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Appraisal and AD&C Problems Hamper Housing Recovery
Inappropriate appraisal practices and the acquisition, development and construction (AD&C) lending crisis that has choked off credit for home builders threaten to prolong the current housing and economic downturn, NAHB told Congress on July 23. Testifying before the House Small Business Committee's Subcommittee on Finance and Tax, NAHB Chairman Joe Robson said these two issues “are placing enormous pressure on home builders’ bottom lines and, for many, endangering their ability to survive the economic downturn. Additional credit resources could be extremely helpful to them and other small businesses to bridge the divide and survive to the eventual economic recovery.”
The inappropriate use of distressed and foreclosed sales as comparables in determining new home values is needlessly driving down home prices and forestalling an economic recovery, he said, citing a recent NAHB survey that found 26% of builders losing sales because appraisals on their homes are coming in below the contract sales price.
These appraisal practices are a major contributing factor to the current AD&C credit crisis. Falling appraised values for land and subdivisions under development have led some financial institutions to stop lending to developers and builders, to demand additional equity and even to call performing loans.
NAHB is calling on housing and federal financial regulators to adopt clear, concise regulatory guidelines that will allow appraisers to develop realistic valuations based on sales that are truly comparable.
To maximize the ability of the Small Business Administration (SBA) to help home builders and other small businesses gain access to credit, NAHB recommends increasing funding and the loan size for the America’s Recovery Capital loan program, he said.
This program offers small businesses guaranteed deferred-payment, interest-free loans of up to $35,000 that can be used to pay principal and interest on existing loans; qualify small business debt, including mortgages; and for other purposes. The $255 million program continues through Sept. 30, 2010 or until its funding is exhausted.
NAHB also supports proposed improvements to the SBA 7(a) program, which provides capital for a range of purposes — including construction and supplies — to increase the participation of non-traditional lenders in SBA programs.
Finally, Robson commended the committee’s proposal to establish a supplemental loan assistance program to complement the lending initiatives currently administered by the SBA. A primary objective of this program would be to target businesses with capital needs in excess of $10 million.
“Like all small businesses, home builders vary in size and many would find much greater benefit from a program that would expand and increase loans for businesses with higher capital needs,” said Robson.
For more information, e-mail Greg Brown at NAHB, or call him at 1-800-368-5242, x8421.
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House Approves $123.1 Billion for Transportation, Housing Programs
The House on July 24 approved a $123.1 billion fiscal 2010 Transportation, Housing and Urban Development (THUD) Appropriations Bill by a vote of 256-to168. The Senate is not expected to consider its THUD bill until mid- to late-September. The House measure would provide $47 billion for the Department of Housing and Urban Development, including $18.04 billion for tenant-based Section 8 rental assistance and $8.1 billion for project-based Section 8 rental assistance.
In other areas of interest to home builders, the spending bill would provide $250 million for the Hope VI program, $4.6 billion in Community Development Block Grants, $25 million for brownfields redevelopment, $2 billion for the HOME program and $70 million for housing counseling assistance.
The legislation would also extend the current Federal Housing Administration, Fannie Mae and Freddie Mac conforming loan limits through Sept. 30, 2010.
The House is expected to complete action on its fiscal 2010 Labor, Health and Human Services and Education Appropriations bill this weekend.
Both the House and Senate are required to complete the annual appropriations process prior to the start of the next fiscal year, which begins on October 1, 2009.
For more information, contact Jenna Hamilton at x8407.
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House Panel Approves Section 8 Voucher Reform Act
On July 23, the House Committee on Financial Services approved H.R. 3045, The Section 8 Voucher Reform Act of 2009 (SEVRA). H.R. 3045 is a revised version of a SEVRA bill passed last year by the House, which NAHB supported. NAHB also supported the companion Senate legislation, which was substantially similar to the House measure, although the Senate did not act on its bill.
H.R. 3045 contains several important provisions supported by NAHB, including streamlining of the unit inspection process, a revised funding formula for the program that ensures stability of the flow of funds to public housing agencies (PHAs), and improvements to the Section 8 project-based voucher program. It would also restore previous assistance levels by authorizing 150,000 new vouchers.
However, there are a few outstanding issues of concern to NAHB. H.R. 3045 omitted provisions related to ensuring that persons with Limited English Proficiency can access HUD housing programs, which were included in the earlier SEVRA bill. Housing industry groups are also concerned that the bill would change screening requirements for new Section 8 voucher applicants. Staff will continue to work with committee members to address these issues as the bill moves forward. There is no Senate companion bill at this time.
To view the legislation, click here and type the bill number in the box in the upper center screen. For more information, contact Claudia Kedda at x8352.
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