Washington Update - 03/13/2009 (Plain Text Version)

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NAHB Chairman Robson Testifies on Mortgage Lending

NAHB Chairman Joe Robson told Congress that the housing sector is still being significantly affected by the upheaval in the financial and mortgage markets that started in 2007, and there is deep concern that these financial dislocations will increase the depth and length of the housing downturn. Testifying on March 11 before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, he said that coordinated regulatory efforts among federal and state agencies are necessary to ensure prudent lending practices and effective consumer protections while facilitating efficient operation of the residential mortgage markets.

“NAHB supports efforts to ensure that mortgage lending occurs in a safe and sound manner and that abuses in lending practices are properly addressed,” said Robson. “However, it is imperative that any steps taken in this effort do not inadvertently or unnecessarily disrupt the mortgage lending process or consumer financing options, or increase the costs or reduce the availability of mortgage credit.”

NAHB urged Congress to implement a clear national framework for mortgage origination standards to replace the current patchwork of state and local laws, which often lead to unnecessary restrictions on mortgage credit. “Specifically, Congress should establish a federal pre-emption statute creating essential uniformity in mortgage market standards,” said Robson.

The nation’s home builders also strongly support the use of alternative dispute resolution techniques, including binding arbitration, as the most rapid, fair and cost-effective means to resolving disputes. “Invalidating binding arbitration provisions in contracts would undermine decades of jurisprudence strongly favoring arbitration of disputes where the parties have agreed to use the arbitration process,” Robson told lawmakers. “NAHB opposes any attempt to prohibit the use of pre-dispute arbitration in contracts.”

More details on Robson's testimony can be found in NAHB's press release. For additional information, contact Scott Meyer at 1-800-368-5242, x8144.

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.

During the hearing, House Financial Services Committee Chairman Barney Frank (D-Mass.) and Rep. Paul Kanjorksi (D-Pa.), chairman of the Capital Markets Subcommittee, warned representatives of the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission that they must act quickly to revise the rule.

“If the regulators do not act now to improve the standards, then the Congress will have no other option than to act itself,” said Kanjorski.

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. These efforts are aimed at ending the unnecessary practice of writing down illiquid but economically viable securities. This will strengthen bank capital and provide a strong incentive to make credit more widely available.

The coalition has met with several members of Congress and submitted a letter to the Financial Crisis Advisory Group, established by the FASB and the International Accounting Standards Board. A letter has also been submitted to the Public Company Accounting Oversight Board, a corporation that oversees the auditors of public companies and is responsible for providing them with guidance on the application and use of mark-to-market rules.

The coalition’s efforts seem to be making significant headway. At the congressional hearing, FASB Chairman Robert Herz told lawmakers that his organization would expedite guidance on the application of mark-to-market rules within three weeks.

While NAHB will continue to work with the coalition on the mark-to-market issue, importantly 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. These actions are largely due to enforcement of bank regulatory real estate lending rules based on excessively low appraisals, which is applied independently of mark-to-market accounting rules.

NAHB is tackling the broader issue of AD&C lending head on. 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. [return to top]

Card Check Legislation Introduced in House and Senate

House and Senate lawmakers finally introduced the long-awaited, and confusingly-named, Employee Free Choice Act (EFCA) on March 10, officially kicking off what will be an extremely contentious debate over the future of the workplace secret ballot. EFCA would allow labor unions to organize a workplace without holding a secret ballot vote. Instead, workers would be able to organize themselves into a union by collecting the signatures of at least half of a workplace's employees. The process, colloquially referred to as “card check,” requires that the names of everyone who signs the cards be publicly posted, meaning that the union officials, employers and coworkers know who did, and did not, sign the card.

The employer community and many employees who have gone through a card check process oppose the effort to eliminate the secret ballot requirements that currently exist under the National Labor Relations Board (NLRB) provisions. Employers and workers have argued that allowing unions to simply organize following a card check process would create a scenario that would encourage unions to coerce, intimidate and harass workers to sign the cards. In Senate testimony this week, Larry Getts, an employee of the Dana Corporation in Fort Wayne, Indiana, shared his story. “Union organizers waited for us in the break room, sat with us at lunch whether we wanted them to or not, and walked us to our cars at the end of the day. The entire time they were constantly badgering us to sign the cards," he said.

Under current law, unions conduct card check campaigns in workplaces. Once they have obtained 50% of the workers’ signatures, the process then moves to a secret ballot, where workers make a final decision whether to unionize. While an employer may not be aware that a card check collection is proceeding, they have the opportunity to address the issue with workers after the collected cards are submitted to the NLRB and before the secret ballot election takes place.

In addition to eliminating the secret ballot requirement, EFCA would also create a mandatory arbitration requirement on first contracts if workers and employers are unable to settle their differences within 90 days of commencing negotiations.

The EFCA House bill is H.R. 1409, and it was introduced with 223 cosponsors. The Senate companion legislation, S. 560, was introduced with 40 cosponsors. It is not yet clear when the legislation will head to the House or Senate floors, although rumors continue to circulate that the Senate will consider the legislation first, with many House lawmakers unwilling to vote on the legislation until the Senate can “prove” it can pass it. NAHB will continue to push against enactment of EFCA, and the card check issue will be one of the main issues considered at the NAHB Legislative Conference at the end of March. To view the legislation, click here and type the bill numbers in the box in the upper center screen. For more information, contact Jenna Hamilton at 1-800-368-5242, x8407. [return to top]

Attend Crucial Legislative Conference on March 24

Builders looking to send a message to Congress that housing deserves 100% of their ongoing attention to lead the nation’s troubled economy back to higher ground should mark their calendar now for the most important grassroots event of the year — the 2009 NAHB Legislative Conference — which will take place on Tuesday, March 24 in Washington, D.C. The timing of this year’s Legislative Conference — which, for the first time will take place independently from the NAHB spring board meeting — is particularly significant considering the growing downward momentum in housing and the nation’s job market.

With policymakers in Washington confronting the most difficult financial crisis since the 1930s, attending this year’s conference could be one of the most important decisions that builders make this year. Builders are encouraged to travel to the nation’s capital and to urge their representatives and senators to support policies that will stabilize home values, mitigate foreclosures, bolster consumer confidence and get the economy moving forward.

Issues that we will cover include: housing's critical role to the economy, the AD&C crisis, preserving the mortgage interest deduction, reforming the housing finance system, reinstating the downpayment assistance program, promoting the National Green Building Standard and opposing card check legislation.

A strong builder turnout on March 24 will send a powerful message to members of Congress that housing must remain a top national priority. For more information and to register for NAHB’s 2009 Legislative Conference, click here; or contact Molly Murray at 1-800-368-5242 x8282. [return to top]