Washington Update - 04/18/2008 (Plain Text Version)

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Builders Report Credit Squeeze on Loans to Build Homes

Maryland builder and 2000 NAHB President Bob Mitchell testified on April 16 before the Senate Small Business Committee during a hearing on “Impacts of the Credit Crunch on Small Firms.” Mitchell said that the mortgage credit crunch has spilled over into land acquisition, land development and home construction (AD&C) lending, and urged lawmakers to consider several avenues to broaden sources of AD&C credit.

“This credit crunch actually appears to be worsening despite the concerted efforts of central banks here and abroad,” said Mitchell. “Tighter mortgage lending terms have made it difficult for home buyers to obtain financing to purchase new homes. Likewise, there have been dramatic adverse swings in the cost and availability of AD&C loans for home builders.”

To broaden sources of AD&C credit, Mitchell called for:

Fannie Mae to ramp up activity in its AD&C loan purchase program and for Freddie Mac to create a similar program.
Federal Home Loan Banks to improve AD&C liquidity by accepting housing production loans as collateral for the secured advances they make to member institutions.
The Federal Housing Administration to help increase competition in the AD&C market by insuring the construction portion of these loans in order to attract new originators such as mortgage banking companies. “As in the case of the end-loan mortgage market, FHA could be a crucial stabilizing force in AD&C lending in turbulent times such as these,” said Mitchell.
Wall Street specialists to develop prototype private security instrument for AD&C loans. In particular, changes to tax provisions relating to Real Estate Mortgage Investment Conduits and Taxable Mortgage Pools could be helpful in securitizing construction loans.
Banking regulators to take a balanced approach when evaluating bank lending, especially in regard to AD&C loans. “Small businesses, including small builders, are vital to the economy and arbitrary or unreasonable regulatory restrictions would only serve to harm many builders, and potentially, many banks,” said Mitchell. “It would be ironic and tragic to have the positive work of the Fed undone by bank regulators taking a totally different vision and approach when it comes to lending matters.”

Housing Stimulus Measures Would Help Consumers and Businesses

Meanwhile, stimulating demand for homes and stabilizing housing prices would do the most to relieve the financing and other business difficulties faced by home builders. The housing stimulus legislation moving through Congress contains key provisions that would help ailing home owners, restore consumer confidence, jump-start housing, stabilize financial markets and save jobs, he said.

Specifically, Mitchell called on Congress to pass a housing stimulus package that would provide a temporary home buyer tax credit, expand the carryback of net operating losses beyond the current two years and expand the mortgage revenue bond program.

For more information, see NAHB's press statement or contact Dave Ledford about AD&C issues at 800-368-5242, x8265 or Kelly Pike at x8420.

Dodd Holds Hearing on Foreclosure Plan

Senate Banking Committee Chairman Chris Dodd (D-Conn.) on April 16 held the second in a series of hearings on solutions to mitigate the rising number of foreclosures occuring across the nation, which have led to turmoil in the mortgage and credit markets. The hearing focused on Dodd's HOPE for Homeownership proposal, which would create a new initiative within the Federal Housing Administration to refiannce mortgages of distressed home owners. A similar plan being offered by House Financial Services Committee Chairman Barney Frank (D-Mass.) is expected to be considered by the House panel next week. NAHB continues to closely monitor the situation. For more information, contact Scott Meyer at 800-368-5242, x8144. [return to top]

House Holds Marathon Clean Water Act Hearing

The House Transportation and Infrastructure Committee held a legislative hearing on April 16 entitled “H.R. 2421, the Clean Water Restoration Act of 2007.” H.R. 2421 was introduced by Chairman Jim Oberstar (D-Minn.) with a companion bill, S. 1870, unveiled in the Senate by Sen. Russ Feingold (D-Wis.). [Note: the Senate held a hearing on S. 1870 last week.] Over the past year, NAHB has worked against both these bills, which would greatly expand the scope of the Clean Water Act (“CWA”) by removing the word “navigable” from the CWA and adding an expansive definition of “waters of the United States.” These drastic changes would bring almost every wet area in the country under federal jurisdiction, rather than labeling some waters federal and some state controlled. Such jurisdictional changes would result in an exponential permit increase for builders.

The hearing, which consisted of five panels and lasted nearly 10 hours, included government officials, lawyers and county commissioners. Proponents and opponents of the bill were roughly split. Those in favor of H.R. 2421 felt the legislation was a simple clarification or restoration of the original intent of the CWA; opponents said this would expand the scope of current law and that there needs to be a line drawn between state and federal waters for the legislation to be constitutional.

Although Chairman Oberstar claimed his bill was a work-in-progress and was willing to compromise, no specifics were decided. NAHB again submitted written testimony to the committee and NAHB will continue to work with the House panel and its Senate counterpart during the coming months. To view the bills, click here and type the bill number in the box in the center screen. For more information, contact Annie Raymond at 800-368-5242, x8307. [return to top]