May 3, 2010
Nation's Building News

The Official Online Newspaper of NAHB

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Lack of Credit a Threat to Sustainable Housing Recovery, Builders Warn

Some 1,000 builders visiting Capitol Hill on April 21 as part of NAHB’s annual Legislative Conference told lawmakers that business conditions in the housing industry remain grim in the face of an ongoing credit crisis that has choked off the availability of acquisition, development and construction (AD&C) lending to begin or complete viable residential projects.

The credit crunch has been particularly acute in the housing sector, and builders recently surveyed by NAHB have reported continued deterioration in residential lending conditions.

“Our message to Congress was loud and clear,” said NAHB Chairman Bob Jones. “The lack of credit for AD&C financing must be resolved soon. Otherwise, it could end the budding housing recovery before it has time to take root.”

While in Washington for the April 18-23 NAHB board meeting, association leaders and a cross-section of builders were able to continue their ongoing series of meetings with top federal policymakers to alert them to the dire impact of credit scarcity and to discuss other key housing issues.

NAHB Senior Officers and key staff members — accompanied by leading executives from the single-family, multifamily and manufacturer/supplier sectors of the home building industry — on the morning of April 19 updated all five Federal Reserve Board governors, including Fed Chairman Ben Bernanke, on the state of the nation’s housing.

While the specifics of NAHB’s conversations with Fed officials have always been confidential in order to allow for a frank exchange of ideas, builders did tell the governors that the AD&C credit crunch is a critical problem for the industry and is raising doubts over the strength of the nascent housing recovery and its ability to move the economy forward following the worst downturn since the Great Depression.

A separate one-hour meeting with Fed Governor Elizabeth Duke focused on this issue.

Later that afternoon, NAHB Chairman Jones, First Vice Chairman Bob Nielsen, CEO Jerry Howard, EVP for Advocacy Bill Killmer and Chief Economist David Crowe met at the White House with Lawrence Summers, director of the National Economic Council, to discuss steps the federal government can take to help boost housing’s role in generating jobs.

Topics included the AD&C credit crisis, the future role of housing’s government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, Federal Housing Administration (FHA) and GSE loan limits, financial services regulatory reform and an overview of the housing outlook.

NAHB Senior Officers and senior staff discuss housing finance issues with HUD Secretary Shaun Donovan, far right.

Serious difficulties with the credit crunch and new home appraisals were at the top of the agenda when the NAHB Senior Officers met with Housing and Urban Development Secretary Shaun Donovan on April 20. Other topics of discussion included the GSEs, FHA underwriting changes and the Administration’s foreclosure mitigation efforts. NAHB leaders emphasized the importance of Secretary Donovan raising housing credit problems in discussions with other members of the Administration's economic team.

Continuing to take its case to those who can make a difference in pursuing policies aimed at restoring the health of the housing sector, NAHB has remained engaged with the nation’s top banking regulators. On April 29, Senior Officers and staff met with Sheila Bair, chairman of the Federal Deposit Insurance Corporation, and John Dugan, comptroller of the currency, to discuss solutions that will help restore the flow of credit to housing.

NAHB has also been reaching out to all the major banking trade organizations and housing industry groups. On April 27, association leaders met with their counterparts from the Independent Community Bankers of America to further address the importance of lending to creditworthy borrowers and the need for regulators to provide constructive guidance to encourage and facilitate real estate loan workouts.

During the Legislative Conference, builders conducted more than 250 meetings with their members of Congress, urging lawmakers to send a letter to banking regulators voicing their concerns on the lending environment.

The letter urged regulators to recognize the damaging economic impact of overly restrictive lending policies. It also said that financial institutions should be encouraged to fund viable new projects and to take steps to avoid foreclosure on AD&C loans by accommodating loan modifications and workouts.

“While I support prudent financial regulatory oversight, it seems that bank examiners are forcing actions that are unrelated to sensible regulatory requirements,” the letter said. “It is not in anyone’s interest — not lenders, not builders, not the economy as a whole — to deny credit for viable projects and to force performing borrowers into insolvency.”

In addition to delivering an urgent AD&C message to lawmakers, builders participating in the Legislative Conference cited the importance of using tax credits to encourage energy retrofits and urged members of Congress to oppose any attempts by labor unions to revive the failed health care amendment by Sen. Jeff Merkley (D-Ore.).

Merkley would have required construction firms employing more than five workers to provide health insurance even though the law exempted from mandated coverage all small businesses with 50 or fewer workers. While NAHB was successful in stripping the Merkley language from the final health care bill, concerns remain that proponents of the provision could add it to an unrelated piece of legislation moving through Congress.

Photos by Herman Farrer Photography

Senate Majority Leader Harry Reid (D-Nev.), left, meets with a delegation of members that includes NAHB First Vice Chairman Bob Nielsen, second from left, a builder from Reno, Nev.

Kentucky builders discuss housing issues with Senate Minority Leader Mitch McConnell (R-Ky.), far right.

A large delegation of NAHB members meets with Senator Thomas Carper (D-Del.), center.

NAHB members meet with Republican Conference Chair Mike Pence (R-Ind.), center.

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