What a difference a year makes! Barely 11 months ago, the National Association of Realtors joined forces with trade group allies on Capitol Hill to torpedo a Bush administration real estate settlement system reform plan, that sought to encourage "guaranteed packages" of mortgage and closing costs for consumers.
Now the NAR has adopted a new strategic plan that urges its million-plus members to consider "expansion" into "packaging" -- including "settlement and other services beyond brokerage." The key difference, say NAR officials, is that the Bush plan gave too much control over mortgage and settlement packaging to lenders, whereas the packaging concept the association now advocates keeps Realtors at the center of the home purchase transaction.
"What we have here," said NAR vice president for research Ellen Roche in an interview, "is a recognition that packaging (already) is being done by our members" -- chiefly the largest brokers. Most of the 50 top realty brokerage firms in the country offer at least a handful of ancillary services to home buyers, ranging from mortgages to insurance to warranties and home improvements.
But most mid-sized and smaller brokerage firms offer minimal -- or no -- settlement-related services, according to NAR. In its 2004 survey of member business practices, the association found that just four percent of all firms offered hazard insurance to clients, seven percent offered warranty plans, and three percent offered settlement services.
The packaging strategy now being pushed by NAR is more like the "one-stop shop" that the association has favored in the past, said Stephen Cook, vice president for public affairs. The Realtors' strategic plan, unlike HUD's reform proposals of 2002-2003, does not involve controversial exemptions from RESPA anti-kickback rules for "packages." Under HUD's proposals, companies that created fixed-fee, guaranteed-cost mortgage packages for consumers would be exempt from certain RESPA rules prohibiting "markups" of fees and "volume discounts" from vendors.
NAR's plan, in fact, could tie in well with growing efforts by large mortgage lenders to create joint ventures with realty brokers and home builders using current RESPA rules. For example, Countrywide Home Loans and MetroCities Mortgage Corp. have created dozens of successful joint ventures with realty brokers that provide customized loan services to home buyer clients, while sharing loan-related revenues with participating brokers.
Giant title underwriters such as First American Corp. and Fidelity National Financing meanwhile are creating discount-priced "bundles" of settlement-related services -- including everything from credit to appraisal to title, tax, and escrow -- expressly designed for mortgage lenders who want to serve one-stop shop efforts by Realtors, builders, and others.
The new NAR packaging strategy is also a tacit recognition that many brokers are earning declining percentages of their total revenues from commission splits with sales associates, but see growing potential in ancillary settlement-related revenue-producers such as title and escrow.
Could the Realtors' packaging moves influence HUD's forthcoming revised proposals on mortgage settlement reforms? HUD is mum on the subject publicly, but one official in the department said "we would be foolish" not to sit down with NAR to search for common ground on guaranteed packaging.