MINUTES OF THEBOARD OF DIRECTORS MEETING

NATIONAL ASSOCIATION OF REALTORS2005 MIDYEAR LEGISLATIVE MEETINGS

MARRIOTT WARDMAN PARKMARRIOTT BALLROOM, LOBBY LEVEL

WASHINGTON, DCMAY 14, 2005

8:30 AM-1:00 PM

CALL TO ORDER - AI Mansell, Midvale, Utah, President

PRESIDING: Al Mansell, Midvale, Utah, President, NATIONAL ASSOCIATION OF REALTORS K .

President Mansell identified that a quorum was present and called the meeting to order at 8:30a.m. in theMarriott Ballroom, Marriott Wardman Park Hotel. A list of those directors present can be found in Exhibit1.

The invocation was delivered by Virginia Cook, Dallas, Texas, Committee Liaison, Information.Communication and Education Group

The Pledge of Allegiance was led by Mike Owen, Boca Raton, Florida. Committee Liaison. AssociationLeadership Group

MaryLou Stephens served as parliamentarian for the meeting.

NOMINATING COMMITTEE REPORT - Cathy Whatley, Chair, Nominating Committee, presentedthe report on behalf of the Committee.

RECOMMENDATION #1: A motion carried to elect the Nominating Committee's recommended slate o!candidates for Officer of the NATIONAL ASSOCIATION OF REALTORS K for the year 2006. Thesecandidates completed the appropriate legal and financial audits and individual interviews with theNominating Committee.

President: Thomas M. Stevens, CRB, CRS, GRI;Vienna, Virginia

President-Elect: Pat Vredevoogd, ABR, CRS, GRI, PMN; Grand Rapids, Michigan

First Vice President: Richard F. Gaylord, CIPS, CRB, CRS, GRI: Long Beach. California

Treasurer: Bruce F. Wolf, Englewood, Colorado

For Regional Vice Presidents:

Region 1: David Drinkwater, Scituate, MassachusettsRegion 2: George Wonica, Staten Island, New YorkRegion 3: Phil Mcginnis, Dover, DelawareRegion 4: Lois Killebrew, Signal Mountain, Tennessee

1

Region 5: Roger Neal Jackson, Monroe, GeorgiaRegion 6: Joe Banyai, Southfield, MichiganRegion 7: Joan Seramur, Minocqua, WisconsinRegion 8: William Stradt, Bettendorf, IowaRegion 9: Fred Kratky, St. Louis, MissouriRegion 10: Jetty Donaldson, Baton Rouge, LouisianaRegion 11: J. Wes Graham, Clovis, New MexicoRegion 12: Pili Meyer, Port Angeles, WashingtonRegion 13: Diana Bull, Santa Barbara, California

President— Elect Tom Stevens announced the 2006 Vice Presidents, Committee Liaisons, and PoliticalFundraising Chair.

Vice President and Liaison to Committees: Steve Hoover, Roanoke. Virginia

Vice President and Liaison to Government Affairs: Henry B. Ray, Birmingham, Alabama

Committee Liaisons:

Public and Federal Issues Group: Nick D'ambrosia (VA)State and Political Issues Group: Bill Brown (CA)Law and Policy Group: Ted Loring (CA)Commercial & Business Specialties Group: Cynthia Shelton (Fl)Information, Communications and Education Group: Bruce Aydt (Mo)Association Leadership Group: R. Scott Brunner (Ms)International Group: Teresa King Kinney (FL)Housing and Diversity Group: Ron Phipps (RI)Large Firm Relations: Virginia Cook (TX)Political Fundraising Chair: Adorna Carroll, (CT)

APPOINTMENT OF REGIONAL VICE PRESIDENT, REGION 2 - Al Mansell

A motion carried that Charles Oppler, New Jersey, be elected to serve the balance of the term as Region 2Vice President.

APPROVAL OF MINUTES FROM THE PREVIOUS MEETING - Al Mansell

A motion carried to approve the minutes from the Board of Directors Meeting held at the 2004REALTORS® Conference. The minutes (Exhibit 2), can be found online at REALTOR.ORCi.GOVERNANCE PAGE.

APPROVAL OF EXCUSED ABSENCES - Al Mansell

A motion carried to approve requests for excused absences from this meeting. A list of those directors canbe found in Exhibit 1.

2

In addi t ion to those d i rec tors w h o reques ted an excused absence , a list o f d i r c c t o r s w h o were absent from them e e t i n g can also be found in Exh ib i t 1.

APPROVAL OF THE CONSENT AGENDA - Al Mansell

A motion carried to approve the Consent Agenda, which was provided to the directors at the Directors'Material Pick-Up. (Exhibit 3)

INTRODUCTION OF 2005 AFFILIATE PRESIDENTS, EXECUTIVE COMMITTEEREPRESENTATIVES AND EXECUTIVE OFFICERS Al Mansell

President Mansell introduced the 2005 presidents, executive committee representatives and executiveofficers of the Institutes, Societies and Councils who were in attendance. (Exhibit 4)

Approval of Proposed Amendments to the Bylaws of the Institute of Real Estate Management.REALTORS© Land Institute, Society of Industrial and Office REALTORS *', The Counselors of RealEstate and the Women's Council of REALTORS® - Al Mansell

A motion carried to approve the proposed amendments to the bylaws of the Institute of Real EstateManagement, REALTORS® Land Institute, Society of Industrial and Office REALTORS*. The Counselorsof Real Estate, and the Women's Council of REALTORS K.

These amendments were reviewed by the National Association's general counsel and are deemed not to beinconsistent with the policies and Constitution of the National Association. (Exhibit 5)

REPORT OF THE VICE PRESIDENT & LIAISON TO COMMITTEES Adorna Carroll. Berlin,Connecticut

Recommendation #1: A motion carried that the composition of the REAL.TORS* Political InvolvementCommittee be amended.

Proposed Composition: #9 67 members as follows: Chair and vice chair, the immediate past chair, one-local board or state association executive, one local or state government affairs director; 54 members whichwould consist of one member from each state and territorial asst>eiafkm,-a44-of whom-must-be- federal-dtsmi tcoordinators, one member from each state. District of Columbia and territorial association with 1(> or lessFederal Political Coordinators (FPCs); two or more RPIC members from states with 20 or more FPCs basedon current congressional apportionment. Under current concessional apportionment, states eligible foradditional members are as follows: California (total of 3). Florida (total of 2). Illinois (total of 2) i New York

(total of 2), Ohio (total of 2), Pennsylvania (total of 2), and Texas (total of 2).

Rationale: This proposal allows for proportional representation on the REALTORS* Political ln\ol\cmcntCommittee. RPIC state representative allocation will be determined by the following formula: one additionalRPIC state representative for every 20 FPC slots per state (two US Senators and 18 congressional districts inthe state). The composition change will become effective January 2007. This proposal allows larger statesto exercise more control over performance of FPCs, and adds eight new members. States currently affectedare California (53 districts - 55 FPCs; 3 total RPIC state representatives), Florida (25 districts 2" FPCs: 2

3

total RPIC state representatives), Illinois (19 districts - 21 FPCs; 2 total RPIC state representatives). NewYork (29 districts - 31 FPCs; 2 total RPIC state representatives), Ohio (18 districts 20 IPCs; 2 total RPKstate representatives), Pennsylvania (19 districts 21 FPCs; 2 total RPIC state representatives) and 1 exas ( ;2districts - 34 FPCs; 2 total RPIC state representatives) - all states that historically have had under-performing FPCs (in terms of filed field reports and responses to NAR Calls To Action). This would createmore accountability for FPCs in the state as well as raise NAR's Grassroots visibility in the state.

Recommendation #2: That the purpose of the Federal Housing Policy Committee be amended.

Proposed Purpose: Monitors and analyzes current and prospective federal housing issues affecting the I HAsingle- and multi family housing programs, HUD-assisted housing programs, H^DctHmHumiv-dt tflt fmHMMprograms, the VA Home Loan Guaranty Program, the rural housing programs under the Rural Housing andCommunity Development Service, the Farmer MAC and the Farm Credit System, and federal budgetarypolicies and actions pertaining to each, and the Committee recommends appropriate public policies toaddress them.

Rationale: This proposal seeks to enhance policy coordination and symmetry between the Federal HousingPolicy Committee, the Commercial Legislation and Regulatory Subcommittee, the State and Local IssuesCommittee and the Housing Needs Committee.

Currently, the Federal Housing Policy Committee is responsible for issues affecting all federal housing anddevelopment programs including federal multifamily programs, community development programs andfederal housing counseling programs. The Federal Housing Policy Committee is proposing the follow ing:

(1) To increase NAR's focus on multifamily housing programs and to enhance governance coordination, thecommittee proposes moving issue and policy responsibility for multifamily housing programs to theCommercial Legislation and Regulatory Subcommittee. The Commercial Legislation and RegulatorySubcommittee is currently responsible for identifying and analyzing issues that impact the commercial realestate sector. Moving multifamily responsibility to the Commercial Legislation and RegulatorySubcommittee represents a natural alignment of governance responsibility.

(2) To complement the enhanced purpose of the State and Local Issues Committee, the committee proposesmoving issue and policy responsibility for community and economic development programs to the State andLocal Issues Committee. Last year the State and Local Issues Committee revised and expanded its purposeto include community development and economic development programs. Again, nun ing community andeconomic development responsibilities to the State and Local Issues Committee represents a naturalalignment of governance responsibility.

(3) To enhance NAR's attention to homebuyer education programs vis-a-vis NAR's Housing Opportunitiesprogram, the committee proposes moving issue and policy responsibility for federal housing counselingprograms to the Housing Needs Committee. This will support responsibilities of the Housing NeedsCommittee to recommend policy increasing the education and awareness of housing opportunities andeligibility.

A motion carried to approve recommendation #2 with the following amendment:

Proposed Purpose: Monitors and analyzes current and prospective federal housing issues affecting the FHAsingle- and multi-family (1-4 units) housing programs, HUD-assisted housing programs. HUD communitydevelopment programs, the VA Home Loan Guaranty Program, the rural housing programs under the RuralHousing and Community Development Service, the Farmer MAC and the Farm Credit System, and federal

4

budgetary policies and actions pertaining to each, and the Committee recommends appropriate publicpolicies to address them.

Recommendation #3: A motion carried that the purpose of the I lousing Needs Committee be amended

Proposed Purpose: To monitor, analyze, and disseminate information on local and state governmentalactivity affecting housing; to identify programs in developing affordable housing projects: to enableREALTORS® to participate and/or collaborate joint efforts aimed at providing access to sate and decenthousing; and to encourage housing opportunities affordable to people through model programs identified aistate and local levels for replication elsewhere; and to monitor, analyze and recommend policy affectingfederal housing counseling programs.

Rationale: The proposal enhances the committee's goals of promoting affordable housing, and ol "prom»»tmuhomeownership education.

One of the committee's standing action items is as follows: "The Housing Needs Committee will continue n«play an active role in representing REALTOR® interests and points of view in the implementation o\homeownership education and counseling standards across the United States." In addition. NAR. throughthe Housing Opportunity Program, became a founding partner in 2004 of the Neighborhood ReinvestmentCorporation's new National Center for Homeownership Education and Counseling, which also shares thegoal of quality homebuyer education.

Therefore, adding oversight of federal housing counseling programs and proposed modifications is consistentwith the goals and mission of the committee, and will result in more pro-active involvement with housingcounseling at the federal, state and local level.

Recommendation #4: A motion carried that the purpose of the Commercial legislation and Regulator)Subcommittee be amended.

Proposed Purpose: To identify and analyze emerging legislative and regulator) issues that impactcommercial real estate; monitor and analyze current and prospective housing issues affecting federalmultifamily housing programs and recommends appropriate policy: to develop, communicate, and advocatepublic policy which benefits the business interest of our commercial members while protecting andenhancing the right to own, use and transfer real property.

Rationale: This proposal seeks to enhance policy coordination and symmetry between the CommercialLegislative and Regulatory Subcommittee and the Federal Housing Policy Committee.

Currently, the Commercial Legislative and Regulatory Subcommittee is responsible for issues impactingcommercial real estate, including multifamily programs. By moving federal multifamily housing program tothe Commercial Legislative and Regulatory Subcommittee from the Federal Housing Policy Committee wecan increase NAR's focus on multifamily housing programs and enhance governance coordination. \ lo\ mgmultifamily responsibility to the Commercial Legislation and Regulatory Subcommittee represents a naturalalignment of governance responsibility.

Recommendation #5: A motion carried that the name of the Resort Real Estate Committee he changed.

Proposed Name: Resort & Second Home Real Estate Committee

5

Rationale: The current name, Resort Real Estate Committee, is contusing and is limiting in its description ofreal estate activities. Resort leadership feels that they lose the interest of many members u ho considerthemselves second home or vacation real estate specialists when those areas of specialty arc not reflected inthe committee's name. From its inception, NAR's resort area has been broad in scope, encompassing secondhomes, time share, rentals, hotels, development, condominium brokerage and other areas of practice specificto recreation, leisure and resort areas. By changing the name to Resort and Second Home ( ommittcc. thefocus becomes more inclusive rather than exclusive.

Research results from a November 2004 focus group comprised of association executives who ha\e resortarea specialists or resort sales in their areas, strongly indicated a lack of awareness of the NAR resort areaand more importantly, a lack of understanding that second homes are a vital part of the committee's purposeand initiatives. The focus group revealed that AEs did not believe that the term resort accurately andcompletely described the full scope of everything included in the NAR definition of resort specialist Inaddition, AEs believed the terms vacation, recreational, and second home more appropriately described thistype of real estate agent than the term resort. This is problematic because associations arc not ulcntitv ingtheir market with the services being offered.

During the summer of 2004, Business Specialties hosted a Course Delivery Symposium for a total of"X5Education Staff from state and local REALTOR® Associations licensed to offer the two-day "Resort &Second Home" course. The resounding concern was that participants would focus on Rcson and that itwould not attract students in their market. We have since given permission to associations and course-providers to market the course with "Second Homes" as the primary descriptor - as a result of their requestsProviders believe this marketing change will increase course offerings.

Recommendation #6: A motion carried that the name of the Resort Real Estate Forum be changed.

Proposed Name: Resort & Second Home Real Estate Forum

Rationale: Like the Resort Real Estate Committee, the name of the Resort Real Estate Forum is contusingand limiting in its description of what its programs entail. Resort leadership feels that thev lose the interestof many members who consider themselves second-home or vacation real estate specialists when those arc,isof specialty are not reflected in the forum's name. From its inception. NAR's resort area has been broad inscope, encompassing second homes, time share, rentals, hotels, development, condominium brokerage andother areas of practice specific to recreation, leisure and resort areas. By changing the name to Resort &Second Home Real Estate Forum, the focus becomes more inclusive rather than exclusive.

Recommendation #7: A motion carried that the purpose, composition, and terms of service of theEducation Committee be amended.

Proposed Purpose: To establish through planning and visioning processes the future initiatives for NAReducation, to manage the Graduate REALTOR Institute (GRI) program including the REALTOR Instituteaccreditation process, and to encourage cooperative educational efforts with the NAR societies, institutes andcouncils, state and local associations explore means of establishing coalitions with large imlependetHs.national real state companies, and other industry-related organizations. atfsoekttKms t<+4evek>r>t<*vpeFat»veeducation opportunities for members.

Proposed Composition: 30 3J_ members as follows: chair and vice chair, the immediate past chair: 2affiliate representatives one of whom should be a CRS; the chair of the state education directors, the chair otthe local education directors; 1 representative from a large franchise organization who serves in a trainingcapacity, (e.g. Director of Training), and 1 representative from a large independent firm who serves in a

6

training capacity, e.g., Director of Training; 1 ARELLO (Association of Real I state Licence I aw oHicuiKirepresentative; 1 REEA (Real Estate Educators'Association) representative: 1 representative Irom NAR'sBusiness Specialties group and 19 at-large members (one of which must be a Local Hoard or StateAssociation Executive), the majority being volunteers who have served their state association as theEducation Committee chair or ef the equivalent in the past five years.

Proposed Terms of Service: One Year Two-year staggered terms

Rationale: To revise and better define the purpose of the Education Committee as a committee that Mronghencourages cooperative efforts with NAR's Affiliates and member boards. To widen the scope of potentialreal estate organizations with which the committee encourages coalitions to include, but not limited to. kusjcindependents and national real estate companies. To add one representative from NAR's BusinessSpecialties Group to reflect this groups' increased contributions and active participation in real estateeducation. To change the terms of service from one-year to two-year staggered terms to provide continuityand carry over of awareness and knowledge of projects and issues for all committee activities. Currcnth.continuity of committee issues is not carried from year to year as the majority of the committee is new eachyear. Chair and Vice Chair would remain one year appointments in leadership role, with one additional \e.uof service as committee member. Knowledge of issues and back ground on committee decisions would curr\forward with one half of the committee being well versed on the critical issues that were addressed in theprevious year.

Recommendation #8: A motion carried that a new educational forum be created.

Proposed Name: Real Estate Education Forum

Reporting Group: The proposed Education Forum will be organized and programmed under the directionof the Education Committee and its leadership.

Proposed Purpose: To provide opportunities for presentations and idea sharing relating to newtechnologies, trends, and general real estate education best practices.

Proposed Composition: Open[Education Committee Chair and Vice Chair to serve as leadership. |

Proposed Terms of Service: N/A

Proposed Qualifications: Open to individuals with an interest in real estate education: no qualifications orrequirements to participate.

Staff Executive: Kenneth Burlington (IL)

Proposed Meeting Times:Midyear Legislative Meetings (one hour prior to Education Committee meeting)REALTORS® Conference & Expo (one hour prior to Education Committee meeting)

Rationale: To provide an open education forum intended to inform members, board staff, and real estateeducators of new developments, trends, and new technologies available in real estate education. Adding thi^forum will allow the Education Committee meeting to focus on substantive issues including the direction otthe education research projects, administration of the GRI designation and other matters requiring studvdecision making, and potential recommendations to the NAR Board of Directors. To provide a forum for the

7

open discussion of real estate education issues that the Education Committee may consider formallyaddressing.

Recommendation #9: A motion carried that the Meeting and Convention Committee and the ConventionProgram Advisory Group be merged and to rename the full committee.

Proposed Name: Meeting & Convention Conference Committee

Proposed Purpose: To determine policies and provide member input into the Program development andpromotion of Association meetings and conventions conferences to present innovative programming andexciting events for REALTORS that encourage participation by brokers and agents, both seasoned and ncuto the industry. To determine policies that ensure ensuring continuity, and maintenance of Associationstandards of professional excellence in all areas, providing long-term benefits to the membership andensuring the integrity of the Association in the hospitality industry.

Proposed Composition: 4-§> 29 members as follows: chair and vice chair, 2 immediate past chairs. 1 stateexecutive officer, 1 board executive officer, 1 Education Committee member, and 8 at-large members, andthe chairs of the following education forums:Auction ForumBusiness Technology & Information Systems ForumEconomic Issues & Commercial Real Estate Business Trends ForumEconomic Issues & Residential Real Estate Business Trends ForumEqual Opportunity-Cultural Diversity ForumInternational ForumLand Use, Property Rights & Environment ForumLegislative and Political ForumMarketing ForumMember Information Services ForumProperty Management ForumReal Estate Related Services ForumResort Real Estate ForumRisk Management & License Law Forum

Proposed Terms of Service:Chair and Vice Chair - one-year termImmediate Past Chairs - one year staggered termForum chairs - one year term concurrent with appointmentEducation Committee Member: one-year term concurrent with appointmentAt-large members, Board and State Association Executives two-year staggered terms

Proposed Qualification(s) for Consideration:For at-large members:

Has held a position on the Board of Directors within the past 3 years.Has attended the last five Annual Conventions Conferences.Has been actively involved in NAR committees for the past 5 years.Holds an affiliate designation (preferred).

Rationale: Policy issues have become rare and the committee has focused primarily on programming andpromotion for past six years. The Convention Program Advisory Group also focuses on programming withForum Chairs providing valued input based on their forum topic expertise. The Convention Program

8

Advisory Group has met the day before the Meeting and Convention Committee, providing their input to thecommittee on the following day. Merger will eliminate overlap in purpose and bring everyone together inone two-day meeting. Policy remains in purpose in the event issues arise. The committee's size of 29members is still conducive to the brainstorming nature of their work. The Education Committee member andForum Chairs are appointed for one term; participation on the Meeting & Convention Committee coincide-with their respective appointment. All other members, including the state and local board executive officersserve two-year staggered terms to maintain continuity which has been valuable in planning from year to war.Members may not always be able to attend five consecutive conferences. Currently the Meeting &Convention Committee only meets in January with the Convention Program Advisory Group. TheConvention Program Advisory Group also meets during the Midyear Legislative Meetings. The full(combined) group would have the opportunity to meet and address additional issues at Midyear.

REPORT OF THE TREASURER - Michael Brodie, Piano, Texas

Recommendation #1: A motion carried that the 2004 year-end financial statements as audited by BIX)Seidman, LLP be adopted for the consolidated entity of NAR, with RIN, RUB AC, the REAl TORS R RelictFoundation, and Sentrilock LLC (Exhibit 6, pages 24-54) and for the combined entity of NAR and itsaffiliated Institutes, Societies, and Councils (Exhibit 6, pages 55-59).

Recommendation #2: A motion carried that the following 2005 Operating Budget Adjustments, resulting ina revised 2005 Operating Budget of $13,251,893, be approved as follows (Exhibit 6. pages 60-97)

Recommendation #3: A motion carried that the following 2005 Capital Budget Adjustments, resulting in arevised 2005 Capital Budget of $12,212,590, be approved as follows (Exhibit 6, page 63).

Recommendation #4: A motion carried that a membership figure of 1,175,000 for 2006 & 2007 budgeting(includes full time equivalents) be approved (Exhibit 6, page 97).

Recommedation #5: A motion carried that the NAR dues remain the same (at $64.00 per member) tor 200oand 2007 (Exhibit 6, page 97).

Recommendation #6: A motion carried that a fiscal year 2006 operating budget consisting of Gross Non-Dues Revenue of $31,039,977 + Gross Dues Revenue of $75,200,000 and Interest Income of $4,987,000making a total Gross Revenue budget of $111,226,977, less Gross Expenses of $ 104.965.S62 leaving anExcess of Revenue over Expenditures of $6,261,115 and that a Capital Budget of $7.7()S,700 be approved(Exhibit 6, page 97).

Recommendation #7: A motion carried that a fiscal year 2007 operating budget consisting of Gross Nun-Dues Revenue of $33,401,632 + Gross Dues Revenue of $75,200,000 and Interest Income of $5,464,000making a total Gross Revenue budget of $114,065,632, less Gross Expenses of $109,095,394 leasing anExcess of Revenue over Expenditures of $4,970,238 and that a Capital Budget of $7,392,000 be approved(Exhibit 6, page 97).

Recommendation #8: A motion carried that a Special Assessment of $20 per member continue in effectfor 2006 (Exhibit 6, page 98).

Recommendation #9: A motion carried that 2006 Special Assessments of $23,500,000. less PublicAwareness Program Expenses of $25,000,000, leaving a deficit of ($ 1,500,000) be approved. Further, that

9

the $1,500,000 shortfall in funding the 2006 Public Awareness Program be balanced by applying SI .NMHMHI

of available carryover of unused excess Public Awareness Campaign Assessments (Exhibit 6, page lJX).

Recommendation #10: A motion carried that the Board of Directors be noticed in time tor (he OctoberConvention of the recommendation that the Special Assessment for 2007 remain at S20 per member,eliminating the $5 increase per member originally approved by the Board of Directors in May. 2004 (Exhibit6, page 98).

Recommendation #11: A motion carried that 2007 Special Assessments of $23,500,000. less PuhlicAwareness Program Expenses of $25,000,000, leaving a deficit of (S1,500,000) be approved. Further, thatthe $ 1,500,000 shortfall in funding the 2007 Public Awareness Program be balanced by applying SI .500.01 HIof available carryover of unused excess Public Awareness Campaign Assesments (Exhibit 6. page l)N).

Recommendation #12: A motion carried that NAR's current Member Travel Policy be amended toincorporate changes approved by the Finance Committee (Exhibit 6, pages c)9-102).

Recommendation #13: A motion carried that there be a permanent Reserves Investment Subcommitteewithin the Finance Committee, and further, that the Reserves Investment Subcommittee be comprised o\seven members, five of which must come from the Finance Committee, and that the Treasurer select themembers of the Subcommittee subject to the approval of the President. The Subcommittee members u illserve staggered three-year terms and not more than two consecutive three-year terms, ami shall beresponsible for implementation and oversight of the NAR Investment Policies, as approved by the FinanceCommittee and BOD. The Treasurer will chair the Subcommittee and be in addition to the seven members(Exhibit 6, page 103).

Recommendation #14: A recommendation carried that the creation and funding of Sentril.oek FinanceCompany, with a capitalization or investment level not to exceed $20 million be approved and further, thatthe funding take the form of either a direct capital investment or loss reserve /compensating balancearrangement to offset the credit risk of the local association loan pool.

LEED SILVER CERTIFICATION - AI Mansell, Midvale, Utah, President

The Washington building was awarded a Silver certification for achieving a high level of environmentalperformance as part of the Leadership in Energy and Environmental Design (LHFD) Green Building RatingSystem.

President Mansell accepted the award for the association which was presented by Karen Leigh Cook.President of EECOM.Inc.

SEARCH COMMITTEE REPORT - Mike Brodie, Piano, Texas, Treasurer

Recommendation #1: A motion carried that the Board of Directors delegate to the Leadership I earn theauthority to enter into an employment contract with the new EVP/CEO.

Rationale: The NAR Constitution provides that authority to select the LYP CLO rests w ith the Hoard «>!Directors. The Leadership Team would like the ability to finalize the selection of the candidate prior in ilu2005 October Conference. In order to finalize the selection, the Leadership Team is requesting that the

10

Board of Directors delegate to the Leadership Team the authority to enter into an employment contract withthe new EVP/CEO.

REALTORS® Information Network, Inc. (RIN) Director's Report - Michael Brodie, Piano. Texas.RIN Director

Brodie provided an update on the REALTORS® Information Network, Inc. (RIN) for the directors.

REALSELECT DIRECTOR REPORT - Terry McDermott, Chicago, Illinois, EVP/CEO

McDermott provided an update on the activities of RealSelect for the directors.

REALTORXOIVr/HOMESTORE REPORT - Allan Dalton, President, REALTOR.Com* and MikeLong, CEO, Homestore, Inc.

Long and Dalton provided the directors with an update on the REALTOR.COM activities and challenges torthe upcoming year.

POLITICAL FUNDRAISING UPDATE - Larry Von Feldt, Overland Park, Kansas, PoliticalFundraising Chair

Von Feldt thanked the directors for their support and reported that members have contributed $3.2 millionand 18 states have already reached their RPAC Fundraising goal. The Political Fundraising Committeeexpects to reach its member RPAC participation goal of more than 50 percent this year.

REALTORS® POLITICAL INVOLVEMENT COMMITTEE UPDATE Bob Snowdcn. Buffalo.Wyoming, Chair

Snowden urged the directors to work with members to increase registration on the NAR Action Center and torespond to NAR Calls for Action on important legislative issues. The committee set a 3 percent goal forAction Center participation among members this year.

RESOLUTION FOR ROBERT A. HOLLOW AY, BATON ROUGE, LOUISIANA Al Mansell

A motion carried to approve the resolution for Robert A. Holloway, Baton Rouge. Louisiana, as presented n»the directors.

REPORT OF THE DISTINGUISHED SERVICE AWARD COMMITTEE Benjamin Blair. Topcka.Kansas, Chair

Distinguished Service Award Committee Chair, Benjamin Blair, Topcka, Kansas, announced the 2005 DSARecipients, Steve Casper, ABR, Ohio and Richard Rosenthal, CRH, California, will be awarded theDistinguished Service Award for their political and community activities on behalf of REALTORS11 and for

11

their dedication to the REALTOR® association. The awards will be presented at the 2005 REALTORS HConference and Expo in San Francisco.

REPORTS OF THE COMMITTEES - Al Mansell

President Mansell thanked the chairs and vice chairs for their work. (Note: Copies of the Filed Reports canbe found in Exhibit 7 . Copies of the Reports of the Institutes, Societies and Councils can be found inExhibit 8. To obtain a copy of these exhibits, please call 312/329-8870.)

RISK MANAGEMENT COMMITTEE - Vice Chair David Mansell. Midvale. Utah, presented the reporton behalf of the committee.

Recommendation #1: A motion carried that the National Association of REALTORS K not adopt, endorseor recommend the current standards promulgated by the Real Estate Standards Institute ("RES I" former! vknown as "Touchstone for Excellence") because these standards do not reflect the standard of care in the realestate industry.

Recommendation #2: A motion carried that the Professional Standards Committee evaluate the relationshipbetween the RESI standards and the REALTOR® Code of Ethics (e.g., whether the RFSI standards will berelied on as a basis for complaints under Article 11 of the Code of Ethics).

LEGAL ACTION COMMITTEE - Chair Carol Shields, Pekin, Illinois, presented the report on behalf ofthe Committee.

Recommendation #1: A motion carried that NAR provide funding of $81,964.50 in four of the five easesfor which assistance was requested, as follows:

Jay Reifert v. South Central Wisconsin MLS (WI) Plaintiff commenced this class action antitrust suitalleging that Defendants South Central Wisconsin MLS and REALTORS(^ Association of South CentralWisconsin unlawfully tie the sale of MLS services to the purchase of services from a REALTOR KAssociation, in violation of the Sherman Act. Plaintiff further alleges that the named Directors of SCYVMI Sare also individually liable because they have the sole power to alter or repeal this policy and "met.discussed, conspired, ratified, and approved" the "forced" requirement of membership. The plaintiff aKoseeks to bring this case as a class action of persons that paid to participate in the MLS and also paid to bemembers of NAR and a state and local Realtor® Association.

NAR will contribute one-third of the fees and expenses not reimbursed by the E&O insurer, up to S3 5.000.

Lois Hekker v. Sarasota Association of REALTORS® (FL) Plaintiff commenced this class action antitrustsuit alleging that the Sarasota Association of REALTORS K unlawfully ties the sale of lock box andcomparable sales reports to the "purchase" of membership in a REALTOR1*- Association, in violation o!Section 1 of the Sherman Act. Plaintiff is a member of SAR although she could participate in the SAR \ll Swithout being a member because the association is in Florida where the Thompson decision precludeslimiting MLS access to association members only. She claims that she is a member of SAR only so that shecan participate in the lock box system and obtain comparable sales data, which are not available to non-member MLS participants, but would not maintain membership if she were not required to do so to obtainthose services. Plaintiff further alleges that the Directors of SAR are also individually liable for this allegedviolation of federal antitrust law because they alone have the power end to "forced" membership, but inMcad

12

"conspired to ratify and approve" and refused to end the membership requirement. The plaintiff also seeksto bring this case as a class action of persons who are members of SAR and purchased lock box serviceand/or comparable sales information from SAR.

NAR will contribute one-third of the fees and expenses not reimbursed by the E&.O insurer, up to $35,000

Stormwater NPDES Petition (VT) A new Vermont statute comprehensively reformed its stonnwatcrmanagement program, including a new system of stormwater discharge permitting, in order to protectVermont waterways. Complete implementation of the statute and program is ongoing. Included in thestatute is a provision that preserves marketable title for properties that discharge stonnwater to certainwaterways for which the owner has failed to comply with the applicable permitting requirements during the"transition" period before the full permitting program is implemented.

The Conservation Law Foundation petitioned the Vermont Agency for Natural Resources to require federalNational Pollutant Discharge Elimination System (NPDES) permits for stonnwater discharges into fivespecified watersheds pending full implementation of the state stormwater management program. TheAgency denied the petition and CLF appealed to the Vermont Water Resources Board, which held that an\property owner discharging more than a de minimisof amount of stonnwater run-off into the five \vaterwa\sat issue must obtain a federal NPDES permit under the federal Clean Water Act. ANR and certain affectedprivate parties filed a motion with the Vermont Supreme Court to stay that ruling pending appeal of theBoard's decision to the Supreme Court. The Vermont Association of Realtors K filed an amicus brief insupport of the request for a stay, which the Court granted. The issue of whether federal NPDES permits arealso required until the Vermont stormwater management program is fully implemented remains before theVermont Supreme Court.

NAR will contribute one-half of the expenses of $3,929 incurred by the Vermont Association in tiling itsamicusbrief, which is $1,964.50.

Helena Building Industry Association v. Lewis and Clark County, et. al (MT) Lewis & Clark Countyadopted new subdivision regulations that impose minimum water flow requirements, require sprinklers innew residential development, and impose a $1,000 per lot fee that can be paid in lieu of satisfying the waterflow and sprinkler requirements. The Helena Building and Industry Association intends to tile suit tochallenge these new subdivision regulations because their adoption docs not comply with Montana statuton.requirements for adopting such regulations; they exceed the authority of the County to adopt subdi\ isionregulations that address such matters; the $1,000 fee in lieu is not specifically reserved for tire protectionpurposes and thus constitutes an illegal tax, and is an unauthorized and unreasonable exercise of theCounty's authority; the water flow and per lot fee requirements do not bear a sufficient nexus to newdevelopment and are therefore an unlawful taking without just compensation and a violation of due process:and certain other claims.

NAR will contribute twenty percent of the fees and expenses incurred in the litigation, up to SIO.ooo.

PROFESSIONAL STANDARDS COMMITTEE - Chair Dale Mattison. Washington. DC. presented thereport on behalf of the Committee.

Recommendation #1: A motion carried that the maximum deposits that may be required to initiate appealsof ethics decisions and requests for procedural review of arbitration hearing procedures be increased from$250 to $500.

13

Rationale: Authorizes associations to recoup an increased portion of the costs incurred in conducting appealand procedural review proceedings.

Recommendation #2: A motion carried that effective immediately upon approval by the Board ofDirectors Professional Standards Policy Statement 48, Quadrennial REALTOR R Ethics Training, he-amended (underscoring indicates additions, strikeouts indicate deletions):

Effective January 1, 2001 through December 31, 2004, and for successive jour (4) year periods thereafter.REALTORS® are required to complete quadrennial ethics training of not less than two (2/ hours and third(30) minutes of instructional time. REALTORS® completing such training during any four (4) year cycleshall not be required to complete additional ethics training in respect of this requirement as a requirement <>jmembership in any other Board or Association.

A REALTOR® completing the new member Code of Ethics orientation during any four (4) rear cycle shallnot be required to complete additional ethics training in respect of this requirement until a new four (4) vciircycle commences.

Failure to complete the required periodic ethics training shall be considered a violation of a membershipduty for which REALTOR membership shall be suspended until such time as the required training iscompleted.

Members suspended for failing to meet the requirement for the first four (4) year cycle (2001 2(104/ willhave until December 31, 2005 to meet the requirement. Failure to meet the requirement bv that time willresult in automatic termination of membership.

Failure to meet the requirement for the second (2005 - 2008) cycle and subsequent four (4/ year cycles u iIIresult in suspension of membership for the first two months (January and February) of the year following theend of any four (4) year cycle or until the requirement is met, whichever occurs sooner. On March I of th a lyear, the membership of member who is still suspended as of that date will be automatically terminated.

Every Board and Association is required to provide access to necessary ethics training programs eitherlocally, in conjunction with other Boards and Associations, or through other methods (including, but notlimited to, home study, correspondence courses, or Internet-based instruction). Any training offeredpursuant to this requirement must meet the learning objectives and minimum criteria established by theNA TIONAL ASSOCIA TION OF REAL TORS® from time to time. (Adopted /1/99)

Rationale: Closes an unintended loophole that currently allows REALTORS R failing to meet their ethic*training obligation to remain suspended indefinitely without further consequences. This change authorize^termination of membership after a two (2) month period of suspension.

MULTIPLE LISTING ISSUES & POLICIES: Chair Deborah Dwyer, Pittsfield, MA. presented thereport on behalf of the Committee.

Recommendation #1: A motion carried that the Internet Data Exchange ("IDX") Policy be amendedeffective upon approval of the Board of Directors as follows (underscoring indicates proposed additions,strikeouts indicate proposed deletions): (Exhibit 9)

Associations of REALTORS® and their Multiple Listing Services are encouraged to immediately, and mu>,by January 1, 2002, enable MLS Participants to display on Participants' public websites aggregated MLS

14

active listing information subject to the requirements of state law and regulation. To comply with thisrequirement MLSs must, if requested by a Participant, promptly provide basic "downloading" of currentlisting information. Associations and MLSs can also offer alternative display options including framing <>}Board, MLS, or other publicly-accessible sites displaying Participants' listings (with permission of tin-framed site). For purposes of this policy, "downloading" means electronic transmission of data from Ml Sservers to Participants' servers on a persistent or transient basis, at the discretion of the \ll.S cAcludmg ilulisting or property address, respectively, of any seller who affirmatively directs thajjhc• listing or tinproperty address not appear on the Internet or other electronic forms of display or distribution.

MLSs that allow persistent downloading of the MLS database by Participants for display or distribution onthe Internet or by other electronic means may require that Participants (1) utilize appropriate sec untyprotection, such as firewalls, provided that any security obligations imposed on Panic ipants may not begreater than those employed concurrently by the MLS, and or (2) jnajjijain an audit trail oj consumeractivity on the IPX site and make that information available to the MLS if the MIS has reason to beln\e Oura Participant's IPX site has caused or permitted a breach in the security of the claiaj>r a violation of MISrules related to use by consumers. This policy does not require associations or MLSs to establish public l\accessible sites displaying Participants' listings.

Unless state law requires prior written consent from listing brokers, listing brokers' consent for such IPXdisplay may be presumed unless a listing broker affirmatively notifies the MLS that the listing broker retuu .to permit display (either on a blanket or on a listing-by-listing basis). If a Participant refuses on a blanketbasis to permit the IPX display of that Participant's listings, then that Participant max not tk**-nknHht>rframe display the aggregated MLS data of other Participants on an IPX site.

Alternatively, MLSs may require that Participants' consent for display of their listings by other Participant\on IPX sites be affirmatively established in writing. Even where Participants have given blanket autho n t\for other Participants to display their listings on IPX sites, such consent may be withdrawn on a listing-Inlisting basis as instructed by the seller.

Access to MLS databases of current listing information, or any part of such databases, max not be pro\ idedto any person or entity not expressly authorized such access under the MLS rules.

Participants Internet Web sites may also provide other features, information, or services in addition to IPXinformation (including Virtual Office Website ("VOW") functions) which are not subject u> this policy.

Policies applicable to Participants' IPX sites

L Participants must notify the MLS of their intention to establish an IPX site and jnake their IPX \itedirectly accessible to the MLS for purposes of monitoring/ensuring compliance u it_h_applica_ble_zid_es anilpolicies.

2, Participants must protect IPX information from misappropriation by employing reasonable ejjorts tamonitor and prevent "scraping " or other unauthorized accessing, reproduction or use oj the MLS danihasi

3^ Listings or property addresses of sellers who have directed their listing broker^ tojuOihoUl theirlisting or property address from display on the Internet (including, but not limited to. public hzocc essibU •Web sites or VOWs) shall not be accessible via IPX sites. Notwithstanding this prohibition, listing britkcrsmay display on their IPX sites or their other Web site(s) the listing or property address oj_conscn!ing sellers

15

4. Participants may exclude listings from display on their IPX sites based only on objective criteriaincluding, but not limited to. factors such as geography, list price, type of property, or cooperativecompensation offered by listing brokers.

5. Participants must refresh all MLS downloads and refresh all MLS data at least once every \even < ~jdays.

6. Except as provided elsewhere in this policy or elsewhere in an MLS '.s rules and regulations, an IPXsite or Participant operating an IPX site may not distribute, provide, or make any portion <>j the .Ml Sdatabase available to any person or entity.

]_. When displaying listing content, a Participant's or User's IPX site must clearly identify the name <>jthe brokerage firm under which they operate in a readily visible color and typeface.

Policies applicable to Multiple Listing Sen-ices

In addition, tThe following guidelines are recommended but not required to conform to National Associationspolicy. Pursuant to these guidelines, MLSs may:

1. prohibit display of expired, withdrawn, or pendins listings

1-2^ prohibit display of confidential information fields intended for cooperating brokers rather thanconsumers including compensation offered to other MLS Participants, showing instructions, propertysecurity information, etc.

3. prohibit display of the type of listing agreement, e.g. exclusive right to sell, exclusive agency, etc

4. prohibit display of seller 's(s ') and occupant 's(s ') name(s). phone number(s), and e-nniil addrcss(es)

25. require that any listing displayed identify the listing firm in a readily visible color and typcjcice notsmaller than the median used in the display of listing data

36. require that the identity of listing agents be displayed

47_. require that information displayed not be modified. MLS data may be augmented with additional datanot otherwise prohibited from display so long as the source of the other data is clearly identified. IJusrequirement does not restrict the format of MLS data display or display of fewer than ajl_oj_ the availablelistings or fewer authorized data fields.

58. require that any display of other Participants' listings indicate the source of the information beim:displayed and require Participants to refresh all downloads and re-fresh-aU tkiht-at lettfrt-tHR-e-t'verK- vev-r* < r<

9. require that other brokers' listings obtained from other sources, e.g., from other MLSs. from non-participating brokers, etc., display the source from which each such listing was obtained

410. require Participants to indicate on their websites that the information being provided is for consumerpersonal, non-commercial use and may not be used for any purpose other than to identify prospectiveproperties consumers may be interested in purchasing

16

-777. may establish reasonable limits on the amount of data/number of listings that consumers max retrn v*or download in response to an inquiry

SI2. limit the right to display other Participants' listings to a Participant's office(s) holding participatoryrights in the same MLS

13. require a notice on all MLS data displayed indicating that the data is deemed reliable but is notguaranteed accurate by the MLS. Participants ' IPX sites may also include other disclaimers nctv^san '<>protect the Participant and/or the MLS from liability

Additional local issues / options

1. Where MLS participatory rights are available to non-member brokers or firms as a mailer of law or locaidetermination, the right to display listing information pursuant to IPX may be limited, as a matter of /<>< <//option, to Participants who are REALTORS®.

2. MLSs may, but are not required to, limit the right to display listing information available pursuant to /7>\to MLS Participants licensed as real estate brokers.

3. MLSs may, but are not required to, limit the right to display listing information pursuant to IDX to MISParticipants engaged in real estate brokerage. This requirement can be met In maintaining an off hi- .>/Internet presence from which Participants are available to represent real estate sellers or buyers for b<>ih>

4. MLSs may, but are not required to, allow non-principal brokers and sales licensees affiliated wuh MISParticipants to use information available through IDXto populate their own websites.

Even if use of information through IDX is provided to non-principal brokers and sales licensees affiliatedwith MLS Participants, such use is subject to Participants' consent and control and the requirements of w'<//<law and/or regulation.

5. MLSs may, as a matter of local option, limit information which can be downloaded and or otherw /\rdisplayed under IDX to properties listed on an exclusive right to sell basis.

6. MLSs cannot prohibit Participants from downloading and displaying or framing other brokers' listingsobtained from other sources, e.g., other MLSs, non-participating brokers, etc., but can, as a matter of localoption, require that listings obtained through IDX be searched separately from listings obtained from nth.ersources, including other MLSs.

7. MLSs may, as a matter of local option, require Participants to consent to display of-tketr Its lings- b\- f*thrtParticipants under IDX as a condition of having their listings transmitted to aggregators-fmbltshcrs ttf retiiproperty ads.

87. MLSs may, as a matter of local option, charge the costs of adding or enhancing their "downloading"capacity to Participants who will download listing information. Assessment of such costs should reasonnhhrelate to the actual costs incurred by the MLS.

Rationale: Enhances the existing IDX policy by incorporating relevant provisions ot the VOW polio norpart of NAR's ongoing discussions with the Department of Justice.

17

Recommendation #2: A motion carried that a Statement of Multiple Listing Policy be adopted reading asfollows:

The listing broker is the owner of the listing and its content. Use of listings and listing information by \fl.Ssfor purposes other than the defined purposes of MLS requires Participants ' consent. Sue h consent cannot />«required as a condition of obtaining or maintaining MLS participatory rights nor can Participants Inrequired to transfer any rights (including intellectual property rights) in their listings to MLS to obtain ormaintain participatory rights. MLSs may require Participants to consent to storage, reproduction,compiling, and distribution of listings and listing information to the extent necessary to fulfill the definedpurposes of MLS. MLSs may also require participants to warrant that they have the rights in submittedinformation necessary to grant these rights to MLS.

Rationale: Clarifies that use of Participants' listings is limited to the defined purposes of MIS: thatunrelated uses require Participants' consent; and that granting such consent cannot be required as a conditionof participation in MLS. Also, MLSs cannot require Participants to transfer rights in their listings to MI S asa condition of participation.

Recommendation #3: A motion carried that the Board of Directors authorize the Leadership Team to:

1) try to resolve the Department of Justice investigation by modifying the IDX policy tocreate a single, uniform policy to govern all Internet display of MLS listings, and

2) approve or disapprove any proposed multiple listing policy changes.

Rationale: Provides authority to conclude the ongoing review of the VOW policy.

Recommendation #4: A motion carried that the following provision of the Virtual ()fticc Website("VOW") policy adopted May 17, 2003 be amended as follows (underscoring indicates additions, strikeoutsindicate deletions):

Effective date: The foregoing policies became effective upon adoption by the N AR Board o\ Directors onMay 17, 2003, except that (1) MLSs have until not later than July 1,2005 January 1. 2006 to adopt andimplement the foregoing policies and (2) Participants shall have until not later than 1X0 days followingadoption and implementation of these policies by an MLS in which they participate to cause their VOW tocomply with these provisions.

Rationale: Defers mandatory adoption of the VOW policy during the ongoing discussions with theDepartment of Justice.

EDUCATION COMMITTEE Chair Kerry Kidwell, Heyworth, Illinois, presented the report on behalt olthe Committee.

Recommendation #1: A motion carried that the REALTORS) Institute Policy Statement be purged ofredundant and obsolete language, and that sections in need of additional clarification be better defined in thePolicy as follows:

ACCREDITATION

18

Accreditation is an ongoing process involving NAR, the respective State Association, and a panel of peerreviewers. The purpose of accreditation is to maintain a quality program that continually meets the demandsand challenges of the ever-changing real estate profession. Effect i ve-J-aireary-l-W?. State Associations mustbe accredited as providers of the REALTOR® Institute program...

Annual accreditation review periods are from January 15 - October 15. Approximatel-y47 4i*tes w»H heaccredited annually. Accreditation peer reviews will be staggered throughout the review penotl Specificdeadlines will be included in the Accreditation Guidelines distributed annually to states being reviewed foraccreditation.

GRI PINS

A national standard Graduate, REALTOR® Institute pin i s-avail ah ltMt»-tht? State Asseeiatkms. StateAssociations should award pins or allow GRI designees graduittes to purchase pins upon completion of theprogram. Pins must be purchased through a licensed provider. Former graduates may purchase the nathmalpin from their State Association. Pins may be ordered by State Associations hv calling the CaliforniaAssociation of REALTORS® Inc. at 800/761 3676.

(NOTES: (1) It is essential that the comma always appear between the words "Graduate" and "REAL I < )K -Institute" as follows: "Graduate, REALTOR® Institute", with the exception of the "GR1" logo and (2) thaithe program is called REALTOR® Institute rather than REALTORS-* Institute.)

CHANGES TO THE GRI CURRICULUM

On a periodic basis the NAR required topics will be reviewed to determine if changes, additions or deletion^are needed. Feedback from a variety of sources will be encouraged as well as input from State AssociationsTho Designations & Certifications Program Subcommittee^'The Education Committee has oversight of theGRI curriculum and the accreditation process.

PROMOTION AND PUBLICITY

Promotion of REALTOR® Institute curriculum offerings should start-weU-w-atlvatret?—a-winimunv t+f MUdays. Announcements should be made at meetings of the State Association-antl-Hf the Local Board**-wfthmthe state as well as in their respective publications. Brochures or flyers-that-faH-y e*fvkmHhe prtwam-shtHiJtlbo distributed. Newspaper stories and personal contacts are helpful.

OVERVIEW

The REALTOR® Institute curriculum represents the minimum common body of knowledge for progrcssi\real estate professionals as defined by the Education Committee of the NATIONAL ASS( )CIA I K )N (>fREALTORS®. NAR recommends that the REALTOR® Institute program be completed within five (5)years of starting the program.

B. ELECTIVENote: The NATIONAL ASSOCIATION OF REALTORS*' will act as a clearinghouse for instructionaloutlines/objectives and examinations. During each accreditation period. State Associations will indicatewhat information (curriculum, objectives, examinations, etc.,) may be entered into the GRI ClearinghouseState Association education staff has access to the GRI Clearinghouse.

19

RECIPROCITY GRI RECOGNITION

GRI is a nationally recognized designation. It is important that the NATIONAL ASSOCIATION ()IREALTORS® provide its members throughout the country with a RHALTOR K Institute course ot study thatis recognizably similar from state to state. Only with a degree of standardization is this possible.

Individuals who have received the GRI designation from one State Association must be grantedunconditional reciprocity recognition by every other State Association.

EQUIVALENCY

In cases where individuals take GRI courses out of state, State Associations must review the individualsstudent's GRI course records or course curriculum on a case-by-case basis to determine what part of the (iRIprogram is transferable. State Associations may assess a reasonable fee for this service.

Recommendation #2: A motion carried that the REALTOR K Institute Policy Statement be revised to:

A. Require an examination for GRI programs provided via alternative delivery methods, such as the Internet

THE CURRICULUM

A. REQUIRED

The curriculum is based upon a set of required, broad competencies, topics, and expected student learningoutcomes. State associations must develop specific, measurable learning objectives to correlate with theirrespective program curriculum. Course or Module examinations should include test items that correspond tothe required instructional objectives. Delivery methods other than live classroom instruction must include anexamination that corresponds to the required instructional objectives.

B. Require a statement in marketing announcements indicating which states have authorized thecourse to count for GRI credit.

PROMOTION AND PUBLICITY

NAR will direct its promotion efforts to assisting State Associations. NAR will offer to State Associationsstatistical information for inclusion in state GRI marketing and promotion plans. Marketing and courseannouncements must include a statement regarding which states have approved this course tor GRI credit.

C. Include a noncompliance statement indicating penalty for noncompliance with any aspect of theGRI Policy.

PROCEDURES FOR CONSIDERATION OF ALLEGED VIOLATIONS OF REALTORSINSTITUTE POLICY

Alleged violations of the REALTOR® Institute Policy will be received and reviewed by the chairman andvice chairman of the Education Committee in consultation with staff and counsel. A written response vs i II berequested from any state association so charged. Staff and counsel will then attempt to provide teclinical andprocedural assistance to the association cited in the complaint when deemed appropriate bv the chairman andvice chairman. Where the efforts of the Committee leadership and staff are unsuccessful, thc a\lcgcd

20

violation of the REALTOR® Institute Policy will be considered by a special hearing panel _o 1 five member sof the Education Committee selected by the chairman that will meet at one of the regularly scheduledmeetings of the National Association or, where deemed necessary by the president, at a special meetingcalled for the purpose. Any challenge to the qualifications of a panel member shall he decided by thechairman. The burden shall be on the complainant to show that the state association has violated theREALTOR® Institute Policy.

Both the complainant and respondent may submit supporting documentation of no more than IOC) pages 111support of the alleged violation or in support of the state association's response to the charge. Such mat en a I smust be received by the National Association no later than 30 days prior to the date of the hearing and \yil]be provided to the members of the hearing panel prior to the hearing.

Both the complainant and the respondent may be represented by counsel at the hearing. The procedures u>_hcfollowed at the hearing will parallel, as closely as possible, those established in the ('ode <)JJ\tl>ucs_cuhiArbitration Manual for the conduct of an ethics hearing, in effect at the time the complainant is received b \the National Association. Any variations from the procedures established in the C 'ode of Ethics andArbitration Manual will be made at the discretion of the chairman of the Education Committee.

The decision of the hearing panel will be provided to the parties no more than 60 days after the hearing. Thedecision will be signed by a majority of the hearing panel members or alternatively, will be accompanied hvcertification from staff that the panel's decision has been reviewed by and is concurred in by a majority _o fthe hearing panel members.

If either the complainant or respondent chooses to appeal the hearing panel's decision, a written request torappeal must be filed with the National Association within 30 days of receipt of the decision by the partiesThe request for appeal must specify, in detail, the bases on which the hearing panel's decision is beingchallenged. Upon receipt of a request for appeal, staff will put the matter on the agenda of the EducationCommittee at its next regularly scheduled meeting. The appeal hearing will be the final matter of business onthe committee's agenda and will be considered in executive session. The party requesting the appeal wi11have 15 minutes to explain why the decision of the hearing panel should be modified or should not headopted. The chairman of the hearing panel will then have 15 minutes to respond. Followi ng that, the pa rt srequesting the appeal, the chairman of the hearing panel, and the non-appealing party will each have 5minutes to offer any rebuttal and to make any closing statement. Following this, the parties will bedismissed.

Following the closing statements, the Education Committee will remain in executive session for the purpi> s eof determining whether the hearing panel's decision should be affirmed, modified, or reversed. The deci s i o nof the Education Committee will be final and binding and not subject to any further review or appeal vvI t h thesole exception that any recommendation that a state association's accreditation to confer the CiRI designationbe terminated shall be reported to the Board of Directors with the final decision to he made hv the directors

In instances where no appeal is made to the decision of the hearing panel within the allotted 30 davs. thedecision of the hearing panel will be considered final and binding and not subject to further review or appeaIbut shall be reported by the chairman of the hearing panel to Education Committee at the next regularlyscheduled meeting for informational purposes. Any recommendation that a state association's accreditationto confer the GRI designation be terminated shall be reported to the Board of Directors with the finaldecision to be made by the directors.

21

Recommendation #3: A motion carried that the REALTOR00 Institute Policy Statement he revised tochange the timing for State Associations to be reaccredited as providers from three years to five years asfollows:

ACCREDITATION

Accreditation is an ongoing process involving NAR, the respective State Association, and a panel of peerreviewers. The purpose of accreditation is to maintain a quality program that continually meets the demandsand challenges of the ever-changing real estate profession. Effective January 19()7. State Associations mustbe accredited as providers of the REALTOR® Institute program every thfee five years.

Recommendation #4: A motion carried that State Associations have the authority to confer the C iKIDesignation to their members, and that State Associations shall establish criteria to be used when entennuinto equivalency agreements with other states as follows:

DESIGNATION

"Graduate, REALTOR® Institute" (GRI) is the designation awarded by State Associations to those theirmembers who successfully complete the full course of study and examinations (or equivalencyexaminations) which meet the minimum requirements for such a course of study as established by theEducation Committee of the NATIONAL ASSOCIATION OF REALTORS'* and approved b\ the Board .»tDirectors of the National Association.

EQUIVALENCY

In cases where individuals take GRI courses out of state, State Associations must review the individualsstudent's GRI course records or course curriculum on a case-by-case basis to determine what part of the (iklprogram is transferable. State Associations may assess a reasonable tee for this service.

State Associations shall establish criteria to be used when entering into equivalency agreements with otherstates. Equivalency credits cannot be unreasonably denied. A state association whose program has beendenied equivalency may request review pursuant to the Procedures for Consideration of Alleged Violationsof the REALTOR® Institute Policies to determine whether the denial was unreasonable.

L A N D USE, PROPERTY RIGHTS & E N V I R O N M E N T C O M M I T T E E C hair t-d Tugaw. BnuhamCity, Utah, presented the report on behalf of the Committee.

Recommendation #1: A motion carried that the NAR policy statement on Property Rights be amended[bolded language] as follows:

Governments shall not arbitrarily infringe on the basic right of the individual to acquire, possess and Irechtransfer real property, and shall protect private property rights as referred to in the 5th and 14th Amendmentof the United States Constitution.

We support legislative implementation of the 5th Amendment's guarantee of compensation when propert\rights are taken. Every person should have the right to acquire real property with confidence and certaintvthat the use or value of such property will not be wholly or substantially eliminated by governmental actionat any level without just compensation or the owner's express consent.

22

In addition, we support legislation which will provide property owners expeditious aeeess to administrate eand judicial systems at all levels - local, state and federal - to pursue Fifth Amendment takings claims orrelief from other property rights violations.

We recognize the need for all levels of government to be able to exercise legitimate police powers in theregulation of private property to protect the health, safety and general welfare of its citizens. However, u hengovernment actions or regulations are not founded within legitimate police powers, the government shouldbe required to pay compensation for the inordinate burden levied on the property owner.

Likewise, when a government entity exercises its eminent domain power to condemn private propertv forpublic use, the government should provide - as required by the 5th Amendment - "just" compensation toaffected property owners that covers not only the value of the property condemned but also all otherreasonable and necessary costs generated by the condemnation action - e.g.. hiring legal counsel, obtainingtemporary housing, lost business revenue and severance damages.

Furthermore, when a government entity exercises its eminent domain authority, it should do so only u hennecessary to materially advance a real and substantial public purpose or benefit. ITie government shouldprovide persuasive, objective evidence that the project, and the resulting public purpose or benefit, will infact be realized.

Rationale: Eminent domain is recognized by U.S. courts as a fundamental power of government. However,this government power is restrained by the 5th Amendment of the U.S. Constitution, which provides "...norshall private property be taken for public use, without just compensation." This restraint on governmentpower applies to state and local governments, and private bodies exercising delegated power, by the DueProcess clause of the Fourteenth Amendment.

Eminent domain is one of several tools for achieving economic development available to governmententities. Since eminent domain impacts the Constitutional rights of property owners, it should be exercisedcarefully and only in special circumstances. This is especially true in situations where a condemnationaction transfers a property interest from one private party to another. In these cases, condemnation raises theissue of whether it is intended to achieve a "public use" as required by the 5th Amendment. The meaning of"public use" changes over time as society evolves, and a determination of whether a condemnation action iexercised for public use depends on the facts of each situation. Therefore, it is important that a governmententity be required to justify any condemnation action in order to ensure, as much as possible, that under thecircumstances it is both necessary and likely to achieve a real and substantial benefit for the community.

In addition, a property owner affected by a condemnation action incurs costs above and beyond the loss ofthe subject property. Considerations of fairness and reasonableness require that payment of "just"compensation, as directed by the Constitution, must cover these additional costs.

EQUAL OPPORTUNITY COMMITTEE - Chair Adrian Arriaga. McAllen. Texas, presented the reporton behalf of the Committee.

Recommendation #1: A motion carried that NAR support a safe harbor for properties that are incompliance with current accessibility requirements when those requirements are changed, such that new andchanged requirements apply only when there is modification to the property and then only to the modifiedportion of the property. For new construction, the effective date for any changes to accessibility

23

requirements should provide sufficient time to ensure that designs can he changed prior to the issuance of abuilding permit, and only after new requirements are published in the International Building Code.

Rationale: The U.S. Department of Justice is modifying the rules for the Americans with Disabilities Act(ADA) to bring consistency with recent changes in the Architectural and Transportation Barriers ComplianceBoard (Access Board). Title III of the ADA applies to "places of public accommodation" including realestate offices. Both existing and new facilities are required to comply with ADA standards. Changes inaccessibility rules raise questions concerning how these rules impact existing facilities and new construction.Requiring existing facilities to be remodeled each time accessibility requirements change would be costlyand disruptive and is inconsistent with building codes which generally do not apply retroactively to existingfacilities. For new construction, the time between the date the government publishes new rules and theireffective date should provide developers with maximum flexibility in the design and permitting process toassure compliance with both federal accessibility standards and local building codes.

Recommendation #2: A motion carried that NAR support efforts by HUD to provide translations andinterpreters for beneficiaries of federal housing programs per the following conditions:A. HUD translates all its documents required for the programs into all required languages,B. Translated documents state that the English language version is the enforceable version of the document.C. HUD compensates housing providers for the additional costs of translation and of using translateddocuments and interpreters,D. HUD indemnifies housing providers who use HUD translations should there be a conflict between thetranslation and the English language original.

Rationale: HUD is considering guidelines for agencies and housing providers that receive federal assistanceon when and how they should provide translations of documents or interpreters to communicate with peoplewho have limited proficiency in English. Having the ability to speak in languages other than English is aneffective way to address diverse and immigrant populations. Providing explanations or translations ofcontracts and other important documents in other languages often helps buyers and sellers understand thesedocuments and contracts. However, in many communities there are over 100 languages spoken by peoplenot proficient in English.

Schools have been required by the federal courts to communicate with a student's family in their language ifthey are not proficient enough in English to understand important communication in English. As a result ofthis requirement, an Executive Order issued by former President Clinton requires all federal agencies todevelop methods to assure that people with limited English proficiency are provided important informationin their language.

Title VI of the Civil Rights Act of 1964 prohibits discrimination on the basis ot national origin in federalhousing programs, including project based and certificate based Section 8 rent subsidies. The guidance III l>is considering would apply to all housing providers that receive federal assistance. HIT) has been indiscussion with interested parties regarding the scope of the requirements, the threshold levels for providingtranslations and interpreters, the thresholds for specific languages, and balancing the costs and benefits ofthese requirements.

Many subsidized properties have long term contracts with HUD to provide subsidized rents. In additionsome communities prohibit a property owner from refusing to accept tenants using Section S certificates.Providing translations and interpreters will increase the cost of providing housing, but the housing pro\ idcroften does not have the option to withdraw from project accounts. Inconsistency in the quality oftranslations raises other issues including the liability for improperly translated documents.

24

CONVENTIONAL FINANCE AND LENDING COMMITTEE Chair Peter Rubin. Cherry Hill. NewJersey, presented the report on behalf of the Committee. (Exhibit 10)

Recommendation #1: A motion carried that NAR approve the Subprime Lending Work Group reportrecommending a three-pronged approach to combating predatory lending:

A. Build on the public awareness campaign to raise awareness of this issue.NAR's 2005 public awareness campaign already includes a new tagline: "Talk to a REALTOR R first."This provides a great platform for encouraging REALTORS K to use their central position in the purchasetransaction to help consumers become more financially literate and avoid predatory lending.

B. Foster consumer education.The Report recommends that NAR encourage REALTORSX to:a) Work with existing programs to help consumers qualify for fair and affordable financing;b) Refer consumers to information about financial literacy, including how to avoid predatorylending; andc) Refer consumers, when appropriate, to reputable credit and housing counselors. This will include postinglinks on Realtor.org.

C. Support stronger anti-predatory lending legislation and regulations.The report provides a set of principles for NAR staff, the Committee, and others in NAR's leadership as the>consider anti-predatory lending legislation and regulations. The Work Group reviewed many possibleimprovements to the Home Ownership and Equity Protection Act of 1994 - known as HOEPA - thatprotects borrowers with certain high-cost mortgages. The report recommends a long list of improvements toHOEPA. While not every item on the list is likely to be included in legislation or regulations, NAR shouldonly support proposals that take a strong stand against predatory lending, including as many of the items aspossible.

Rationale: The Subprime Lending Work Group was formed at the 2004 Mid-Year meetings to developrecommendations for consideration by the Conventional Finance and Lending (CFL) Committee forstandards for NAR to use in evaluating proposed state and federal legislation and regulations. The objectiveis to develop standards that represent a balance for continued valid uses of subprime loans for borrowers u ithimperfect credit while avoiding predatory (abusive) lending practices. Having detailed policy guidance willfacilitate NAR's participation in complex negotiations likely among all affected groups and Congress orfederal regulatory agencies.

ADJOURNMENT - Al Mansell

There being no further business, the meeting adjourned at 11:45 a.m.

2005_BOD Midyear_Minutes.doc5/31/05

25