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Mark-to-Market Addressed at House Hearing
The House Financial Services Capital Markets Subcommittee held a hearing this week on mark-to-market accounting problems. Mark-to-market requires banks to value assets based on their current market price. It has been blamed by many in the financial and business community for exacerbating the current financial crisis by forcing lending institutions to write down the value of billions of dollars of their holdings—including illiquid mortgage securities—making it difficult for some of them to meet their capital regulatory requirements.
NAHB has joined a recently formed coalition that includes the Mortgage Bankers Association, Independent Community Bankers of America, U.S. Chamber of Commerce, Financial Services Roundtable, several of the Federal Home Loan Banks and others to seek solutions to the mark-to-market accounting problems that will allow for greater flexibility in applying the rules.
While NAHB will continue to work with the coalition on the mark-to-market issue, such changes will not directly address problems builders are experiencing with their acquisition, development and construction (AD&C) financing where lenders are requiring additional equity for outstanding credit and balking at loan extensions.
NAHB is urging regulators and lenders to give leeway to residential construction borrowers who have loans in good standing by providing flexibility on re-appraisals, loan modifications, and perhaps forbearance on loans to give builders time to complete and sell their inventory.
The AD&C issue will be a major part of the upcoming Legislative Conference on March 24, where members of Congress will be asked to urge banking regulators to provide this flexibility. In addition, we will seek an allocation from the financial “bailout” funds to allow banks to avoid excessive equity calls and other adverse actions on performing loans.
For more information on this issue, contact Scott Meyer at 1-800-368-5242, x8144; or John Dimitri, x8529.
Read the full article in NAHB's Washington Update.
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