Detailed Summary

Community Choice in Real Estate Act - Amends the Bank Holding Company Act of 1956, and the Revised Statutes of the United States, to prohibit the Board of Governors of the Federal Reserve System and the Secretary of the Treasury, respectively, from determining that real estate brokerage activity or real estate management activity is financial in nature, is incidental to any financial activity, or is complementary to a financial activity. (In effect, prohibits financial holding companies and national banks from engaging, directly or indirectly, in real estate brokerage or real estate management activities.)

Status of the Legislation

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Points in Favor

Mixing Banking and Commerce: Bad for Consumers and Bad for the Economy
The U.S. economy depends in large part on the health of the banking and real estate industries. Several regulatory actions that would allow banks in the real estate industry are putting our economy and the well-being of American consumers at risk. These ill-considered moves would upend one of our nation's most fundamental economic policies,the separation of banking and commerce. In return, we are likely only to get bigger banks, higher costs, and less consumer choice and service.

Allowing Banks in Real Estate Hurts Competition and Hurts Consumers
Regulations proposed by the Federal Reserve and Treasury would allow big banking conglomerates into real estate brokerage and property management. If adopted, the regulations will lead to:

The same large-scale consolidation that has taken place in the banking industry itself.

Less competition, less choice, and higher costs for consumers.

Pressure on bank-affiliated real estate brokers and agents to market and sell financial products such as insurance, securities, and credit cards.

Banks sharing of private consumer data obtained in real estate transactions with their affiliates and third parties.

Unfair competitive advantages for banking conglomerates, which benefit from access to capital at lower rates--thanks to federally insured deposits--than local real estate companies.

According to a J.D. Power survey, 28 percent of homebuyers had problems with their lenders, such as errors in closing documents, miscommunication of loan terms and unavailable or unresponsive loan consultants or mortgage brokers.

If almost 1 in 3 homebuyers can't get adequate customer service for their loan, how will they be served by banks during the much more complex process of buying or selling a home?

Banks Are Special Let's Keep Them That Way
Banks play a unique role in our financial system. In response to the bank failures of the 1930's, the federal government established federal deposit insurance. As a trade-off, banks accepted comprehensive federal regulation and limitations on their eligible activities. The S&L crisis of the 1980's demonstrates the importance of strong federal rules keeping financial services separate from commercial activities.

To avoid giving banks undue competitive advantages over non-banking firms, Congress has established the national policy against mixing banking and commerce. It's simple, it's straightforward, and it avoids the entanglements that dilute the clear mission of banks to provide and support a strong payment system and provide banking services that are essential to a healthy economy.

Allowing banks to enter the real estate brokerage industry is inconsistent with this policy and weakens the regulatory structure necessary to protect the federal deposit insurance fund, the payment system, and the U.S. economy.

Amid today's rapid technical innovations and fast-moving markets, unintended and unforeseen consequences of expanding bank powers pose very real risks to the security and vitality of our economy. We've experienced this before, and it's been costly. Loosening restrictions on the activities of federally insured depository institutions led to the S&L crisis of the 1980's. There's no reason to risk a rerun of that $124 billion debacle.

Banks Want Consolidation of the Real Estate Industry into a Few Hands
Bank-controlled real estate brokerages will most likely become marketing arms for mortgage departments and other proprietary products and services banks sell, whether they are in the consumer's interest or not.

The real estate industry, dominated by tens of thousands of small businesses, will lose its consumer service focus if banks are allowed to consolidate the industry.

REALTORS provide extensive personal attention to consumers during the lengthy process of buying or selling a home, banks simply can't provide that type of personal counsel because of the inherent conflicts with their other business objectives.

The American People Agree: Keep Banks Out
According to a recent national survey conducted by Public Opinion Strategies, American consumers believe that bank-owned real estate brokerages will result in worse customer service, trample privacy through unrestricted access to private financial information, force them to pay more and higher fees, and cause serious conflicts of interest. According to survey results:

Americans believe consumers are going to be hurt by banks that own real estate brokerages and have access to home buyers' and home sellers' bank account and other financial information.*

Americans believe it would be a conflict of interest for a bank to offer and approve loans on homes that they were already involved in as a real estate broker (66% say true – 28% say false)*

Americans believe banks will pass on real estate costs to their account holders (64% say true – 29% say false)*

*+/- 3.46% Margin of Error

Points Against

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