WASHINGTON National banks have a straightforward argument for why they should be allowed to enter the real estate brokerage business: If federal thrifts and state-chartered banks in 26 states can own real estate brokerage subsidiaries, then national banks should be able to as well.
Real estate agents disagree, naturally, and are lobbying furiously to maintain the status quo.
Lost in the debate, though, is the fact that only a handful of banks and thrifts of the thousands now eligible have started real estate brokerages.
In North Carolina, where state-chartered banks have had brokerage powers for more than 100 years, only one state bank operates a real estate affiliate. And in some other states with similar laws, including Delaware, Massachusetts, Wyoming, and Texas, no state-chartered banks and only a handful of thrifts are operating brokerages.
Banks have very broad powers in Delaware, but there no banks getting into real estate brokerage, said Robert A. Glen, Delawares banking commissioner. And its not really a hot topic here.
Still, it is a hot topic in Washington.
The 1999 Gramm-Leach-Bliley Act allowed banks to expand their range of services offerings through financial subsidiaries or financial holding company affiliates. Though real estate brokerage was not specifically listed as a potential new line of business, the law gives regulators the authority to expand those powers as they see fit.
Bank trade groups are urging regulators to grant financial subsidiaries or holding companies real estate brokerage powers. This week the American Bankers Association released a survey which it sponsored that concluded that consumers want more choices for real estate brokerage.
But outside the Beltway, there seems to be less of a fuss.
In Wyoming, for example, most bankers did not even know about a two-year-old state law that allowed them to buy or start real estate brokerages until Jeffrey C. Vogel, the states deputy commissioner of banking, wrote an article about it for the Wyoming Banking Associations magazine last month.
Shortly after the article ran, Mr. Vogel said he received calls from several bankers surprised to know they could enter real estate brokerage though few expressed any interest in starting one.
For so long Wyoming law was so narrow, and banks could only do what was expressively outlined. The rest was silent prohibition, Mr. Vogel said. And all of that changed recently, but many banks did not know about the new powers.
Like Gramm-Leach-Bliley, some state statutes do not expressly prohibit nor condone banks involvement in real estate brokerage. Steve Scurlock, executive vice president for the Independent Bankers Association of Texas, said that because that states law is vague, some bankers may not want to set up a subsidiary out of fear that real estate firms may contest the banks interpretation through a lawsuit.
Cost may be another reason why most banks and thrifts have steered clear of the brokerage business. AnchorBank in Madison, Wis., started a subsidiary over a decade ago, but sold it four years later to an independent firm. Douglas J. Timmerman, president and chief executive officer of the $3.1 billion-asset thrift, said the unit never met expectations.
While it clearly fit in with our mortgage business, it was not very profitable, and it was not worthy of our time, effort, and resources, Mr. Timmerman said.
Marvin N. Schoenhals, president and CEO of Wilmington Savings Fund Society in Delaware, said banks and thrifts that enter the real estate business also risk alienating brokers in their communities.
The $1.7 billion-asset federal thrift sold its brokerage subsidiary almost a decade ago, and Mr. Schoenhals said he would never start another. You dont gain so much on one side, and you lose a whole lot more on the other.
Tony Wolfe, CEO and president of $518 million-asset Peoples Bank in Newton, N.C., said it knew it risk of damaging its relationships with brokers when it set up a brokerage subsidiary six months ago. He says the unit, which primarily handles foreclosed homes and the bank employees homes, has brokered about 10 deals.
Despite only modest interest from the industry, Mr. Scurlock said he suspects that some smaller thrifts and state banks are waiting for a bigger national bank to make the first move.
The first person to eat a raw oyster is a brave person, he said.
Clinton Savings Bank in Massachusetts, with $212 million of assets, is among those taking a wait-and-see approach. Its president and CEO, Steven P. Cash, predicted that more small institutions would get involved in brokerage once they see bigger banks succeeding at it. The trend was first to get involved in trust services and then insurance, and now it is moving to real estate brokerage, he said.
Real estate agents, meanwhile, say they have never felt threatened by the small banks and thrifts. But Steve Cook, vice president of public affairs with the National Association of Realtors, said they are worried about larger, national banks impact on the industry, said.
I think its a different situation, he said. The banks pushing for the power have the ability to make large investments to enter the business and will do so.
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