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Realtors get a one-year reprieve in battle to keep mega banking out of their business

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Local, state and national Realtor associations vow to return to Washington, D.C., next year to seek a law prohibiting so-called mega banks from entering the real estate industry -- as in permanently.

A mega bank, which typically has hundreds of billions of dollars in assets and provides a variety of financial services, could cost traditional Realtors their livelihood and short change consumers, according to Susan Tinsky, vice president of governmental affairs for the San Diego Association of Realtors (SDAR).

Banks could package services at a better rate for consumers -- because of their resources -- and refuse to lend money to borrowers who were represented by outside Realtors, she said. The upshot? Realtors wouldn't be able to compete and would be driven out of business. Consumers also would lose because of fewer options for representation, she said.

"Banks control purse strings," Tinsky said.

The U.S. Congress recently enacted a one-year ban on mega banks entering the real estate industry.

A 1999 law authorized the Federal Reserve and the Treasury Department to define permissible activities for financial holding companies, according to the American Bankers Association (ABA). The banking industry never received the official green light.

These agencies recently proposed allowing banks to engage in real estate brokerage and management. The banking industry supports this proposal, which they say would increase competition, provide consumers more choice and enable banks to round out their services.

The issue isn't about mega banks, according to Catherine Pulley, an ABA spokeswoman.

Several financial institutions, including thrifts, savings and loans and credit unions already are permitted to offer real estate services in California, as well as in several other states.

The real estate industry has tried to get a bill passed that would permanently keep banks out of the real estate industry, Pulley said, but the bill "wasn't getting any traction, the bill has gone nowhere, the bill hasn't seen the light of day."

Several real estate companies are offering financial packages, according to Pulley. "They are offering mortgage services, they are offering title insurance, they are offering property insurance," Pulley said. "These are bank products -- why are the real estate companies in the (banking) business?"

SDAR's Tinsky said consumers benefit from personal agent representation because Realtors are familiar with day-to-day market conditions.

"The transaction itself can be a somewhat lengthy process," she said. "The Realtor is not just at the end where the escrow company, the title company and the bank company comes in."

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