H.R. 3221, Housing and Economic Recovery Act of 2008
The timeshare industry would
have been materially and adversely affected by the proposed language of
HR 3221. Title V, Section 502(a) of the Senate bill, as proposed by
United States Senator Jack Reed (D-RI), sought to amend the Truth in
Lending Act (TILA) in the case of an extension of credit that is secured
by the “dwelling” of a consumer—to include timeshare
properties. As a result, developer financing made available to consumers
who buy timeshare interests would have been inadvertently subject to the
new provision, greatly complicating the buying process for consumers and
causing severe disruption to several major hospitality companies with
significant operations in this industry.
The requirement in Section
502(a)(B)(ii) of the Senate bill initially required that TILA
disclosures “be furnished to the borrower not later than seven
business days before the date of consummation of the
transaction.”
Although the Senate Bill
attempted to lump timesharing in the same basket as other traditional
real estate products, this is not the case in practice. The reality is
that the consumer is buying a fully pre-paid lifetime vacation
experience and not a dwelling or a residence. Approximately 70% of
timeshare buyers finance the acquisition of their timeshare interests
rather than shop for a lender or a loan, and almost 100% of those who
finance their timeshare interests take advantage of developer financing
at the point of sale, much like a major consumer goods purchase such as
an automobile.
The passage of the Senate bill,
without an exemption for timeshare, would have caused great dislocation
in the timeshare industry. Compelling timeshare developers to provide
buyers with a TILA statement seven business days prior to the date a
sale is consummated is both unnecessary and impractical and would create
enormous hardship by forcing the industry to alter its traditional
method of sale and financing while not providing the intended benefit to
timeshare buyers.
H.R. 3221 contained an
exemption for timeshares from the seven-day requirement, as well as
certain other provisions. In the final version of the Act, however, a
Senate technical drafting error occurred and the timeshare exemption
from the seven-day requirement was eliminated when moved and codified
into a different paragraph in the Act. President Bush signed H.R. 3221
into law on July 30, 2008, with a one-year enactment date. As a
result, ARDAfaced a daunting
task of urging Congress to pass a technical correction to the Housing
and Economic Recovery Act of 2008 to reflect its intent to provide
timeshare lenders with an exemption from the seven business day
disclosure requirement.
That in all reality was
easier said than done. There was total gridlock in
Washington and on
Capitol Hill. Therefore, finding a vehicle to attach ARDA’s
amendment did not look promising. Congress was not contemplating a
technical corrections bill. As such, ARDA searched for a new vehicle to
secure its exemption.
During this same time, the
nation faced a national fiscal and economic crisis of catastrophic
proportions. Congress flew into action creating a bipartisan plan as
agreed to by Senate and House leaders and the administration. The bill
sought to have a positive impact on the financial markets, help to
stabilize the economy and ensure credit flows to businesses, property
owners, and consumers. The bill was designed to protect taxpayers and
also contains provisions that will increase the ability to assist
at-risk homeowners to stay in their homes and avoid foreclosures. The
Emergency Economic Stabilization Act of 2008 (EESA) provided up to $700
billion to the Secretary of the Treasury to buy mortgages and other
assets that are clogging the balance sheets of financial institutions
and making it difficult for working families, small businesses, and
other companies to access credit, which is vital to a strong and stable
economy. EESA also established a program that would allow companies to
insure their troubled assets.
In early October 2008, after a
failed attempt, Congress finally passed EESA. ARDA was able to
successfully secure an exemption for timeshare lenders from the seven
business day disclosure requirement within that legislation.
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