| December 8, 2009 |
By Joe Robson
NAHB Chairman and
Jerry Howard
NAHB Chief Executive Officer |
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Meeting with the Federal Reserve Chairman
and several Fed governors today, NAHB's Senior Officers and members representing a broad swath of our federation -- including both single-family and multifamily builders -- discussed the state of the home building industry and ongoing challenges in housing finance.
 This week's edition of the Monday Morning Briefing is coming to you a little late, because we wanted to be able to report on our latest outreach to federal regulators, which happened just today. Our members took the opportunity to provide the Chairman with first-hand accounts of the experiences they have had in trying to obtain financing for viable projects. They were specific in their concerns about the lack of credit and the severe impact this is having – and will continue to have – on the fragile housing and economic recovery. While no promises were expected or made by the Federal Reserve at this time, the chairman and governors were very attentive to our concerns and asked several insightful questions. Going forward, we will continue reaching out to every possible regulator, bank agency and legislator who has the ability to help restore the flow of credit to our industry.
WHAT THIS MEANS TO YOU: As a member of NAHB, your voice is heard by those who have the ability to take action toward resolving the challenges confronting our industry. NAHB is working every day and reaching out to every possible resource to communicate builders' concerns about the ongoing credit crunch and other issues that affect your business.
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FHA will tighten rules for borrowers
 as it seeks to bolster agency finances, said HUD Secretary Shaun Donovan in testimony before the House Financial Services Committee on Dec. 2. Specifically, FHA proposes to increase the up-front cash and raise minimum credit scores for borrowers who receive FHA-backed mortgages, and to limit seller assistance to buyers in terms of paying closing costs or giving free upgrades. The idea is to increase the amount that borrowers invest in the homes they buy in order to discourage them from defaulting on loans or walking away from underwater mortgages. According to Secretary Donovan, with the FHA now backing about 30% of all loans for home purchases and 20% of refinancings, tighter risk controls are needed now than when the agency had a much smaller volume of business prior to the housing downturn. To date, however, FHA officials have not yet decided how much to increase up-front cash requirements for borrowers. As for seller concessions, the agency now allows sellers to provide 6% of the home's value; Donovan said he wants the maximum permissible level lowered to 3%, in line with industry norms. In addition, agency staff are reviewing whether to increase the monthly insurance premiums charged to borrowers. Meanwhile, to protect itself against the riskiest borrowers, the agency has decided "for the time being" to raise its minimum credit score requirements for new borrowers – but again, staff are still determining what the new threshold should be. Read more in this Washington Post article or view Secretary Donovan's testimony here.
FHA's proposed changes would have a significant impact on borrowers' ability to obtain FHA-insured loans. However, several of the proposals would require changes in the law, and the HUD Secretary did not provide a timeline for implementation of any of the changes he mentioned. Going forward, NAHB will continue to interact with HUD and FHA to ensure that viable mortgage borrowers are not prevented from using this essential financing assistance. Send questions to: MondayMorningQuestions@nahb.org.
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EPA's finalized Construction and Development ELG rulemaking
 was posted in the federal register on Dec. 1, and this long-anticipated regulatory action will have significant ramifications across our industry. The rulemaking establishes the minimum control technologies that must be incorporated into every construction storm water permit issued by EPA and authorized states; nationwide implementation will occur over a four-year timeline. For the first time ever, the effluent limitation guideline (ELG) will require monitoring of construction site discharge to meet a numeric limit. This limit, set at 280 NTU, is considerably less stringent than the 13 NTU limit that the EPA had previously proposed – but it will still be extremely difficult for many projects to achieve, especially in areas where the naturally occurring NTU rate is even higher. However, where the EPA had proposed to mandate the use of extremely costly Active Treatment Systems, this requirement was dropped in the final rulemaking. At this time, NAHB experts are thoroughly analyzing the EPA's latest rulemaking to determine (1) how the EPA can justify the numeric limit it chose; (2) ramifications for the industry; and (3) next steps. Read more in Nation's Building News Online, or send questions to: MondayMorningQuestions@nahb.org.
While this additional regulation is by no means a welcome development, it is worth noting that, as a direct result of comments that EPA received from NAHB and others, the agency could not justify promulgating its originally proposed standard due to significant concerns about costs, benefits and available technology. Going forward, NAHB will continue working to alleviate the ever-growing regulatory morass faced by our members.
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More than 2400 proposals for building code changes
 were debated over the course of 16 grueling days of International Code Committee (ICC) hearings in Baltimore last month, and NAHB's codes experts were on the job fighting for the best possible outcomes for our members. In all, NAHB took a position on over 900 of the proposed code changes, including 54 proposals submitted by us. NAHB was represented on 10 of the 14 ICC Code Committees during the hearings, and thanks to this representation as well as the hard work of our staff and member volunteers, we were fairly successful in this round of decisions. Key issues included: (1) energy conservation; (2) structural requirements; (3) carbon monoxide detectors; (4) accessibility and visitability; and (5) whole-house ventilation. Unfortunately, there were a couple of places where we didn't fare so well; for example our "Home Builders 30% Solution" for energy efficiency was disapproved for inclusion in the International Energy Conservation Code in this round, along with five similar proposals by other groups. Also disapproved were two NAHB proposals that would have removed the mandatory requirements for sprinkler systems in one- and two-family homes.
Nation's Building News Online has all the details on the latest round of code development hearings, so be sure to check that out when you can. In the meantime, our staff is currently in the midst of assessing the outcome of the hearings and preparing to submit public comments that are due in early February. Contact MondayMorningQuestions@nahb.org for more info.
WHAT THIS MEANS TO YOU: Whenever building code changes that will affect your business are being debated at the national level, NAHB's experts are there to represent your views and ensure the best possible outcomes that will promote safety, affordability, efficiency and common sense within the building process.
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Connecting builders and developers with new financing sources
is the aim of a great new offering called the Partnership Pavilion that NAHB is developing for the 2010 International Builders' Show (IBS) this January, and our members who wish to participate can now signify their interest using this online form.
Given the severe lack of available credit for acquisition, development and construction (AD&C) financing that our members are currently facing, an innovative approach was called for to help them access new sources of debt and equity financing while reinvigorating the traditional sources of housing credit – which is precisely why the Partnership Pavilion is being launched. And, since the IBS is the largest and best-attended annual building industry trade show in the country, it just makes sense to provide a confidential setting within that venue where our members can meet one-on-one with potential new backers for their projects. As envisioned, the pavilion will be a centrally located forum with private office space and concierge services during the International Builders' Show this Jan. 19-22 at the Las Vegas Convention Center. Here, NAHB members will have the opportunity to discuss their funding needs with representatives of a variety of capital sources and financing advisors.
Builders and developers who are interested in participating in the Partnership Pavilion will need to qualify in advance of the show by providing specific information on their proposed projects via an online portal that will soon be available at nahb.org/partnership; you can sign up to be notified when that portal is available by visiting this page right now. Potential funding sources will review the information that is submitted by our members, and those who are interested in further exploring a given deal will be able to set up a meeting at the pavilion with the designated applicant. Please visit our Web site at www.nahb.org/partnership for more information. Send questions on this item to MondayMorningQuestions@nahb.org.
WHAT THIS MEANS TO YOU: The Partnership Pavilion at IBS is just one way that NAHB is fighting to help open up the lines of credit for acquisition, development and construction financing in the residential building sector. Through this unique new program, our members now have an unprecedented opportunity to explore alternative as well as traditional funding sources that previously might not have been available to them.
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Mortgage rates hit a record low last week,
 falling for a fifth consecutive time to an average of 4.71% on a 30-year fixed loan for the week ended Dec. 3, according to a Freddie Mac survey. This was down from the previous week's 4.78% average, which had tied the earlier record low set in April. According to Freddie Mac Chief Economist Frank Nothaft, "Interest rates for 30-year fixed-rate loans are currently 0.8 percentage points below this year's peak set in mid-June, which shaves roughly $100 off the monthly payments on a $200,000 mortgage." To put the low rates in perspective, 30-year rates were at 5.97% about a year ago, and back in 2007, they were approaching 7%.
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Sales of new single-family homes rose 6.2% in October
 to a seasonally adjusted annual rate of 430,000 units, according to data released by the U.S. Commerce Department on Nov. 25. The median sales price of new homes sold in the month was $212,000; the average sales price was $261,100. Meanwhile, the number of unsold new homes on the market stood at 239,000, or a 6.7-month supply at the current sales rate. This government report came on the heels of the National Association of Realtors' report on existing-home sales, which showed a 10% gain in October from the previous month. Both new and existing sales numbers were higher than year-ago levels this time around. Read the government's report online here.
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