Billions of dollars in fees and commissions are at stake in a bid by
bankers to provide brokerage services.
Should banks be allowed to offer real estate services? This is not a $64,000
question. Actually, the total value of homes sold in 1999 in the U.S. was
closer to $908 billion, with the broker's commissions totaling around $46
billion. Looking to expand from mortgage loans into real estate brokerage,
the banking industry is asking the Federal Reserve Board for a piece of this
action. That would mean banks could continue their quest to provide one-stop
shopping services for consumers, with banking, investing, home buying and
home improvement loans. But is that really good for consumers? As usual,
it's hard to separate the rhetoric from reality.
The issue has started a bitter debate between the American Bankers
Association and the real estate industry represented by the National
Association of Realtors(r) (NAR). Each must work together in the home
finance arena but when it comes to bankers entering the Realtor(r)'s turf,
the gloves come off. NAR "strongly opposes the proposed rule change, which
would result in domination of the real estate business by just a few large
financial holding companies. This would be bad for the economy, bad for
business and bad for consumers... Like a voracious octopus, the banking
industry -- already bloated with recently acquired rights to deal in
securities and insurance--has seen something else it wants--the highly
successful real estate brokerage."
But how big is the power grab really? The banking industry says that many
real estate brokerages already offer mortgage services that banks normally
offer, so why discriminate? More competition in the home buying and
brokerage market should be good for the consumer. Banking wants to
facilitate real estate transactions through their holding companies'
brokerages, which would provide services to for-sale-by-owners and commercial
property transactions, especially. But NAR isn't backing down. It says
that consumers could end up overpaying for homes, sellers could undersell,
and all might be vulnerable to liabilities related to disclosure rules and
What does the public think? Beware of polls, they can always be used to
manufacture results for the entity that sponsored the poll. But in one
survey by Public Opinion Strategies, nearly two out of three consumers said
their interests would be best served by keeping bankers out of the brokerage
business. Nearly 70 percent of survey respondents said they would be hurt by
approval of the regulation because bank-owner real estate brokerages would
have access to their bank accounts and personal financial information. And 58
percent said banks are too powerful already.
The Federal Reserve Board, which will make the decision regarding banks later
this year, has extended the period for public comment from March 2 until
close of business May 1, 2001. The Fed is interpreting a law passed by
Congress called the Gramm-Leach-Bliley Act of 1999 that expanded the role of
bank holding companies. For more information go to the Federal Reserve website.
Sources used to create this article include Realtytimes.com