National Association of Realtors faults new rule by U.S. Office of

St. Louis Daily Record & St. Louis Countian, Apr 16, 2004 by Mike Nixon

The National Association of Realtors took an official stand opposing a new rule by the U.S. Office of the Comptroller of Currency during hearings last week before the U.S. Senate Committee on Banking Housing and Urban Affairs. NAR President Walt McDonald said the regulation, which was adopted on Feb. 12, that exempts national banks and their operating subsidiaries from state consumer protection laws amounts to favoritism and poses a threat to both consumers and small business.

The OCC is helping to create an industry that is dominated by a few large mega-banks, leaving consumers with fewer choices and higher rates, and it sends a clear message to consumers that the federal government cares more about corporate America than about America's consumers, McDonald told committee members.

The OCC rule permits national chartered banks to ignore state banking laws and regulations concerning advertising, licensing, privacy and insurance requirements that many states have implemented to head off the practice of predatory lending and other questionable practices. The OCC rule has been identified by governors, states attorney general and real estate commissioners as being anti- competition in nature. McDonald noted that national banks are offered a free pass while local mortgage lending institutions must comply with various state fees and regulations. NAR is also concerned that the OCC rule is yet another link in the chain that will lead to national banks engaging in new activities, such as real estate brokerage, while remaining unconstrained by state consumer protection safeguards and licensing requirements. It's bad for consumers, and it's bad for the community-based businesses that serve them, he said.

OCC Comptroller John D. Hawke Jr. responded to McDonald's charges and testified before the committee that national banks and their subsidiaries are already regulated and supervised by federal rules and that the OCC is committed to protecting consumer rights.

The OCC's pre-emption regulation does not pre-empt state laws other than those listed [in the Gramm-Leach-Bliley Act that include submission to tort reform, contract law, public safety and anti- discrimination regulations], Hawke said.

Hawke told the committee that the OCC has exclusive authority to supervise, examine and regulate national banks in accordance with the visitorial powers rule. Congress re-emphasized this principle of exclusive visitorial powers only recently in the Reigle-Neal Interstate Branching law by explicitly providing that to the extent state consumer protection laws apply to the interstate branches of national banks, he said.

Hawke insisted that the new rule enables national banks to operate more efficiently and is not a threat to consumer protections against unfair lending practices. Our approach to predatory lending is a comprehensive, ongoing, integrated supervisory approach, focused on preventing predatory practices, not on banning and restricting specific loan products based on their terms, he said.

The NAR along with the National Association of Home Builders, the National Association of Mortgage Brokers, the National Conference of State Legislators and AARP have united their efforts to fight unfair lending practices and a lack of affordable housing in the residential real estate market. These organizations contend that the OCC rule does nothing to adequately address those issues or set standards among nationally chartered mortgage lenders.

At a time when state consumer protection laws have not kept banks from enjoying the largest profit margins they've earned in decades and the housing sector has been the pillar of our economy, why does the OCC need to fix a regulatory system that's obviously working? McDonald asked. Decisions like this that have such a profound effect on whole industries, states rights' and consumers should only be made by elected officials in Congress. We're firmly committed to ensuring that Congress carefully scrutinizes the implications of the comptroller's actions and takes the appropriate legislative action, he said.

The OCC is an independent government agency with exclusive enforcement authority for laws and regulations pertaining to nationally chartered banks.