they did so from 1989 until 2011). An increase to 30 percent in AHP contributions would have led to $1.4 billion dollars in additional funding for affordable housing in 2024, all without requiring Congressional appropriations.
• Renew the FHLBanks mission focus on housing beyond mandatory AHP contributions. This includes a critical examination of membership (and whether it is appropriate for members who no longer originate mortgages to benefit from Home Loan Bank advances). This also means leveraging all the unique strengths and capacities of the FHLBank system towards housing, such as by strengthening Community Development Financial Institution (CDFI) membership and their access to cheap advances for mission-consistent activities. The FHLBanks should apply their role as wholesale banks and their capital market strength to support less expensive funding for affordable housing. Finally, FHLBanks can better leverage their capital investments for mission activities as well, such as by establishing a revolving loan fund, which can help finance affordable housing activities over the long-term.
• Pilot new housing programs through the FHLBank system. As a regional system, the 11 FHLBanks are also uniquely positioned to respond to local financing needs and to develop new pilot programs: especially to provide financing needs that remain underserved, such as through shared equity financing, mortgages for manufactured homes, and small-dollar mortgages. Indeed, FHFA recommended that FHLBanks establish “centers of excellence,” which can help promote best practices across the system. We also recommend that FHLBanks foster even stronger partnerships with the communities they serve, to make sure they serve all communities in their jurisdiction.

The post An Unfulfilled Promise: Affordable Housing and the Federal Home Loan Bank System appeared first on Consumer Federation of America.

Sharon Cornelissen, CFA’s Director of Housing, reacts:

“It is disappointing to see the banking trade associations try to undermine the modernized CRA rule, which was the result of years of interagency collaboration, thousands of public comments and industry input, and a careful consideration of how banking and the challenges of underserved markets look different today than when CRA was passed in 1977.”

The Community Reinvestment Act remains an essential tool to make sure that people in lower-income and historically underserved communities across the United States have access to lending, ranging from a loan to start a small business to a mortgage to buy a home.

Adam Rust, CFA’s Director of Financial Services, reacts:

The CRA was done in an incredibly deliberate manner. It took a decade to get the regulators to consider changes. Critics have no reason to fault the process, as the regulators intentionally aimed to honor all of the expectations of the APA.

Moreover, the new rule is hardly one-sided. The small banks received significant concessions. Even though CRA was meant to address redlining, race is still not considered in exams.

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Earlier this month, the Supreme Court heard oral argument in connection with the cases Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, which challenged the Chevron deference doctrine. Based on the nature of their inquiries and remarks, the Supreme Court’s six conservative justices indicated that they may very well upend Chevron deference. Such a ruling would hamper federal agencies from continuing to do their important work, give corporations the ability to effectively gridlock policymaking, and ultimately, eliminate important safeguards for American consumers. 

This blog provides some examples of how overturning Chevron deference could adversely impact each key issue area that the Consumer Federation of America focuses on. We aim to shed light on the potential challenges and setbacks in advocacy and policy enforcement and emphasize the critical role that Chevron deference plays in supporting the work of federal agencies.  These potential impacts underscore the importance of maintaining Chevron deference for the continued protection and promotion of consumer interests and well-being. 

Food Safety  

Food safety advocates understand all too well that consumers face a gauntlet of preventable harms in the food system not so much because federal regulators enact bad policies, but because they do not take any action at all. Cronobacter in infant formula, dangerous Salmonella in poultry, literally thousands of chemicals in food with unexamined safety records, alcoholic beverage labels that fail to disclose ingredients, allergens and other basic facts—all of these problems and more require new rulemaking, which regulated industry may challenge in court. Despite Chevron deference, the industry and its throngs of well-paid lawyers often prevail, and years of work can go down the drain. Decades of regulatory dysfunction may follow, as has happened in the wake of a federal court of appeals ruling that invalidated the Department of Agriculture’s rules on Salmonella in meat and poultry in 2001. Indeed, USDA’s failure to protect consumers from foodborne illness has become so dire that several large companies have joined consumer groups in support of reform. Many factors undoubtedly contribute to regulatory inertia—a conflicted mission at USDA, a culture of timidity at the U.S. Food and Drug Administration, the revolving door between industry and regulatory agencies in general, the list goes on. However, should the U.S. Supreme Court rule that regulatory agencies are even more susceptible to second-guessing from the courts, the tendency to use litigation risk as an excuse for inaction will grow, and consumers will pay the price.   – Thomas Gremillion

Investor Protection 

A potential U.S. Supreme Court decision in Loper Bright to unravel the Chevron doctrine poses a significant threat to the Securities and Exchange Commission’s (SEC’s) ability to protect investors from bad actors, promote market integrity and fairness, and ensure investors have the information they need to make informed decisions.  At a time when markets, technology, and financial risks are evolving rapidly—perhaps unprecedentedly so given the rise of artificial intelligence, the risks of climate change, and the growth of cryptocurrencies—it is imperative that the SEC keeps pace. Upending Chevron would fundamentally jeopardize the SEC’s ability to do so. 

Even now, the SEC’s investor protection efforts continually face the threat of litigation from industry opponents. If the Court tips the scales even further by limiting the SEC’s authority to interpret and apply the securities laws, then the prospects for strong, lasting investor protections would only get worse.  Policing our markets and protecting investors from misconduct demands a level of expertise and precision that only the SEC possesses, and that neither courts nor Congress can match. Limiting the SEC’s ability to exercise its authority would only serve to harm investors, diminish market integrity, and destabilize our financial system. – Micah Hauptman / Dylan Bruce

Housing 

The overruling on Chevron deference would have far-reaching consequences for the ways Americans are housed. Over the last forty years, this jurisprudence has supported the ability of federal agencies to effectively regulate American corporations and protect consumers. Within housing this includes the ability of agencies to implement federally- mandated rental protections and housing counseling, offer fair housing oversight, enforce federal emission and building standards, and protect homeowners against exploitative mortgage products. For example, in 2023, after years of collaboration between three federal banking agencies (the FDIC, Federal Reserve Board, and OCC) and several rounds of vigorous public input, new, modernized rules interpreting the 1977 Community Reinvestment Act were released: a deeply collaborative product that responds to the unique realities of banking and community development today.

The overruling of Chevron risks making these types of rulemakings all but impossible and allows the worst acting corporations and their trade groups to gridlock policymaking by tying decisions up in courts. By contrast, federal agencies are led by politically appointed leaders, are accountable to Congress, and staffed by policy experts who often bring decades of experience. It is essential that we allow federal agencies to continue to do their important work and make sure that American consumers live in safe and affordable homes, are protected against housing discrimination, and can rely on fair and transparent mortgage products. – Sharon Cornelissen

Product Safety  

The U.S. Supreme Court’s decisions in Loper Bright Enterprises v. Raimondo and Relentless v. Department of Commerce could undermine consumer safety and health.  The potential safety ramifications are enormous and could implicate vehicle safety standards, phthalates concentrations in children’s toys, drugs, medical devices, and so much more. The federal agencies tasked with ensuring public health and safety rely on their agencies’ vast technical and scientific expertise. Subject matter experts can include engineers, epidemiologists, chemists, and other complex fields. Neither Congress nor judges have access to the expansive technical expertise of federal agencies. Unlike the judicial system, federal agencies provide the public with the chance to comment on proposed regulation. As such, health and safety agencies can utilize critical information from product safety professionals and safety advocates. The foundational principle of Chevron enables agencies to keep consumers safe and healthy. – Courtney Griffin 

Consumer Protection 

The Chevron doctrine correctly defers to subject matter experts at agencies like the Federal Trade Commission who live and breathe consumer protection on a daily basis and who are accountable to the public through legislative oversight and extensive transparency requirements. If the Supreme Court strikes down Chevron, inexperienced and uninformed political appointee judges can freely question regulatory interpretations and create harmful case law that is difficult to overturn. Such a decision will inevitably erode longstanding, strong safeguards that keep Americans safe, healthy, and shielded from predatory and fraudulent practices. – Erin Witte  

Financial Services  

Without Chevron deference, the current practice of permitting regulators to interpret regulatory ambiguities in consumer financial protection law will make consumers vulnerable to discrimination and undermine innovation in the marketplace. 

In almost every facet of our economy, technology is disrupting business practices and permitting new risks to consumers. Since the 19th century, commercial banking has been understood to consist of lending money, taking deposits, and paying checks. A judge with experience in banking law should readily grasp the meanings of those activities and their implications for our economy. On the other hand, emerging technologies require policy professionals with a deep understanding of highly technical topics. Federal regulatory agencies employ these experts. Their wisdom benefits policymaking. 

Addressing discrimination in artificial intelligence is among the developments likely to require deep understanding as a precondition for successful regulatory implementation of existing banking laws. Even an attorney with a career of experience in fair lending law would be challenged to evaluate the fairness of an AI-driven algorithm, for example. The Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), the Fair Credit Reporting Act (FCRA) and the Federal Trade Commission Act (FTCA) are among the laws whose fairness standards can be applied to algorithmic decision-making in lending and lending-adjacent activities. 

 Inaction by the institution with authority for AI governance, be it a regulator or the Courts, will lead to problems for all affected stakeholders. Consumers will be vulnerable to discrimination and without regulatory clarity, lenders will be anxious to try AI out of fear of legal jeopardy. Markets need clarity on how fairness is defined and measured and even on how to identify protected class status when lenders are prohibited from soliciting demographic information directly. The Supreme Court must uphold the principle of Chevron deference. – Adam Rust   

The post What’s at Stake for Consumers if the Supreme Court Overturns “Chevron Deference” appeared first on Consumer Federation of America.

The report for the third quarter of 2023 provides a simplified presentation of key data points for easy reference, and an overview of the FHLB financial drivers, including:

• A simple business model with one primary line of business (advances).
• Record profits in 2023 driven by higher interest rates and the earnings from the investment of capital.
• Operating costs that may seem efficient, but should be better explained for a business with fewer than 7,000 customers.

The Need for Enhanced Periodic Reporting for Policymakers and the General Public

The FHFA already provides regular reporting on some aspects of the FHLBank System, such as an annual report to Congress. Their recent report, FHLBank System at 100: Focusing on the Future, calls for enhanced reporting. The CFR applauds this recommendation and calls on FHFA to go even farther with the reforms. FHFA could improve FHLB transparency by providing quarterly reporting on each of the Banks and the System as well as making this data easily available to any user.

For comparative purposes, insured depository institutions must file quarterly Call Reports with the FDIC.  FDIC provides detailed reporting on these numbers each quarter through the publication of the Quarterly Banking Profile. The reports are available to the general public for download and further analysis. Additionally, each FHLBank files periodic disclosures to the SEC. Anyone interested in a more comprehensive disclosure must go through the filings individually to compile basic performance information or a comparative analysis within the system. Because each FHLBank takes a somewhat different approach to its disclosures, it is challenging to assess the entire system.

Going forward, the CFR will focus on building an analytical foundation based on key information about the System, all taken from publicly available documents. The CFR will update the data and analysis on a quarterly basis. This work will be posted on the CFR website, helping the general public, media and advocates to hold each FHLB accountable.

Please contact Katie McCann at kmccann@consumerfed.org with all inquiries.

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“Through lax hiring and training, many companies sponsor agents that have too little knowledge and experience to adequately serve consumers,” said Stephen Brobeck, a CFA senior fellow and the report’s author.  “Home buyers and sellers benefit from considering recent sales experience and customer evaluations before hiring an agent,” he added.

The CFA report examined the annual number of home sales of 2,000 randomly selected agents working for major companies in four diverse urban areas – Central Pennsylvania, Orlando (FL), Tucson (AZ), and Minneapolis (MN).  This research revealed that nearly half of the agents (49%) sold only one or no homes the previous year and that nearly three-quarters of the agents (70%) sold five or fewer homes. [2]

“The residential real estate industry is truly a part-time industry with most agents working sporadically and holding another job, often full-time,” said CFA’s Brobeck.  “There is no other financial services industry or profession where part-time, marginal workers are so ubiquitous,” he added.

Despite the agent glut, most major companies continuously advertise sales positions.  On one major employment website, in five of six urban areas at least one sales position was advertised by all but one of six major companies.  This continuous hiring reflects four main factors:

• A high agent turnover rate opens up job positions that companies feel must be filled.
• Newly recruited agents bring with them new clients, often friends and family members.
• These agents pay fees – ranging from $50 to $400 monthly — that help companies cover overhead expenses.
• Since most agents are independent contractors not employees, firms have limited liability for the conduct of these agents.

This limited liability diminishes the incentive of companies to adequately train, mentor, and oversee the new agents.  Nearly all national and large regional companies offer training in the practicalities of selling property, but these courses are usually online and not required.  Mentoring programs are infrequent, and those brokers with responsibility for new agents often are given too many agents and too few incentives to adequately oversee.  As a result, notes the report: “The large majority of new licensees apparently are not required to take courses, participate in company training programs, seek a mentor, or receive active broker supervision.”

Moreover, most states do not require more active supervision of new than experienced agents.  Only seven states require stricter supervision, and only three (Colorado, Illinois, Montana) define what this supervision entails.

“Consumers do not benefit from the failure of companies to adequately train and oversee new agents,” said CFA’s Brobeck.  “Incompetent agents impose costs on consumers ranging from missed sales opportunities to disadvantageous sale prices to problematic homes,” he added.

State governments, the industry, and consumers can address these agent inadequacies.

• State governments can require agents to take post-license courses on the practicalities of selling property (7 states do).  They also can require companies to more closely supervise new agents (7 states do).
• The residential real estate industry needs to set higher standards for training and overseeing new agents.  These standards would increase agent competence, help ensure a smoother sales process, and enhance the reputation of the industry as well as benefiting consumers.
• CFA urges home sellers and buyers to research the recent sales experience and customer reviews of agents before hiring one.  The most useful sources of this information are Zillow and Realtor.com.  “Researching agents will not only benefit individual buyers and sellers but also help ensure a more competitive marketplace where competent agents are more likely to succeed,” CFA’s Brobeck notes.

^[1] Stephen Brobeck, A Surfeit of Real Estate Agents: Industry and Consumer Impacts (July 2023) and A Surfeit of Real Estate Agents 2: Is Entry Too Easy? (October 2023).

^[2] The National Association of Realtors projects only 4.1 million sales of existing homes this year.  Between 2007 and 2022, except in 2021 (6.1 sales) these annual sales ranged between 4.1 million and 5.6 million, so that while 2023 sales are low, they are still within the range of the past 15 years.

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We support the broader purpose of the Basel III reforms, which is aimed at promoting greater financial security in the banking system, tackling undercapitalization, and reducing outsized risk-taking by larger banks. The Basel Committee articulated its international standards for bank safety and soundness in the wake of the 2008 financial crisis. Member countries committed to implementing these requirements in 2017. The recent 2023 US banking crisis reinforced the need for enhanced capital requirements. The comment letter also highlighted this as the need to reduce “the privatization of gains and the socialization of losses.”

At the same time, our comment recognizes the need to change small parts of the proposal, which would impact mortgage affordability and access for lower-income borrowers and borrowers of color. Indeed, as also argued by the National Fair Housing Alliance, this part of the proposal risks imperiling fair lending access and is based on risk-standards inconsistent with the actual risk associated with the mortgage products often used by these consumers. For example, a large part of the risk of high-LTV products, those with a down payment of under twenty percent, is taken on by mandatory private mortgage insurance (PMI). While we recognize the importance of changing this element of the Basel III proposal, and of protecting lower-income borrowers and borrowers of color, this proposed change does not delegitimize or change the broader need for improved capital standards.

The post CFA Supports Basel III Proposal to Strengthen Capital Standards for Large Banks appeared first on Consumer Federation of America.

Despite the oversupply, major firms continue to recruit new agents, often failing to provide sufficient training and mentorship. This results in a majority of agents selling few or no properties yearly and a prevalence of inexperienced agents in the market. The report suggests that this system persists due to factors like high agent turnover, new agents bringing in clients from their personal networks, and firms benefiting from fees paid by these agents. The lack of effective training and mentorship underscores the need for improved industry standards and consumer awareness when selecting agents.

The post A Surfeit of Real Estate Agents 3: Abundant Jobs, Inadequate Mentorship, and Few Sales appeared first on Consumer Federation of America.

Join us to learn about Federal Home Loan Bank reform, and how you and your organization can help!

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Racially Disparaging Remarks in the Townstone Financial Show

The case concerns the comments made on the Townstone Financial Show, a weekly AM radio call-in show in Chicago sponsored by Townstone Financial, where the hosts took calls to discuss mortgage-related topics. The show had two co-hosts: Townstone’s CEO and a senior loan officer. The show was an important aspect of Townstone’s business, as ninety percent of the company’s loan applicants heard about Townstone from the radio.

In 2020, the CFPB filed the first-ever redlining complaint against a non-bank mortgage lender, alleging the remarks by Townstone executives were discriminatory under ECOA and Regulation B. Subsequently, the US District Court for the Northern District of Illinois granted Townstone’s motion to dismiss the complaint, asserting that ECOA only applies to applicants. That the CFPB brought the case under the leadership of Director Kathy Kraninger, a Republican official who served during the Trump Administration, underscores the extreme nature of the Northern District’s decision.

On Friday, the Seventh Circuit Court of Appeals will hear arguments from the CFPB to reverse the Northern District’s decision.

The attorneys from the Pacific Legal Foundation representing Townstone want to narrow the set of actions that can constitute grounds for a discrimination claim under the Equal Credit Opportunity Act (ECOA) and Regulation B. They excuse racially-motivated disparaging remarks about Black neighborhoods from Townstone executives as “lunk-headed attempts at humor” and ignore their practical effects.

The CFPB alleges that statements made routinely in the show discouraged Black consumers from applying for credit from Townstone Financial.

In the show, the CEO referred to the neighborhood surrounding a grocery store as “a scary place” and the store itself as the “Jungle Jewel,” where patrons “were people from all over the world.” On a different episode, the CEO said Friday to Monday on the Southside of Chicago is “hoodlum weekend” where the police are “the only ones keeping that [area from] turning into a real war zone and keeping it where it’s kind of at.” When a male caller from Markham, Illinois, a city where more than 80 percent of the population is Black, asked how to improve their credit, the host told the caller, “[you’ve] got to keep those women in line in Markham,” and that generally, “it’s crazy in Markham on weekends….you drive very fast through Markham…don’t look at anybody or lock on anybody’s eyes in Markham.” On one occasion, a co-host advised sellers to “take down the Confederate flag.”

Not surprisingly, Townstone’s lending practices were not equitable. Even though Black households comprise 30 percent of Chicago’s population and almost ten percent of its mortgage applicants, Townstone received only 1.4 percent of applications from Black households. Approximately two percent of applicants came from majority-Black census tracts, even though 18.7 percent of Chicago census tracts have that profile. Townstone employed 17 mortgage loan officers during the years when the show ran, but not one was Black. All it took to ensure Black households didn’t apply was to send the message they weren’t welcome – turning them down wasn’t necessary.

 The Decision Is Very Significant for the Future Enforcement of Fair Lending Laws

If affirmed, the Townstone decision would permit lenders to discourage prospective applicants in protected classes from applying for credit. In effect, lenders could put up signs saying Black households were not welcome, and unless those prospective applicants chose to apply anyway, no discrimination could have occurred.

Regulation B, which implements ECOA, prevents creditors from making any “statement … to applicants or prospective applicants that would discourage on a prohibited basis a reasonable person from making or pursuing an application.”^[1] Any view that Regulation B fails to interpret Congress’ intent, which states that it is “unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction,”^[2] lacks merit. As well, Congress gave the Federal Reserve (the authorized agency for ECOA until 2009) permission to use its “judgment” to make regulations to “prevent circumvention or evasion” of the law.

The fact that events in the case have occurred in Chicago adds a sad irony, as it is a city with a long history of racial discrimination in lending and exclusion in housing. White residents excluded Black residents from their neighborhoods based on racially-biased real estate covenants, white mob violence, as well as government-mandated redlining policies at the Federal Housing Administration (FHA). Moreover, using “blockbusting” techniques to stimulate white flight, speculators often bought properties at distressed prices and flipped them to Black households at significant profits.

In the late 1960s, Black residents in Chicago established the Contract Buyers League (CBL) in response to these issues. Because of the attention brought by the CBL and subsequent organizing in Chicago, Congress passed a series of laws to outlaw discrimination. The Fair Housing Act (1968), ECOA (1974), and Community Reinvestment Act (1977) each address core elements of the problems that perpetuated systemic racism. When communities in the same West Side neighborhoods organized to fight redlining, it led to the passage of the CRA.^[3]

Townstone’s perverse theory represents the next stage in a coordinated effort by a network of conservatives to use free speech protections to strip away anti-discrimination laws. In 303 Creative LLC v. Elenis, lawyers successfully argued that a baker could deny services to a same-sex couple on the grounds that doing so was a form of free speech. Townstone is another expansion of a strategy to permit discrimination.

CFA strongly rejects the decision by the Northern District, as it will encourage more discrimination, and supports the CFPB’s efforts to have the decision reversed. The authors of the US Constitution held that “all men are created equal.” To honor their vision and preserve subsequent victories against discrimination, Townstone must be reversed.

^[1] 12 C.F.R. § 1002.4(b).

^[2] 15 U.S.C. § 1691(a).

^[3] Of note, because banks will still have community reinvestment obligations, regulations will prevent them from redlining. As well, Illinois has recently passed a state CRA law that applies to non-bank mortgage lenders like Townstone. But if Townstone isn’t reversed, some communities may be susceptible to losing access to capital from non-bank lenders.

The post The Townstone Case Imperils Fair Lending Law appeared first on Consumer Federation of America.

What are FHLBanks?

Today, the FHLBank system comprises a system of 11 regional banks that together manage over $1.2 trillion in debt obligations of just over 6,500 members, who include commercial banks, credit unions, and insurance companies. The FHLBanks function as a kind of “bank for banks,” as they give members access to cheap liquidity sources (in the form of discounted loans called “advances”). Their government-sponsored status allows FHLBanks to borrow at near-Treasury rates in the capital markets and pass on that discount to their members. While FHLBank leadership likes to compare their banking system to private sector financial institutions, the FHLBank system is very different in that it is a government-sponsored enterprise (GSE). As such, it receives sizable direct and indirect public subsidies in exchange for fulfilling a public function. The estimated value of this subsidy ranges between $4.7 billion and $6.4 billion dollars a year, as cited in the FHFA report: the bulk of this public subsidy comes from the value of the implicit government guarantee in capital markets, while the FHLBanks also enjoy exemptions from local, State, and federal taxes.

The Evolving Role of FHLBanks in Housing

Despite being founded on a public mission to support housing and receiving sizable public subsidies, the FHLB system has strayed from this founding mission over time. FHLBanks have moved away from helping Americans get housed, to providing liquidity to members without conditions. The FHLBank members and the FHLBanks are enjoying strong profits with little risk, since their advances are covered by collateral and a super senior lien on their members’ assets. But the system is doing relatively little to alleviate our tight housing markets today.

How did this happen? Its membership has significantly evolved. While early members were predominantly savings and loan associations (thrifts) and insurance companies active in the mortgage market, 1989 reform of the FHLBank system opened up membership to commercial banks and credit unions that financed mortgages. But at the same time, housing finance including its main players and sources of mortgage liquidity have significantly evolved – even just over the last decade. Today Fannie Mae, Freddie Mac, and Ginnie Mae dominate the mortgage securitization market and in doing so help inject significant liquidity in the mortgage market. Meanwhile, commercial banks – who are the main users of discounted advances within the FHLB system,  using 58 percent of all advances in 2022 – have largely moved away from the mortgage business over the last decade. As a result, liquidity use by FHLBank members, while supporting members’ profitability, has become disconnected from a focus on addressing unmet housing credit needs.

Key Housing Recommendations in the FHFA Report

The FHFA report offers key recommendations to help the FHLBank system live up to its founding public mission of supporting affordable housing and community development. These reforms would help this system meet the evolved needs and challenges of today’s housing markets. The four most promising reform recommendations to support affordable housing include:

• Issuing a regulation to clearly define the FHLBanks’ mission and mission-consistent activity. This includes linking FHLBank liquidity and housing.
• Helping expand the usefulness and accessibility of FHLBank advances and other services (such as secondary market access) for small community banks, credit unions, and CDFI’s. This includes critically reviewing the highest costs of advances for small CDFI’s, addressing membership barriers, and making sure services are accessible to these smaller institutions. Mission-driven advances and secondary market access can support affordable housing construction and non-traditional mortgage products (such as small-dollar mortgages and Special Purpose Credit Programs).
• A recommendation to Congress to double the required minimum funding for Affordable Housing Programs (AHP). Currently FHLBanks are required to devote at least 10 percent of their annual net earnings to AHP, which often support low-income housing construction. Ten percent is only a drop in the bucket relative to America’s housing needs, though, and relative to the public subsidies and advantages that FHLBanks receive as a GSE. Of note is also that in 2021, only 10 percent went to AHP, while over fifty percent of annual earnings were paid out to member institutions as dividends.
• Ensuring on an ongoing basis that FHLBank members adequately support housing and community development activities (rather than only assessing whether they meet a 10 percent threshold when they become members).

The Consumer Federation of America supports reforms that seek to reconnect FHLBanks back to their founding mission and use their powerful tools to help alleviate housing supply shortages, mortgage unaffordability, and persistent racial inequalities in housing across the country.  CFA Senior Fellow Barry Zigas participated in the first Roundtable convened by FHFA in November, 2022, and some of his recommendations, as well as those of many others who participated in FHFA’s extensive public hearings and outreach, are reflected in this new report.  As a member of the new Coalition for Federal Home Loan Bank Reform, we will publish more blogs that help illuminate potentials for reform from a consumer point of view.

The post Reforming the Federal Home Loan Bank System Can Help Address Our Affordable Housing Crisis: A Reaction to the New FHFA Report appeared first on Consumer Federation of America.

CFR founding members made the following remarks:

Don Layton, former CEO of Freddie Mac: “The FHLBank system, in nearly a century of changing markets, has moved far away from its original public policy purpose. In particular, the large subsidy it receives from the taxpayers goes far too much to big banks, rather than the community institutions the FHLBanks were historically intended to serve.”

The Reverend Luis Cortes, Co-founder and President of Esperanza, Inc., a nonprofit CDC serving the low-income minority community of Hunting Park in North Philadelphia: “FHFA Director Sandra Thompson’s leadership initiating the first-ever comprehensive review of the FHLBanks’ mission is timely. In 1932, homeless families lived in shanty towns that became known as Hoovervilles. FHLBanks were established to create liquidity for housing. That statutory mission has become an after-thought to address that crisis. 90 years later Hoovervilles are arising again with the homeless living in cars, in tents and worse. This rental housing crisis will not wait to ruin lives, disrupt families, and weaken low-income minority communities across the country. We need reform now.”

Sharon Cornelissen, Director of Housing, Consumer Federation of America (CFA): “We applaud the FHFA for publishing this timely report examining how the FHLBank system can be reformed to better fulfill its public mission of supporting affordable housing. We believe reform is especially crucial seeing today’s housing crisis, where millions of Americans are priced out from buying their first home, and Black and Hispanic families continue to own homes at much lower rates than white families. The FHLBank system can do so much more to address these dire needs.”

Michael Stegman, former Treasury and White House senior housing finance policy advisor: “Congratulations to FHFA Director Thompson for starting the journey to comprehensive housing finance reform by returning the FHLBank system to its historical mission of providing liquidity to its member institutions for the sole purpose of expanding the supply of affordable mortgage credit for American families.”

Bruce Morrison, Chairman, Morrison Public Affairs Group, former Chairman, Federal Housing Finance Board, former Member of Congress: “The FHLBs need a reformed mission focus. Their products should promote equitable access to affordable housing and community development. Most of what they do now does not meet that test.”

The Coalition for Federal Home Loan Bank Reform is a non-partisan organization that brings together a wide variety of stakeholders to discuss, educate and shape reform of the FHLB system. Organizational affiliations are for identification purposes only.

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On Monday October 31, a Kansas City jury determined that major real estate industry players had conspired to set prices and awarded $1.78 billion to plaintiffs in this class action lawsuit (Sitzer/Burnett vs. National Association of Realtors et al.), with the possibility of additional treble damages.  Stephen Brobeck, a CFA senior fellow, made the following statement about the decision:

“The speed of the decision and size of the award reveal that jury members believe the industry has restricted price competition to ensure near-uniform five to six percent commission rates.  The extent of injunctive relief decided by the court will strongly influence whether a price competitive system develops that lowers consumer costs and increases quality of services.  We hope that the court will sever the ties between listing agent and buyer agent compensation, freeing sellers from the obligation and need to compensate buyer agents.”

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This includes:

• Eliminating the loophole that allows services to avoid mandatory meetings if they do not have a branch office within 200 miles (a ruling that needs modernization considering the growing role of independent mortgage banks (IMBs) in government-lending in particular).
• Providing additional guidance on the procedural standards around how to schedule the meeting, offer borrowers’ sufficient notice, and provide inclusive language access.
• Implementing sufficient quality control, to ensure servicers indeed follow this updated ruling.

The post Groups Encourage HUD to Improve Mandatory Meeting Guidelines for FHA Borrowers in Default appeared first on Consumer Federation of America.

The report shows that it is much less demanding to earn a real estate sales license – which takes a state median of nine weeks at a state median cost of $600 – than earning a license to practice almost all other financial services occupations, which normally require a college degree as well as special training.  It is even easier to earn a real estate sales license than to practice many manual occupations, from plumbing to hairdressing, which usually require an apprenticeship of more than 1,000 hours as well as coursework.

“There is widespread agreement that required state courses and exams do not adequately prepare licensees to sell real estate,” said Stephen Brobeck, a CFA Senior Fellow and author of the report.  “I recently earned a real estate sales license and am neither qualified nor capable of facilitating home sales on my own.”

In some states, though, it is more difficult to obtain a license than in others.  For example, four states require only 40 hours of coursework, taking as little as two weeks to complete, while three other states require at least 150 hours of coursework.  Further, a dozen states require final course exams to be proctored, while the remaining states effectively allow open-book exams.  The report cites some evidence that states with the least coursework also have the highest agent densities, though it notes that the relationship between median home sale prices and agent densities is even stronger.

The report discusses numerous ways that regulators could toughen entry requirements.  Some, such as increasing hours of coursework or requiring proctored course exams, would often require legislative approval.  Yet, other measures, including working with testing companies (PSI and Pearson VUE) to strengthen state license exams, could usually be implemented by the regulators themselves.  Almost all states require only a passing score of 70 or 75 percent, and the exams often include questions that could be answered correctly without any course knowledge.

“Regulators could easily work with the testing companies to include more relevant and challenging questions on the state exams,” noted CFA’s Brobeck.

The report supplements a report issued in July 2023 that documents the surfeit of agents and related costs both to the industry and to consumers.  The new report drew most information from the websites of state regulators, from related state laws, and from the personal experience of the author, who recently earned a D.C. real estate sales license.

The post Easy Coursework and State License Exams Allow a Surplus of Real Estate Agents appeared first on Consumer Federation of America.

The report shows that it is much less demanding to earn a real estate sales license – which takes a state median of nine weeks at a state median cost of $600 – than earning a license to practice almost all other financial services occupations, which normally require a college degree as well as special training.  It is even easier to earn a real estate sales license than to practice many manual occupations, from plumbing to hairdressing, which usually require an apprenticeship of more than 1,000 hours as well as coursework.

The post A Surfeit of Real Estate Agents 2: Is Entry Too Easy appeared first on Consumer Federation of America.

The comment letter offers recommendations on how to improve guidance for financial institutions, including their shared responsibility in monitoring potential Fair Housing violations. The letter also offers insights on ways to best educate consumers, to make sure they pay attention to potential evidence of bias or unfair treatment, are aware of their rights to request a Reconsideration of Value, and have an accessible way to submit such a request through their financial institution.

The post CFA Joins Advocacy Groups in Fighting Appraisal Bias by Recommending Improved Guidance for Consumers’ Rights to Request a “Reconsideration of Value” appeared first on Consumer Federation of America.