Nation's Building News Online: February 16, 2004Print All Articles Text Version |
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In GSE Regulatory Efforts, Congress Warned of Possible Harm to Home Finance SystemAs the debate over the regulatory restructuring of the housing industry’s government sponsored enterprises (GSEs) was heating up again in the Congress, the nation’s home builders on Feb. 10 called on lawmakers to focus on the vital role that Fannie Mae, Freddie Mac and the Federal Home Loan Banks have played in the nation’s housing finance system, one that has been essential to the housing sector’s ability in the past few years to create jobs and generate economic growth. “Regulation of the GSEs involves two discrete, yet complementary aspects — enforcing compliance with financial safety and soundness principles and ensuring unwavering housing mission orientation,” NAHB President Bobby Rayburn, told members of the Senate Banking Committee. NAHB would support transferring only the financial safety and soundness oversight of the GSEs to a strong and credible regulator that possesses adequate authority and resources, such as the Treasury Department. However, Rayburn said that it is imperative for the regulatory framework to reflect the differences inherent in the charters and operating structures of the GSEs. The purpose of mission regulation is to ensure that the GSEs fulfill their congressional mandate to provide housing finance at the lowest possible cost and to operate within their charters. Reviewing new programs solely on the basis of safety and soundness, as envisioned by the Administration, would severely inhibit or delay the development and implementation of valuable new mortgage products and technological innovations, said Rayburn. “This is why NAHB maintains that the program oversight that is currently conducted by HUD should not be transferred to the Treasury Department,” he said. “NAHB believes that Fannie Mae’s and Freddie Mac’s ability to spur innovative solutions to increase homeownership will continue only if the mission of these corporations is regulated by an agency that also has a housing mission, expertise and experience.” Noting that the Treasury Department has virtually no experience or expertise in evaluating the effectiveness and appropriateness of housing policies, Rayburn added that moving program oversight authority to the Treasury could reduce the capacity of Fannie Mae and Freddie Mac to provide the liquidity and stability needed to keep mortgage credit available at the lowest possible cost to home owners and rental housing providers. On the issue of capital requirements, NAHB supports a strong capital system for the GSEs and agrees that the safety and soundness regulator should have the flexibility to adjust capital standards as necessary, but cautions against immediate changes in either the GSE risk-based or minimum capital standards. Rayburn said that NAHB would be willing to explore the idea of a stand-alone independent regulator, which has been floated as a compromise on the key issues of program oversight and independence of the financial regulator. “While this is not our first preference, NAHB would be open to the idea of Fannie Mae, Freddie Mac and the Federal Home Loan Banks under such a system,” he said. “Our primary concern in any regulatory scenario is that the mission regulator must have a housing focus and expertise, and that the safety and soundness regulator must have sufficient respect and authority to satisfy Congress and the capital markets.” NAHB further recommends that such an entity be governed by a board of directors rather than by a single agency head. A HUD representative should serve on the board of directors in order to ensure that it possesses a housing-oriented focus and experience. To recognize and accommodate the differences between Fannie Mae and Freddie Mac and the Federal Home Loan Banks, Rayburn suggested that such a system establish two divisions and maintain separate funding for the costs of regulation. Photos by Herman Farrer Building News Coast To CoastSolar Power Hits SuburbiaConcerns about global warming, state subsidies and rebate programs, and more affordable technology are making solar power more popular in the suburbs. In fact, no less than 10,000 American home owners installed such systems between 2000 and 2002. However, the cost is still pricey for many at $4.50 per watt; but Home Power magazine Publisher Richard Perez expects a boost in demand when it drops to $2 per watt, making it less expensive than commercial power. A growing number of builders are including solar power in new subdivisions, especially in sunny, blackout-prone states like California. "Our goal is to bring green to entry-level home buyers," remarks Clarum Homes co-founder and Vice President John Suppes, who is willing to give up a portion of the company's profits in order to make solar power available to the masses. Though home owners increasingly are interested in solar power, most are unwilling to sacrifice their big-screen televisions, clothes dryers, air conditioners and other power-hungry appliances and devices. These consumers are taking advantage of services that let them install solar cells and remain connected to the local grid, allowing them to scale back their dependency on fossil fuels, sell a portion of their power to the electric company and continue to use their high-power appliances. Easy AccessGeorgia's EasyLiving Homes is the first coalition of state officials and nonprofit groups in the nation to support the construction of accessible homes. Builders participating in the program must make sure their models have first-floor bathrooms, kitchens and bedrooms; step-free entrances; wider doorways and hallways; and features that allow home owners to remain independent. The accessible design also must blend in with the décor to avoid a clinical atmosphere. In the EasyLiving Homes built by Roy Wendt, for example, bathroom grab bars double as towel racks; and the absence of thresholds and the wider spaces are not noticeable. Wendt shells out less than $500 on these EasyLiving features — which appeal to parents of young children, seniors and people with disabilities alike. Let Your Contractor Finance Home ImprovementsHome owners do not have to write frequent checks for labor or materials if they have their improvement projects financed by the contractor, although they still will need to monitor expenses. Contractor financing also eliminates the need to pay for materials via higher-interest credit cards. Companies like Kenwood Associates assist contractors in qualifying borrowers, processing paperwork and handling payments. Given that contractors must provide proof of insurance and licensing as well as undergo financial and background checks in order to work with the lender, home owners can be assured that the contractor is competent and in good shape financially. Touring Condos That Aren't ThereA growing number of developers are offering virtual reality tours that let prospective buyers view residential projects before construction begins. Companies like Montreal-based Alpha Vision create these tours with the help of 3-D animation software, allowing buyers to see beyond the floor plan or brochure. After completing a detailed replica of the building, Alpha Vision incorporates furniture, appliances, pricey cars and other accessories. Live models or digital actors also are included to represent the target buyers in terms of age, income and ethnicity. Virtual reality tours cost developers anywhere from $30,000-$80,000, depending on whether or not filmed actors and aerial shots are used. "It's an important tool for the developer who has to sell 50% of the project before breaking ground, and it's a comfort level for the buyer to have a feel for what they are buying," notes John Bell of the Fort Myers, FL-based Vistech. Computer-generated tours helped the Rosen Corp. sell 25%-35% of the condominiums in its Esplanade development in Fort Lauderdale. Even so, developer Paul Rosen still believes sales representatives are essential in helping the buyer during the decision-making process. Blueprints for the Home PlanetAn increasing number of builders across the country are constructing environmentally friendly homes that are energy efficient, use recycled and non-toxic materials and take advantage of natural light. However, demand for luxury amenities and the costs involved with green building make it difficult for production builders to jump on the bandwagon. Still, the number of green projects should rise as consumers, builders, architects and others in the industry learn more about the benefits and cost savings that accompany such developments. The Florida Green Building Coalition is one of 21 regional programs nationwide that set green-building standards; and NAHB also plans to establish countrywide voluntary guidelines governing land development, site planning, water conservation, indoor air quality and energy efficiency, among other areas. Unlike the green dwellings built in the 1960s and 1970s, today's environmentally friendly homes blend in with the surrounding neighborhoods. These homes might feature solar water heaters, insulated doors, programmable thermostats, dehumidification and ventilation systems, irrigation systems and durable roofing materials that make them wind-resistant. Experts say home owners who plan to stay put will recoup some of the costs in the form of lower energy bills. Improvements With a FlairGopal Ahluwalia, vice president of research at NAHB, says residential improvement and repair spending surged from $173 billion in 2002 to an estimated $182 billion last year. However, he notes, the nature of that spending appears to be shifting. For instance, Clifton, VA-based remodeling contractor Vince Butler has seen a jump in demand for extensive renovation projects — especially as home owners look at existing dwellings in the city limits to avoid lengthy commutes. While major remodels are too costly for most home owners, luxury projects eventually trickle down to the lower end. Denver-based architect Doug Walter notes, for example, that more and more home owners are choosing huge windows, skylights and sun tunnels to brighten their homes. Detached garages; natural stones and woods; his-and-her offices, studies and hobby rooms; and first-floor bedrooms, step-free baths, wider halls and entryways, and other accessibility upgrades are also gaining popularity. U.S. Rules Put Adult Communities in PlayThe Fair Housing Act outlaws discrimination based on race, color, religion, sex, disabilities and familial status — the latter of which was added in 1988 to help families with children locate housing. Exemptions were made for active adult communities — which permit only those buyers who are aged 55 or older — provided that certain facilities and services were made available, but developers steered clear of such projects to avoid litigation. The Housing for Older Persons Act of 1995 made it easier for builders to construct active-adult communities, exempting them from the Fair Housing Act if all residents are aged 62 or older or 80% or more of the units house at least one resident older than 55. The law allows surviving spouses who are younger than the minimum required age to remain in the community, and it permits younger home owners to retain such properties as long as they rent or sell to seniors. However, the law does not govern communities where fewer than 80% of the units are occupied by seniors. Local governments favor active adult communities because they do not add to an area's traffic problems or make schools more crowded. Solar Power Gets an Energy BoostMore home builders in California are embracing solar energy as a way to increase energy efficiency and lower home buyers' power bills. The California Energy Commission reported that the number of rebate applications for renewable energy systems rose to 1,300 in 2003, up from 240 in the year before. However, many builders say the systems still cost too much, and home buyers only are willing to pay a little more for energy-efficient homes. The supporters of solar energy in the building industry hope the technology will receive a boost from Gov. Arnold Schwarzenegger's plans to use solar energy as part of his attempt to ease the state's power crisis. What's Grounding Builder's Stocks?Despite stellar performances in recent years, the nation's home builders receive little respect when it comes to their stocks. Their earnings have surged 29% since 1999, but their price-earnings ratios have barely surpassed 7%. "In any other industry, this would be ridiculous," argues Toll Brothers Inc. CFO Joel Rassman. Investors are wary of builders' stocks because interest rates are poised to rise from record lows, along with increases in land, materials and labor prices. In fact, their stocks have slipped 11% since the beginning of December due to interest-rate concerns. Though 12 builders have teamed up to establish the Public Home Building Council of America to give their stocks some much-needed publicity, Legg Mason Walker Wood Inc. analyst David Weaver believes the market will remain unchanged until big builders can demonstrate the ability to post significant profits in high interest-rate environments. Did You Know. . .Builders could erect a wall 30 feet high and 30 feet wide down each of the nation's coastlines with the debris they take away from construction sites each year? However, the Charlotte County, FL-based Deconstruction Institute says upwards of 80% of wood-framed homes can be recycled if disassembled with care. That includes an estimated 6,000 board feet of lumber that can be reused. Though the deconstruction process involves much labor, the institute insists this is countered by savings earned from money not spent on new materials and disposal fees. Slowing the FlowThe problem of unsolicited junk e-mails, or spam, is getting more and more aggravating for small businesses. Spam cause losses of $874 annually in lost productivity per employee in a moderate-sized enterprise, according to a report by Nucleus Research, and the typical worker consumes about six minutes every day coping with spam. But small businesses cannot survive without relying on e-mails, says Dave Chittum, vice president and general manger of services at Cornerstone Systems, a security solutions provider, and need to turn to anti-spam services or technology. Anti-spam solutions can take the form of open-source solutions and can be managed by service providers, or be supplied by commercial vendors. For example, Trend Micro's Spam Prevention Service costs $30 per user annually for up to 25 users, says Chittum, and stops spam at the Internet gateway and also prevents employees themselves from sending out spam. McAfee's SpamKiller e250 product, meanwhile, accommodates up to 250 users and automatically eliminates junk e-mails, obstructs deceptive e-mails, prohibits foreign language spam and allows customized filters. Printers: Small Office, Shoestring BudgetFor small business owners dealing with tight budgets and increased demand, PC Magazine tested 17 affordable laser printers and compared them in terms of cost, quality and efficiency. Color laser printers have become popular among small businesses, especially as they decline in price. The low-cost models tested by PC Magazine include monochrome, color and multifunction lasers ranging from under $300 to $750. While the cheaper models lacked stacking, sorting and double-sided printing functions, they all boasted high-quality images and top speeds. Deciding When It's Time to Buy a New PCPersonal computer users and businesses must consider their options when they think about whether or not to purchase new computers. While spending on new computers can lead to a more productive workforce, businesses must question whether their investment will be worth the money, especially considering how quickly new computer hardware and software can become outdated. While new equipment will let users run the latest software, businesses should take note that newer software is often ridden with more bugs than older programs. Software and hardware companies may try to convince users that their equipment is outdated or too slow, but businesses must really consider whether they should spend less to merely improve their old systems or spend more to replace their equipment altogether. Purchasing brand new systems may be more expensive, but new systems can help lower maintenance costs and can help boost the morale and efficiency of employees. Builders Working With Congress to Include FHA Condo Purchases in Zero Downpayment ProgramNAHB is working to improve legislation introduced by Rep. Patrick Tiberi (R-OH) on Feb. 3 that would implement the proposed FHA-insured zero downpayment mortgage announced last month by Federal Housing Administration Commissioner John Weicher at the International Builders’ Show in Las Vegas. After a review of the bill found that it did not include condominiums purchased with FHA-insured loans in the new program, NAHB wrote to Tiberi that it supported his legislation but was eager to work with him to correct this omission. Condo loans could be included with a minor amendment to the bill. The zero downpayment mortgage would carry higher up-front and annual insurance premiums (MIPs) than other FHA single-family programs — 2.25% upfront compared with 1.50% for the standard FHA mortgage insurance programs and 75 basis points annually, decreasing to 50 basis points after five years of satisfactory payment performance. Because the up-front MIP is normally included in the amount borrowed, the higher up-front and annual MIP would be reflected in slightly higher monthly payments. HUD estimates that an additional 140,000 families would be able to achieve homeownership if this proposal is enacted. In its HUD budget for FY 2005, the Administration also proposed a sub-prime FHA Payment Incentive Program, which would be targeted to serve families with “limited or weak credit histories.” A similar program was included in the Administration’s budget proposal for the current fiscal year, but it was deleted by the Congress. Loans insured under this program would bear higher than standard mortgage insurance premiums, which would decrease after the borrower established a record of timely payment. The Administration suggests an annual mortgage insurance premium not to exceed 1.0% for loans insured under this program, compared to 0.50% for standard FHA-insured loans. The program would assist an estimated 60,000 first-time home buyers. To read Tiberi's bill, click here and enter HR 3755 in the box at the upper left. Housing SnapshotMortgage interest rates receded last week. Meanwhile, Federal Reserve Chairman Alan Greenspan reported to the Congress that prospects for growth look good, conceding that businesses need to be creating more jobs and indicating that the Fed will wait to see improvement before it moves to boost interest rates. The size of the federal deficit, which the Administration expects to weigh in at a hefty $521 billion this year, needs to be reined in, however, or it could start having an adverse impact on rates, even over the short term, Greenspan warned. His remarks apparently provided reassurance to the financial markets. An index by the University of Michigan suggested that consumer confidence was unraveling during the first half of this month. And lumber prices continued to trend upward last week. Random Lengths reported that the price of framing lumber was $374 per 1,000 board feet, $18 higher than the prior week. The mill price for 15/32-inch 3-ply CDX Southern Westside plywood was up $30 to $465 per 1,000 square feet, up from $244 a year earlier; and oriented strand board jumped $30 to $470, compared to $197 at the same point in 2003. Mortgage Interest Rates30 Year Fixed Rate: 5.66\% Housing Starts: Dec. 2003Total: 2.088 million\% New Home Sales: Dec. 2003 *1.060 million Existing Home Sales: Dec. 2003 *6.47 million * Seasonally Adjusted Annual Rate Housing America’s Working FamiliesGetting a good education, landing a job in your chosen profession, working hard and buying a home — for generations that’s been the way to get ahead in America. Nowhere has this idea of progress been so clearly demonstrated as in the quality and quantity of U.S. housing built during the past 50 years. Despite intermittent setbacks, the homeownership rate has risen steadily and now stands at a record 68%. At the same time, the percentage of Americans living in overcrowded or substandard housing has dropped significantly. By any standard, the United States has become the best-housed nation on earth. These remarkable achievements that helped define a half-century of American progress, however, do not necessarily guarantee the same measure of success in the future. Dangerous undercurrents are churning in today’s housing market. Despite very affordable mortgage interest rates, millions of working families are finding it increasingly difficult to purchase or rent a decent home in or close to the communities where they work. Many teachers, police officers, firefighters and other moderate-income workers — representing the heartbeat of any community — are working two or three jobs to meet their monthly housing expenses or are looking for housing 50 miles or more from their jobs. In many markets, the gap between those who can afford a home and those who can’t is widening at an alarming rate, and affordable rental housing is in short supply. But the nation’s housing industry has been tested before. Time and again, home builders have demonstrated that with the proper tools and policy they can overcome major obstacles and meet the housing needs of the American people. In 2004, the 215,000 members of the National Association of Home Builders will rededicate themselves to this effort and set forth an agenda to draw attention to — and to begin to reverse — today’s growing affordability gap and to open new opportunities for millions of working American families who are unable to purchase or rent a decent home.
Housing’s Vital Role in the Economic Recovery When it comes to the health of the housing market, everything begins with sound economic fundamentals. In recent years, the U.S. economy’s performance has been inconsistent and lackluster. The one exception has been the housing market, which has been performing remarkably well. Housing has accounted for a disproportionate share of growth in the nation’s Gross Domestic Product during the past two years, and housing production and home sales have helped prevent the economy from slipping back into recession. However, housing cannot do it alone indefinitely, and other sectors of the economy will have to rebound in order to sustain a more robust and long-term economic recovery. The NAHB-supported tax cut and economic stimulus bill adopted by Congress last year provides numerous tax incentives for small businesses and should help trigger a more broad-based economic recovery in 2004. In addition, NAHB will continue to encourage the Federal Reserve Board to pursue the right mix of monetary policies to keep interest rates low and promote long-term economic growth.
Housing and the National Election Critical to housing’s long-term future will be the national elections in 2004 when the American people will go to the polls to elect the President of the United States, 435 House members and 33 U.S. Senators — in addition to thousands of public officials for local and state positions. NAHB will leave no stone unturned in its efforts to elevate housing as a top national priority and to drive home the importance of providing affordable housing for working Americans. Among other things, NAHB will:
Maintaining a Healthy Secondary Mortgage Market Much of the credit for the nation’s remarkable Increase in homeownership and steadily rising housing standards during the past 50 years must go to the development of its world-class and highly efficient housing finance system. Central to today’s highly effective secondary mortgage market has been the development of programs by Fannie Mae and Freddie Mac to lower the cost of home mortgage credit, finance affordable rental housing and assure an ample supply of mortgage credit through a broad range of mortgage instruments tailored to the diverse needs of American households. Today, about two of every three mortgages flow through these two Government Sponsored Enterprises (GSEs). Unfortunately, accounting and management issues at Freddie Mac have triggered an opportunistic onslaught that could reverse decades of progress. The Administration proposed moving almost all of the key regulatory oversight responsibilities for the housing GSEs from the Department of Housing and Urban Development (HUD) to the Treasury Department, which historically has displayed an anti-housing bias. Administration officials have also welcomed discussions on diminishing or eliminating Fannie Mae and Freddie Mac’s government-sponsored status. The issue is now before Congress, and the stakes involved in how this issue is ultimately resolved are huge. Cutting GSE lines of credit to the Treasury — as one top Treasury official has suggested — would raise the cost of home mortgage credit, reverse upward trends in homeownership and undermine housing’s support to the economy and the job market. Even the Administration’s official proposal to move program and mission authority from HUD to the Treasury Department would be extremely damaging to the nation’s efforts to fulfill the goal of providing “a decent home in a suitable living environment for every American family,” which was adopted by Congress and signed by President Truman in 1949. Ironically, it also would impede efforts to achieve President Bush’s goal of increasing minority homeownership by 5.5 million. In light of these developments, NAHB supports the following proposals for regulating the housing GSEs:
A Strong National Policy Agenda for Housing At the federal level, NAHB will pursue an aggressive legislative, regulatory and legal agenda that will, among other things, improve the functioning of the nation’s market delivery system, enhance the housing finance system and lend a helping hand to working Americans living at the edge of affordability in urban and rural America. Specifically, NAHB will:
Promoting Smart Growth and Removing Regulatory Barriers To increase housing opportunities for working Americans over the long term, three things must happen. The overall economy needs to grow at an adequate pace while maintaining low interest rates. This will raise real incomes, create new jobs and increase the purchasing power of working Americans so they can afford to rent and buy decent shelter. Second, the federal government needs to lend a helping hand to assist those Americans living at the edge of affordability. Third, local and state governments need to reform and streamline the zoning and regulatory process to meet a community’s housing needs and to allow for construction of a mix of different types of housing in various price ranges. Cumbersome regulations, excessive fees and exactions, unrelenting public sentiment against higher-density zoning and growth, and resistance to smart growth planning and zoning policies have all contributed significantly to the nationwide shortage of affordable housing. In some areas, regulatory delays and excesses have added as much as 20% to the cost of building housing. To support regulatory reform at the local and state levels, NAHB will:
Tapping the Political Clout of Grassroots Members To implement this highly ambitious agenda for 2004, NAHB will work in partnership with the leadership of its 800 local and state associations to utilize and take full advantage of the energy, resources and political clout of its 215,000 grassroots members. Among other things, NAHB will provide regular updates and status reports on progress being made on its “Housing America’s Working Families” agenda for 2004. NAHB will also make information on the many NAHB products, services and tools readily accessible throughout the federation and will develop a “new member orientation” program and other tools necessary to reinforce the value of membership in NAHB. This partnership between NAHB and its local and state associations will be periodically reviewed and updated throughout the year, with both NAHB leaders and executive officers of local and state associations devoting whatever time is necessary at appropriate meetings to brief members on progress to date and challenges still unmet in “housing America’s working families.” Working with the enthusiastic and energetic support of the leaders of state and local associations and its grassroots members, NAHB will move forward aggressively in expanding housing opportunities for America’s working families in the year ahead. Major Transportation Bill Clears the SenateThe Senate on Feb. 12 voted to approve S. 1072, the "Safe, Accountable, Flexible and Efficient Transportation Equity Act of 2003," or SAFETEA. The $318 billion, six-year program to reauthorize surface transportation programs was approved by a 76-to-21 margin. SAFETEA will reauthorize the "Transportation Equity Act for the 21st Century," or TEA-21. Proponents of the bill say it will create jobs and boost the economy, while its detractors rail against its high price tag at a time of dramatically rising federal budget deficits. President Bush, who has been pushing for a ceiling of $256 billion for the highway bill, has threatened to veto the legislation if it exceeds that cost. The House has yet to act on H.R. 3550, its $375 billion version of the highway measure, but it approved a four-month extension of the current law, which is set to expire at the end of the month. The Senate has not moved on the extension. In a letter to every member of the Senate last week, NAHB urged support for the transportation bill. Home builders are particularly supportive of statutory changes to the nation’s transportation and clean air laws that would address the regulatory burdens of the transportation conformity process. Transportation conformity is a stipulation under the Clean Air Act and TEA-21 that requires states with poor air quality to conduct air quality assessments before they can receive federal funds to construct major transportation projects. Additionally, NAHB supports provisions in S. 1072 to strengthen the Congestion Mitigation and Air Quality Improvement Program, which provides a flexible funding source for state and local transportation projects and programs that improve air quality and congestion in areas of the country with the most severe air quality problems. For the full legislation, click here, and enter S. 1072 in the box at the upper left. An Interview With Assistant Treasury Secretary Wayne AbernathyRecent interviews with Assistant Treasury Secretary Wayne Abernathy and NAHB Executive Vice President Jerry Howard on regulation of the housing GSEs find some common ground: both agree that privatization of Fannie Mae and Freddie Mac is a bad idea. Secretary Abernathy says: "We're not supporting any proposals for privatization." CEO Howard adds: "Efforts to privatize . . . should be opposed." But on other aspects of the debate — issues that will likely decide the future of America's housing finance system — there are some sharp differences of opinion. The following interview of Assistant Treasury Secretary Abernathy was conducted by NAHB Senior Vice Presidents Robert Pflieger and David Crowe on December 10. To read an accompanying interview with NAHB Executive Vice President Jerry Howard, click here. ROBERT PFLIEGER: Mr. Secretary, what do you believe is the mission of Fannie Mae, Freddie Mac and the Federal Home Loan Banks? And do you believe there should be changes in those charters? WAYNE ABERNATHY: Congress was clear when they created the housing GSEs that generally their mission was to harness this nation’s unparalleled financial resources to make the dream of homeownership a greater reality, particularly for those who have been traditionally underserved, like minorities and low-income Americans. The purchase of a home is probably the largest financial allocation that most Americans will make in their lifetime, and GSEs helped make the 30-year, fixed-rate mortgage the bread and butter of our housing finance system. And today many Americans own homes who otherwise would not have had that opportunity. Expanding homeownership is a top priority of the Bush Administration. President Bush has outlined an aggressive housing agenda that includes the American Dream Downpayment Fund, the Single Family Affordable Housing Tax Credit, simplification of the home-buying process and increased home-buying education. Congress has also recognized that homeownership is a priority for this nation and has reinforced that principle on numerous occasions. The Administration has proposed a strong and effective new regulator for the housing GSEs because expanding homeownership is a top priority, and the GSEs play an important role in doing that. Appropriate oversight of them is necessary to ensure that the housing GSEs will be able to continue to play this role now and into the future. MR. PFLIEGER: It has been widely acknowledged that housing has played an incredibly important role over the last couple of years in keeping the economy strong. What, in your view, is housing’s overall contribution to the growth of the economy, recently and over the long term? And what role have the housing GSEs played in that growth? MR. ABERNATHY: There are two parts to that. First of all, let’s talk about the importance of homeownership to the economy. Treasury’s Office of Economic Policy estimates that residential investment accounts for about 5% of Gross Domestic Product overall, and sometimes it accounts for a significant portion of the growth of GDP — over 1% in the third quarter of FY 2003. The building, furnishing and maintaining of homes are extremely important as a share of our economy. But I think probably the most significant impact that homeownership has on the economy is what it does for communities. Go to a community where most of the people rent their home. Compare that with the community where most of the people own their home, and it’s a world of difference. There’s a world of difference in the way the people take care of their homes, the investments they make in their homes, the investments they make in their communities, the roots that they put into their communities and how they participate in the life of the community. Knowing that you own your home means not only that you take better care of your home, but you tend to take better care of your community. MR. PFLIEGER: You mean housing’s social benefits? MR. ABERNATHY: You get more involved in local politics because you figure you’re going to be there a while, and so you’re much more likely to be a participant in the choice for the local alderman than you would be if you were renting there and not planning to be there very long. And there’s a myriad of other kinds of — you’re probably more involved in the schools. You’re more involved in the churches and other good things that take place. People tend to become more involved in the places where they own their property and the home that’s there. That’s what I think is the most significant benefit of homeownership in this country. GSEs play a role by helping to make the 30-year, fixed-rate mortgage into a very commonplace, liquid investment that allows a lot more of our tremendous financial resources to be devoted toward helping people buy their first homes and their second home, or to expand and build upon their homes. Without that, the 30-year, fixed rate mortgage might be seen by lenders as a riskier investment. DAVE CROWE: Why do you describe a mortgage as being a potentially dangerous investment? MR. ABERNATHY: From the lender’s point of view, long-term mortgages are subject to a wide variety of risks, particularly when you’re talking about a fixed-rate loan. When you have a fixed-rate loan, you’re tying up money over a long period of time, and so you increase the amount of exposure that you have to whether or not someone’s going to honor their payments over that period of time. You have exposed the person who provides that money to liquidity risks, and to the risks that financial institutions may need that money for other things because they have a lot of other demands. That financial institution is exposed to interest rate risks that can occur over the life of that particular loan as rates rise and fall. The secondary markets help mitigate a large portion of that risk by spreading it among a greater pool of investors. In a lot of other countries a 30-year, fixed-rate mortgage is a very hard thing to find. In this country, for a long period of time, the 30-year fixed-rate mortgage was something that was hard to find. We needed to find mechanisms by which financial institutions would be willing to commit large sums of money for long periods of time, and the housing GSEs have played a major role in creating those instruments and providing liquidity that allows financial institutions to make those kinds of investments an everyday occurrence. MR. PFLIEGER: And continue to play? MR. ABERNATHY: And they continue to play that role, they certainly do in a variety of ways. And I think it’s interesting the way the different pieces work together. You have, by and large, Fannie and Freddie that are focusing on what you might call standardized, cookie-cutter types of loans, which is what you need to do in order to securitize them. The Federal Home Loan Banks play a very important role in providing liquidity for conforming as well as non-conforming loans. A member of a Federal Home Loan Bank can use these assets as collateral to get funds from a Federal Home Loan Bank to take care of any liquidity needs that institution may have, and thereby make that bank or thrift or credit union more likely to engage in that kind of investment. MR. PFLIEGER: What is Treasury’s view of the wide range of federal policies that support a strong housing delivery system — everything from the mortgage interest deduction, to the low-income housing tax credit, to housing’s share of the federal budget, to the government’s support of the housing GSEs? MR. ABERNATHY: As I mentioned before, the Bush Administration has made increased homeownership a top priority, and has proposed numerous ways to make this dream a reality for more American families. Secretary Snow shares the President’s strong commitment to housing and believes that the housing sector is a crucial component of our economy. Housing is making a tremendous contribution to the current economic recovery. It certainly is no secret that this Administration is a strong supporter of the mortgage interest rate deduction. That has been a key element, a key piece of our tax code for a long period of time and a lot of people rely upon it. It allows a lot of people to get into homes earlier than they otherwise might, and to able to free up the funds they need in order to make their monthly payments. With regard to a number of the other pieces that are designed to help increase homeownership, President Bush proposed the American Dream Downpayment Fund in 2002, and Congress enacted it a few days ago. This program will help low-income Americans overcome what is sometimes the number-one obstacle to buying a new home — amassing the money for the downpayment. A lot of people are making rent payments that are the same or more than what a mortgage payment would be and they would love to own their own home, but they can’t put together the downpayment. They’re paying all their money in rent. They can’t put aside enough money in savings for a downpayment, but they have demonstrated the ability to make a regular monthly payment, they just do it in rent. If they can find help to get that downpayment in place, they could turn that rent into equity and homeownership. The Administration estimates that this new program will help approximately 40,000 families a year with their downpayment and closing costs. MR. CROWE: Can you elaborate on the Administration’s homeownership goals? MR. ABERNATHY: President Bush has set very aggressive housing goals. In June 2002, he announced that he was setting a new minority homeownership goal of at least 5.5 million new minority home owners by the end of the decade. But even though homeownership levels are higher than they have ever been before, the President is still not satisfied. He has recognized that there are still segments of the population that are below the overall national level of homeownership that we can reach with various types of assistance. That’s why this Administration has put forth numerous programs to help serve minority populations in particular. Sometimes it’s just outreach. You get folks and help them understand that homeownership is within their reach, but they just don’t have the knowledge or the understanding to put together all the different pieces. So there’s a lot of outreach being done to show them just what the steps are. I think that the proposal that the Department of Housing and Urban Development is looking at to try to simplify RESPA and all of the processes involved with settlement are excellent ideas to try to make that whole process — which can be very bewildering to people — a lot simpler and more understandable. People hear these horror stories about home buyers going into settlement and having surprises, and they are never pleasant surprises; they’re always unpleasant. If people knew before they walked into that settlement room what their expenses were going to be, you would be taking away one of the additional obstacles to homeownership today. MR. CROWE: Looking at the Administration’s goal to increase homeownership rates among minorities, would Treasury be willing to support federal initiatives designed to address the problems you just mentioned and expand homeownership opportunities? MR. ABERNATHY: President Bush and this Administration are committed to helping more Americans, especially communities that have been traditionally underserved, such as minority Americans, own their own homes. In addition to the housing programs which the President has put forth that I have already mentioned, part of the package that Secretaries Snow and Martinez have proposed to Congress would give HUD additional resources to enforce the various housing goals, and part of that is to break the housing goals into some segments. This would help us achieve not just the overall goal of increasing homeownership among all Americans, but also concentrate on the sub-goals that focus on increasing levels of homeownership among various minorities. With regard to innovation that helps us reach those goals, one of our concerns is that the GSEs, as they grow, continue to stay focused on their mission, which is to expand the envelope of people who can get their homes, who can buy homes, who can purchase homes and not that the GSEs go experimenting in other things that may have only a tangential connection to homeownership. MR. PFLIEGER: Do you believe that the GSEs have gone beyond their mission? MR. ABERNATHY: I don’t know if they have or not. That’s something that the supervisor would need to be able to look at. We want to make sure the supervisor has full authority to be able to look at that, so if they see a proposal that somebody wants to put forth, the supervisor needs to be able to say, “Well, that might be a very interesting proposal and it might increase the financial resources of the entity, but it doesn’t have a whole lot to do with housing. We would prefer that you did your innovating on how you can find new ways to put people into homes as opposed to new ways to increase your bottom line, which may or may not have a direct bearing upon housing.” MR. CROWE: It could be argued, however, that a profitable balance sheet also puts the GSEs in a position to expand their support for the housing market? MR. ABERNATHY: We are all in favor of innovation. Increasing profits isn’t the sole or the primary responsibility of the GSEs, however. In fact, there may be situations where the GSEs should be obtaining a below-market return to provide additional funding to housing markets. That might not bring the full 15% return that they might be accustomed to. It might bring them only a 5% or a 10% return, but it’s still a positive return, and that’s the kind of market that Congress said they ought to be involved in. MR. PFLIEGER: You have been quoted in the media recently questioning the financial condition of Fannie Mae and Freddie Mac, and, let me quote you directly,“we really don’t know what’s going on.” Do you believe that taxpayers face an imminent threat? MR. ABERNATHY: No, I don’t think they pose an imminent threat. I think if there were an imminent threat, there would be certain signs that we would see. But the real issue is that we need a strong, credible regulator that will be able to detect developing problems before they become major problems, and currently we don’t have the kind of regulator or the kind of disclosure from the GSEs that would allows us to do that. For example, Freddie has yet to live up to its commitment to register under the 1934 Securities Exchange Act, and they said that they most likely will not do so until 2005. They have finally put forward their annual report, but they said they aren’t going to give any quarterly data for 2003 until at the earliest June of 2004. I can’t imagine that investors are well served by a major corporation like Freddie Mac conducting business that way. While Fannie Mae was able to register under the 1934 act almost a year ago, Freddie has not, and until Freddie does that, there are important elements of disclosure that are not available, and so our ability to catch problems early on is compromised. MR. CROWE: Would you say that’s a major concern? MR. ABERNATHY: I am concerned that there could be significant problems developing, and the current level of disclosure does not allow regulators to catch those problems before they become disruptive to the role the GSEs play in the housing markets and the financial system. This is a further reason that we need a new, strong and credible regulator. MR. PFLIEGER: Isn’t that OFHEO’s job right now? MR. ABERNATHY: I think it is, but OFHEO, doing the best they can with what they have, were still caught by surprise when Freddie had its accounting problems. I think that suggests that over time, in spite of the people at OFEHO doing the best they can, they just do not have the resources, focus, stature and authority to do the job that needs to be done. MR. CROWE: Do the GSEs pose an imminent threat? MR. ABERNATHY: No, I have no reason to believe that is the case, but that being said, we don’t have the same disclosure for those corporations as we do for other corporations in America, and certainly not the world-class disclosure rules required for financial institutions. In fact, if you look at corporations in America, the level of disclosure we have for financial corporations is even greater than what we have for corporations in general. The reason why you need that is because, as we saw — as we have seen in many financial institutions that have melted down in the last 20 years or so — when they go bad, they can go bad very quickly just because of the nature of financial institutions. Money is so fungible and it moves so quickly, and because confidence is such an important part of the health of any financial institution, that’s why, perhaps more than a corporation that’s in the manufacturing business, we need to be able to have the confidence that they’re operating in a safe and sound manner early on. MR. PFLIEGER: That leads me to another question. Wall Street doesn’t seem to have expressed any lack of confidence in the GSEs. It seems, though, that you have lost confidence in them. MR. ABERNATHY: I would say that we are concerned that the level of supervision and disclosure is not adequate, and we believe that the housing finance markets will be better served if there is a new, credible regulator. I believe that the market has responded to the problems at Freddie differently and perhaps not as severely as if similar problems had been uncovered at a non-GSE. That may be due to the fact that many market participants believe that the federal government would step in if one of the GSEs were to default, even though the bonds state on their face that they are not guaranteed by the federal government. MR. CROWE: Do you think that’s what’s supporting the stock prices of Fannie and Freddie? MR. ABERNATHY: I don’t know if it affects their stock prices as much as it affects their bond prices. Their cost of funds certainly benefits from that assumption. Their stock prices, I think, have been influenced to some degree. If you compare Freddie’s stock prices with Fannie’s, there is a very significant difference in terms of the price-to-earnings ratio. I think Freddie’s is about half of what Fannie’s is in terms of price-to-earnings ratio, reflecting at least some unease, some disquiet, about Freddie’s condition. MR. PFLIEGER: During a Senate Banking Committee hearing on Sept. 23, Senator Sarbanes asked all the panelists to express their views on the idea of privatizing the GSEs. Let me ask you the same question. Does the Treasury Department — the Administration — support privatizing the GSEs? MR. ABERNATHY: We don’t have any plans to promote privatization. We’re not supporting any proposals for privatization. That has not been on our agenda or even in any of our discussions. MR. CROWE: What about the line of credit extended to Fannie and Freddie? MR. ABERNATHY: The discussion that we have been engaged in and our focus over the last several months have been on establishing the appropriate supervision for Fannie and Freddie. We’ve been focusing on getting the right regulatory structure. But let me just point out that, with regard to a line of credit, you have to understand that it is not really a line of credit, but rather the opportunity — the authority that the Treasury has to purchase the securities of Fannie and Freddie. But we have also said on multiple occasions that if Congress wants to look at other issues and would like us to engage in discussion with them, we will do that. But the discussions that we have initiated and our focus are on getting the regulatory system right. MR. CROWE: But opening that door does suggest you might be amenable to it. MR. ABERNATHY: It means if Congress wants to open the door we will have that conversation, and then we will have to decide what kind of policy we have on it. We have not taken a policy position on it nor have we had a policy discussion about whether that is a good idea or a bad idea. But if Congress thinks that there is merit to it and wants us to engage in that, then we will engage in a policymaking process and see if we have a view on it. MR. PFLIEGER: Have you encouraged Congress? MR. ABERNATHY: In that regard, no. I think if you look carefully at what Secretary Snow said when he testified before the House and I think re-echoed when he testified before the Senate, he emphasized that the most important thing we need to do is get the regulatory system right, and that’s what our main focus has been. But again, if Congress wants to deal with this issue or others, we’re certainly open to engage in that conversation. MR. CROWE: Let’s shift to a discussion about who should regulate the GSEs. Recently, there’s been speculation in the press and elsewhere about appointing a totally independent regulator. And you have stated previously that Treasury’s first priority is setting up a solid, world-class regulator for the GSEs. What are the characteristics of a truly independent regulator that you would feel comfortable with? Is this a point where the housing community can find some common ground and reach a compromise? MR. ABERNATHY: What’s most important is that we get the details of the regulator right. The supervisor has to have all the authorities that are needed to carry out its job. That includes full authority over both elements of capital, with minimum capital and risk-based capital. It includes authority over all of the elements of prudential supervision, including authority over new activities. And it includes having an independent source of funding. It includes being able to go to the courts on its own dime, on its own ticket, without having to solicit permission to do that from the Justice Department. Then people want to get into the question of where to put that entity. We have made it clear that if you want to put it in Treasury, there are certain requirements that need to be met, but that’s only if people want to place that entity into Treasury. MR. CROWE: Those are the only conditions for an independent regulator? MR. ABERNATHY: Well, again, the Administration has consistently said that there are certain elements that are essential to an effective, prudential regulator. Secretary Snow outlined those elements in his testimony before the House of Representatives Financial Services Committee in September. The Administration’s requirements for this new regulator are drawn from the powers and authorities that other world-class regulators have in this country and elsewhere. MR. CROWE: And you said new program activity? MR. ABERNATHY: Yes, we believe the new regulator must have authority over new activities. MR. PFLIEGER: You’ve reportedly taken the position that new program authority for the GSEs should be placed under the new regulator, that it cannot remain at HUD and that that position is non negotiable. Is that correct? MR. ABERNATHY: One of the essential elements of an effective regulator is the ability to approve new activities, not just new programs. You cannot point to an effective, world-class regulator of financial services that doesn’t have that authority. MR. CROWE: The regulator’s ability to essentially veto a program on financial safety and soundness grounds is not sufficient? MR. ABERNATHY: It’s not just safety and soundness. There are other elements that tie into it. There are a whole variety of risks that financial regulators look at when they’re looking at the activities of the institutions they are regulating. There are certainly the safety and soundness issues with regard to the financial aspects, but there’s also reputational risk, there are legal risks that they look at, there are management risks. Does this institution have the ability to manage these activities and how do these activities interact with the other activities of the institution? Do they have appropriate ability to understand all the aspects of the activity and where it might lead? All of those things need to be taken into account and looked at. It’s done in a very effective way with those agencies that have that power, and it’s done in a way that doesn’t slow down the ability to bring to market new products. If you look at America’s banks today, they are the world innovators. When it comes to financial services, it’s the United States that develops the new financial services, and they do it within a system where the bank regulators have authority over those new products. MR. CROWE: Could you see this independent regulator — independent of Treasury —operate as a “board,” with equal standing between HUD and Treasury? MR. ABERNATHY: As you know, the type of regulator, whether it is within the Treasury Department or a separate agency entirely, is still an issue that Congress is examining. MR. PFLIEGER: As part of this discussion over how the new regulator is set up, is there an opportunity for industry to participate? MR. ABERNATHY: There is, particularly for those who are the users and beneficiaries of Fannie’s and Freddie’s products. MR. PFLIEGER: Like the home builders. MR. ABERNATHY: Yes, like the home builders, like home buyers and people who supply other aspects of that, the financial institutions that originate the mortgages; all of those need to be looked at. I think there need to be some conversations with Fannie and Freddie, but keep in mind that these institutions were created by Congress to serve certain purposes of Congress. Therefore, Congress, the government, will play the major role, because these are government-sponsored enterprises, and the government ought to have the significant say in how they’re going to be supervised. And so, while they ought to be consulted with, I don’t think their views ought to determine what the final product is. MR. PFLIEGER: So you might see a role for the housing industry in that dialogue. Again, I don’t want to put words in your mouth, but in the event that there is a discussion about creating an outside agency board to regulate the GSEs, you see a role for the housing industry to have a seat at the table for those discussions. MR. ABERNATHY: I think whatever we do with regard to GSE supervision that that process ought to include a discussion with those who rely upon the services of the GSEs to make sure that what we’re creating is going to be able to meet their needs. And as I say, that includes the people who build the homes as well as the people who sell the homes as well as the people who buy the homes and the ones who finance them and originate the mortgages. I think all of those people ought to be involved in that process to make sure that we’re having a system that will be robust enough to continue the great benefits we have of this wonderful financial system for housing and finance. MR. CROWE: Fannie and Freddie both supply capital to the multifamily market as well as the single-family sector. Do you envision a major a role for Fannie Mae and Freddie Mac in facilitating the flow of capital to the multifamily market? MR. ABERNATHY: I think in our discussion we have been talking about basically the context of single homes, but the GSEs do play an important role in the multifamily market as well. And frankly, if you include the Federal Home Loan Banks, a lot of that money also goes into providing rental homes, and that’s important as well. There are a number of people for whom, for whatever reason, their best option is a rental home, and we don’t want that segment of the housing market to be neglected either. MR. PFLIEGER: You have stated a preference for regulating the Federal Home Loan Banks under the same regulatory umbrella being proposed for Fannie and Freddie. Does this make sense given the significant differences in the structure and operation of Fannie Mae and Freddie Mac versus the Federal Home Loan Banks? MR. ABERNATHY: They are different. They’re similar in the markets that they serve, but I think they’re complementary in many ways as well. But I think you can accommodate supervision of Fannie and Freddie and the Federal Home Loan Banks in the same agency, provided you have two divisions within that agency. There is some area for overlap, but there are also separate structures. You have 12 institutions that are cooperative in nature. They are created as mutuals, mutual institutions in essence, in effect. And then you have two that are for-profit entities, and they have different structures and different market forces that affect what they do. There’s also a good deal of overlap. Certainly in the backroom operations, making sure you have your legal team, your financial analysts, your accounting staff and your examination staff. You could have that same set of staff to provide you the kind of resources you need, whether you’re looking at the Federal Home Loan Banks or Fannie or Freddie. In fact, one of the benefits of putting them together in one institution is you would address one of the problems you have with examination staff for Fannie and Freddie today. If you’re a career examiner at OFHEO, your whole career you’re going to look at either Fannie or Freddie, and it’s hard to discover what best practices might be. The examination process is a give and take. The examiners are on the one hand coming in with a jaundiced eye, with a critical eye to see what can be improved, but they’re also learning. They’re learning about the good practices underway in one place that they can then carry to the next institution they look at. That happens in the banking world all the time. When you’re dealing with Fannie and Freddie, they are so much alike it’s hard to bring anything new to one or the other. But if your examiners are examining Fannie Mae this year, and next year they’re looking at the Federal Home Loan Bank of San Francisco, there may be some good lessons that they can learn from those different reviews that they can benefit each of them. MR. PFLIEGER: One reason you have given for having new GSE programs approved by the safety and soundness regulator is to eliminate the bifurcation of Fannie and Freddie’s oversight by HUD and OFHEO. But under your proposal, HUD would still continue to establish and enforce Fannie and Freddie’s affordable housing rules. Doesn’t this also represent a bifurcation of mission oversight if new program approval powers are moved to a different regulatory entity? Why are you concerned about bifurcation in one case but not in the other? MR. ABERNATHY: The best place for housing goals to be set and monitored is with the experts at HUD. The goal setting is not part of the supervisory process. But, while Fannie, Freddie and the Federal Home Loan Banks help us meet those goals, they are ultimately financial institutions. The new supervisor should have all the powers necessary to be a world class financial regulator, including new activity approval. The benefit in keeping goal setting and new activity approval somewhat separate is that HUD can look at those goals without being subject to the day-to-day supervisory responsibilities and concerns and worries. HUD can focus on what the housing market needs, and whether or not the GSEs need to stretch a little bit to meet these goals. The supervisor will look and say, “Go ahead and stretch, but as you’re stretching we’re going to make sure you’re not snapping. My job is to make sure you don’t snap and that you stay focused.” HUD sets the target, the supervisor looks at it to see whether or not the bow you were using is a good bow, whether your arrows are straight. But let HUD set the target. MR. PFLIEGER: Let me conclude by thanking you for participating in this interview. Before closing, are there any other points you would like to leave with NAHB’s 215,000 members? MR. ABERNATHY: Well, perhaps — and the only thing I would add that we haven’t covered here yet is our view that the need for having a good, effective supervisor is not going to go away. The need is probably going to increase, the mission responsibility that they have is so important that we can’t allow ourselves to get by much longer with inadequate supervision of these housing GSEs. We have to make sure that they’re safe today and that they will be safe tomorrow to be able to continue their mission. To read an accompanying interview with NAHB Executive Vice President Jerry Howard, click here. An Interview With NAHB Executive Vice President Jerry HowardRecent interviews with Assistant Treasury Secretary Wayne Abernathy and NAHB Executive Vice President Jerry Howard on regulation of the housing GSEs find some common ground: both agree that privatization of Fannie Mae and Freddie Mac is a bad idea.
Secretary Abernathy says: "We're not supporting any proposals for privatization." CEO Howard adds: "Efforts to privatize . . . should be opposed." But on other aspects of the debate — issues that will likely decide the future of America's housing finance system — there are some sharp differences of opinion. To read an accompanying article with Assistant Treasury Secretary Wayne Abernathy, click here. DAVID CROWE: What does the housing industry believe is the mission of Fannie Mae, Freddie Mac and the Federal Home Loan Banks? Should there be changes in their charter? JERRY HOWARD: I find it interesting that the Administration has been so critical of Fannie Mae, Freddie Mac and the Federal Home Loan Banks recently. The fact of the matter is that Fannie Mae, Freddie Mac and the Federal Home Loan Banks play an integral role in implementing the Administration’s federal housing policy. These entities have evolved into extremely critical components of the nation’s housing delivery system. Their mission is to provide liquidity and stability to the housing credit markets, particularly in areas that otherwise would not be adequately served. By their Congressional charters, these government-sponsored enterprises (GSEs) receive several privileges and legal exemptions to assist them in achieving their housing mission. With the help of these GSEs, more than two-thirds of the nation’s households are home owners. In addition, these GSEs play an important role in the financing of affordable rental properties. Much of this is due to the public/private partnership established by Congress more than a half-century ago. Efforts to diminish their GSE status or misguided attempts to overhaul their regulatory oversight could impair the ability of these enterprises to perform their critical role in the housing finance system. Changing the GSEs’ agency status or removing the housing perspective from their regulatory oversight could have negative ramifications on the housing finance system. Some of these negative impacts could include higher mortgage rates, increased volatility in the cost and availability of mortgage credit (especially for affordable housing), lower homeownership rates, fewer affordable rental units and reduced mortgage product and technological innovations. MR. CROWE: It has been widely acknowledged that housing has played a particularly important role over the past couple of years in keeping the economy stronger than it would otherwise have been. How has government policy contributed to this effort? And what role do you think the housing GSEs have played? MR. HOWARD: Housing has been huge, and NAHB is pleased there is such wide recognition that the housing market has been the key engine of growth in recent years. The housing sector continued to excel in 2003, with new home sales achieving a record performance of more than a million closings. Single-family home construction totaled nearly 1.5 million units in 2003 and multifamily activity, while more subdued, still posted a respectable showing, pushing total housing starts above 1.8 million units. While low interest rates and favorable demographics spurred demand, these results would not have been possible without the support of the finance system for housing. The effectiveness and resilience of this system is the result of a steadfast commitment of federal policy makers to improving the nation’s housing conditions and opportunities. The bedrock of the housing finance system is a liquid and vibrant secondary market that is the product of the activities of Fannie Mae and Freddie Mac. These enterprises have not only contributed to the affordability of housing credit, but also have taken the lead in expanding the menu of affordable housing programs and products. The Federal Home Loan Banks also continue to play an important role both by providing liquidity to housing lenders and by developing innovative programs to address housing needs. MR. CROWE: What is the housing industry’s view of the wide range of federal policies that support a strong housing delivery system — everything from the mortgage interest tax deduction, to the Low Income Housing Tax Credit, to housing’s share of the federal budget and the government’s support of the housing GSEs? Are there ways in which the federal government could improve its support? MR. HOWARD: The United States’ housing delivery system exemplifies a healthy balance of private and public resources that provides greater housing opportunities for all. The federal government’s support of the housing finance system, in partnership with financial institutions, and via the provisions of mortgage insurance and guarantees, is crucial to a stable and growing secondary market. As I mentioned, government-sponsored enterprises provide critical links between the national and global financial markets and the housing finance system, further enhancing stability and growth. And direct federal expenditures serve to reduce the cost of decent and safe housing to affordable levels. Finally, the U.S. tax system has been used for decades as an effective and efficient policy tool that expands housing opportunities without elaborate and expensive bureaucracies. Tax incentives distill public policy goals into economic terms, and tax payers react in the marketplace as they would to any other economic signal. While we are the best-housed nation, there’s always room for improvement. For example many well-intentioned federal regulations, primarily aimed at environmental concerns, have unintended adverse impacts on housing affordability. We believe that environmental protection can be equally effective if the economic impact of these laws and regulations is evaluated against the environmental benefit. This is not currently required, but should be. Also, housing policy should undergo review and refinement as housing and community development needs shift and evolve. The housing “rocket scientists” have come up with an idea for a new tax credit to spur minority homeownership and economic revitalization of downtrodden communities, and legislation to establish such a program is now before Congress. We need to continue to add new housing policy tools, as well as fine tune the proven mechanisms. MR. CROWE: To what extent are you concerned about the current condition or operation of Fannie and Freddie? MR. HOWARD: We are not aware that anyone, even Fannie’s and Freddie’s harshest critics, is claiming that a crisis is looming. These companies are in solid condition, as OFHEO continues to certify. The accounting problems at Freddie Mac certainly are real, but it’s a case of being more profitable than previously stated. Both companies continue to meet very tough capital tests with flying colors and we see no evidence of erosion in their financial health. We wish other companies were in as good a shape. MR. CROWE: The housing industry has been adamant in its opposition to taking control of the GSE programs away from HUD and putting it in the hands of the Treasury. Why is it so important for this authority to remain at HUD? MR. HOWARD: It’s quite simple — HUD is the only cabinet agency with a thorough understanding of, and extensive involvement in, housing-related issues. I have a high regard for the Treasury’s ability to oversee the safety and soundness of Fannie Mae and Freddie Mac’s operations. But those who care about housing are extremely skeptical of Treasury’s intentions in volunteering to be a “world-class” housing-GSE regulator because, time and again, they have expressed an anti-housing bias in their policy statements and actions. This is a historic bias that goes back for decades and has been apparent in both Democratic and Republican Administrations. That just doesn’t seem like the kind of regulator you want to have in charge of deciding the types of things Freddie, Fannie and the FHLBanks can and cannot do. NAHB strongly believes that Fannie Mae’s and Freddie Mac’s ability to spur innovative solutions and to develop new products that increase homeownership will continue only if the mission of these corporations is regulated by an agency that understands and is immersed in housing-related issues. HUD has proven itself to possess the capacity to adequately evaluate the potential benefits to housing from the GSEs’ innovation and advancement in products and to ensure that the GSEs do not stray from their statutory mission. To make a good thing better, HUD’s program oversight could be strengthened through the establishment of an independently funded office within HUD. Having an office within HUD dedicated to mission oversight of Fannie and Freddie would be preferable to the current situation where GSE oversight is conducted through the Office of Housing with few dedicated staff and staff from other HUD offices are detailed on an ad hoc basis for GSE oversight duties. Of course, there would be staffing, administrative and operational costs to achieve this increased regulatory scrutiny. One way to minimize the costs to taxpayers is to handle it by assessing Fannie Mae and Freddie Mac to fund the new HUD office. The new program approval process is another area where it seems like people are trying to substitute regulatory bureaucracy for common sense. The current process rightfully limits prior approval to new programs, which are defined as very broad undertakings unlike what is currently being done. Others are proposing to significantly broaden what would have to be approved to include any new business activities. Submitting each new activity to the approval process envisioned by the Administration would result in such micromanagement of the GSEs’ innovations that they would be unable to respond to changing market conditions in a timely fashion. The result would be to stifle or severely inhibit development and implementation of valuable new mortgage products and technological innovations that have helped to dramatically expand homeownership in the country. MR. CROWE: There has been speculation in the media and in Congress about what an independent regulator would look like and that it could possibly be a board. Is there possibly room there to compromise? Given that there are some strong differences between the Administration and the housing industry and within Congress about the role of a new independent GSE regulator, particularly over the issue of program oversight, do you perceive any common ground between these two views that might suggest the possibility of a compromise? MR. HOWARD: The discussions about who should regulate the housing GSEs have been like performing exploratory surgery on the central nervous system of the housing industry and the economy in general. No one wants to jeopardize the housing finance system that is the envy of the world. But, many people feel passionate about their views. And rightly so. After all, we’re not talking about widgets, we’re talking about peoples’ homes. Here is NAHB’s perspective plain and simple: the regulatory framework for the GSEs should be credible and effective to ensure these organizations fulfill their mission in a safe and sound manner. If every policy maker focuses on this goal, I’m certain the outcome will be a world-class regulator. Things get bogged down when people focus on protecting their turf. I’m pleased that the Administration, lawmakers and key policy makers have resumed discussions. As I mentioned before, NAHB strongly believes that HUD is the appropriate agency to regulate the mission of Fannie Mae and Freddie Mac, including approving new programs and establishing affordable housing goals. However, we’d be willing to explore the feasibility of establishing an independent GSE regulator outside of Treasury so long as that entity has a thorough understanding of and extensive involvement in housing-related issues. The regulator could be structured with a governing board of directors that includes HUD officials and representatives from the housing sector on the board to ensure the GSE regulator possesses sufficient housing-related expertise. MR. CROWE: Treasury Assistant Secretary Wayne Abernathy has suggested that there might be a role for the housing industry in the discussion over how the new regulator is set up? What do you believe the industry’s role should be and what points do you believe need to be emphasized if that dialogue should arise? MR. HOWARD: I wouldn’t say there “might” be a role. I’d say there must be a role. It would be a huge mistake to turn discussion on GSE regulation into a free-for-all referendum of our highly successful housing finance system. Decisions that have not been vetted by those who will have to live with them could have catastrophic consequences for housing. NAHB urges a careful and thoughtful approach on GSE regulation and believes such a course will produce tremendous rewards to those with most at stake in the process — America’s home owners and renters. NAHB’s involvement in the discussion over how the new regulator is set up would add the wisdom, knowledge and experience of over 215,000 direct participants in the production of housing and related activities. In fact, here is what NAHB members believe should be the guiding principles of the GSE regulatory reform debate: The first principle is that the GSE status of these institutions must be maintained. Efforts to privatize, withdraw any of the federal privileges and legal exemptions or otherwise diminish the ability of the GSEs to provide housing financing at the lowest possible cost should be opposed. Our second guiding principle is that the GSEs should fulfill their public mission by conducting activities authorized by their charters in a safe and sound manner and by promoting access to mortgage credit to address the needs of affordable housing throughout the nation. Third on our list of principles for reform efforts is that the regulatory framework of the GSEs should be strong and credible, possess adequate authority and resources and reflect the differences inherent in the charters and operating structures of the GSEs. Further, the regulatory framework should foster competition among the GSEs to develop and implement innovative, low-cost funding and other programs to meet the nation’s housing credit needs. Fourth, the mission oversight of Fannie Mae and Freddie Mac (including approval of new programs and enforcement of affordable housing goals) should be conducted by the Department of Housing and Urban Development or another entity with a thorough understanding of, and extensive involvement in, housing-related issues. Fifth, we believe that the safety and soundness oversight of Fannie Mae and Freddie Mac should be conducted by an independent regulatory agency through rigorous examinations, enforcement of regulations (including capital standards) and transparency, without unnecessarily impairing the ability of these GSEs to accomplish their mission. The sixth of our guiding principles is that the recently implemented risk-based capital standards for Fannie Mae and Freddie Mac should be allowed to remain in place for a period of time sufficient to evaluate the effectiveness of the new standards. And seventh, the regulation of the mission and safety and soundness of the Federal Home Loan Bank System should reflect the uniqueness of the system’s mission, cooperative operating structure, charter type and other characteristics. This is best accomplished by having a regulator dedicated solely to FHLBank System oversight or by having a separate FHLBank System oversight division if a single agency regulates all of the housing GSEs. To read an accompanying interview with Assistant Treasury Secretary Wayne Abernathy, click here. Eye on the EconomyDavid F. Seiders, NAHB Chief Economist Economic growth is good, but inflation still is receding toward zero … Growth of real gross domestic product (GDP) slowed down in the final quarter of 2003, as expected, but the economy still recorded a highly respectable 4.0% annualized rate of increase. This gain brought GDP growth for 2003 to 4.3% (fourth quarter to fourth quarter basis), and growth averaged 6.1% in the second half of the year. The acceleration in economic growth during 2003 was not accompanied by higher inflation in prices of goods and services. In fact, most major inflation measures receded during the year, in some cases falling below 1% in the final months of 2003. This was particularly true of key measures of core inflation (excluding food and energy). Indeed, inflation in the core price index for personal consumption expenditures in the GDP accounts (a favorite of the Fed) fell to an annual rate of 0.7% in the final quarter of 2003. Considering the presence of upward biases in such measures, it’s safe to say that core inflation was approaching zero as the year drew to a close — and that’s not far from outright deflation. The labor market still is struggling, but improvements finally are showing through … Nor did the 2003 acceleration in economic growth generate much improvement in the nation’s labor market. Revised figures show that payroll employment fell by 53,000 over the course of the year, aggregate hours worked in the nonfarm business sector fell by 0.4% and average hourly earnings climbed by only 2%. Employment and hours picked up to some degree during the last four months of the year, but even these gains were meager — averaging only 63,500 jobs per month during that period. The preliminary January report was somewhat better, showing payroll job growth of 112,000, but that’s still well below par for the U.S. economy. The Labor Department’s survey of households (rather than business establishments) paints a somewhat brighter picture of the labor market, highlighted by a gradual decline in the nation’s unemployment rate from a cyclical high of 6.3% last June to 5.6% in January. However, some of this improvement reflected erosion of the labor force participation rate rather than declines in the numbers of persons officially unemployed (actively looking for work). Broader measures of slack in the labor market — including discouraged workers who have withdrawn from the labor force and those working only part time for economic reasons — were still riding very high in January. Greenspan reiterates Fed’s ‘patience’ in midst of receding inflation and slack labor markets … The Fed jolted the financial markets at the conclusion of the Jan. 28 Federal Open Market Committee (FOMC) meeting by backing away from an apparent open-ended commitment to the 1% federal funds rate target — even though the Fed still said it could be “patient in removing” this extraordinary degree of monetary stimulus. However, the initial drop in the stock market and the initial runup in long-term rates have now been reversed, leaving the 10-year Treasury yield close to 4%. Statements by various Fed spokespersons helped calm the markets in the wake of the Jan. 28 FOMC meeting. Furthermore, Chairman Alan Greenspan’s semi-annual Monetary Policy Report to the Congress, delivered Feb. 11 in the House of Representatives, reassured the bond markets and reduced concerns about any near-term tightening of monetary policy. While noting that the federal funds rate will eventually have to rise to a more neutral level, the chairman stressed that “the Federal Reserve can be patient in removing its current policy accommodation” because inflation is “very low” and there’s “substantial slack” in the economy. NAHB’s forecast still assumes that the first rate hike will occur at the FOMC meeting in November. Economic and financial market forces get housing off to a good start in 2004 … The housing sector closed out 2003 with a rush, sowing concerns about sustainability in 2004. After all, home sales and single-family starts soared to record highs in the latter part of last year and the nation’s homeownership rate climbed to a record 68.6% by the fourth quarter. Even the multifamily sector joined the party, powered by a vibrant condo market. All in all, a tough act to follow! We’re still short on housing market data for early 2004. However, the evolving positive performances by the real economy (finally involving the job market), as well as by the stock and bond markets, presumably are providing solid footings for housing demand — particularly for owner-occupied units. Indeed, weekly data on applications for mortgages to buy homes (MBA series) have been quite strong since the end of 2003 as mortgage rates have hung around 5.7%. Mortgage refinancings also have increased, opening up the opportunity for cash-out refi's for many home owners. NAHB’s official forecast envisions modest slippage in home sales and housing production as 2004 moves along, and the projected erosion is associated with a projected updrift in the interest rate structure. It remains to be seen whether or not that pattern will materialize. Stay tuned. The federal budget moves to center stage in the evolving political debates … Rightly or wrongly, the federal budget deficit is turning out to be a complication for the Bush Administration as the election year gets into full swing. After all, the deficit declined and then burst into surplus during the Clinton years, and the deficit has returned with a vengeance since George W. Bush took office. The deficit hit $375 billion in fiscal 2003 and is projected by the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB) to approach or exceed $500 billion in fiscal 2004 — an all-time high. This has prompted charges of fiscal irresponsibility by the Bush Administration. The Bush camp has responded that the President inherited a flagging economy and that three years of recession and sub-par recovery can account for about half of the budget deterioration since 2000 — deterioration that is, by its nature, only temporary. Another one-fourth of the deterioration is attributed to the acceleration in federal spending for defense and homeland security, and that’s characterized as essential for the safety of U.S. citizens in today’s unstable global environment. The remaining one-fourth can be associated with the Bush tax cuts of 2001 and 2003, but the White House says those cuts should help pay for themselves over the long term by stimulating work effort, capital investment and incomes of both businesses and households. The White House also says that policy changes to address the deficit should focus primarily on discretionary outlays other than those for defense and homeland security, and that the Bush tax cuts should be made permanent rather than repealed or allowed to expire (most provisions have expiration dates). Indeed, those principles shaped the President’s budget proposal for fiscal 2005 (released on Feb. 2). Budgetary controls eventually will be critical to the interest-rate structure and housing … A key issue for the housing industry regards the impacts of federal budget deficits on the interest rate structure — an issue that’s being elevated by Democratic contenders and downplayed by the White House. Recent research at the Federal Reserve suggests that it’s not just the size of the deficit that matters but the deficit relative to the size of the economy (deficit/GDP). Furthermore, a temporarily elevated ratio doesn’t boost rates when the economy is operating below potential, as it did in 2001-2003. But when the economy is operating at potential, with a low and stable unemployment rate, the research suggests that each percentage point rise in the deficit/GDP ratio will raise long-term interest rates by 25 basis points. Furthermore, prospective increases in this ratio can affect long-term rates in advance, as investors in bonds assess future market pressures. CBO and OMB estimate that, if current laws and policies remain unchanged, federal deficits will begin to decline after fiscal 2004 and the deficit/GDP ratio will fall sharply from this year onward. If the Bush tax cuts are made permanent (as proposed by the President), the projected deficits are higher in the future but the deficit/GDP ratio still recedes over time. These projections assume a tight rein on growth of federal discretionary spending, and it’s easy for investors to be suspicious of that presumption. To help reassure the markets, Congress should reestablish the procedural budgetary rules that were allowed to expire in recent years, including limits on overall discretionary spending and the so-called PAYGO rules. In his Monetary Policy Report to the Congress, Chairman Greenspan described such rules as a “critical element…to help fiscal policy makers make the difficult decisions that are required to forge a better fiscal balance.” NAHB Chief Economist David Seiders analyzes the economy from the point of view of the housing market every other week in the free e-newsletter, “Eye on the Economy.” The preceding is a reissue of his Feb. 11 edition. To subcribe to “Eye on the Economy,” click here.
Want more economic information? Find it in our publications. Find more in-depth information in our three economics publications, Home Builders Forecast, Housing Market Statistics and Housing Economics. All are availaible by subscription.
To learn more or to order any of these three NAHB economic publications, visit the Economics Publications Information section of the NAHB Web site or call 800-223-2665.
Don’t Miss NAHB’s Spring Construction Forecast Conference See what's on the horizon for the housing industry at the semi-annual gathering of the country's premier economists and finance experts. Get the latest forecasts on housing starts, project budgets and other economic bellwethers at the Spring Construction Forecast Conference on April 21 at the National Housing Center in Washington, D.C. Visit the Web site for more information. Make Your Connection With www.nahb.org Make your connection to the latest housing industry news and information with www.nahb.org — the official public and members-only Web site of NAHB. Log in today to register for educational seminars, meetings and networking events; find important economic and housing data; and learn the latest developments in NAHB’s efforts to promote housing. It’s all available to you 24 hours a day at www.nahb.org. Just click the "Member Log In" button to get started. If you are a member and need information about NAHB products and services, use the NAHB Staff Contact Directory to look up the direct telephone extensions for NAHB staff experts. Awards Help Builder Achieve Great Strides in Housing QualityA Silver Award winner in this year’s National Housing Quality (NHQ) Awards told convention-goers at last month’s International Builders’ Show in Las Vegas how her company’s resolve to make major changes in its culture and operations resulted in significant improvements in performance and profits over a five-year period. Cynthia McAuliffe, president of Grayson Homes in Ellicott City, MD, said that participation in the NAHB Research Center's NHQ program provided her company with valuable information on where it could do better. For that reason, “Don’t wait until you think you are ready for the award to apply for it,” she advises firms that are serious about incorporating customer-focused quality into their construction, business management, sales, design and warranty service. In its initial application for the 2001 awards, Grayson Homes received discouraging news from the industry experts on the judging panel, but assessments in the eight categories that are reviewed — “brutal facts about company deficiencies,” is how McAuliffe characterized the feedback — provided insights into the areas in which there was room for improvement. By working yearly to incorporate quality improvements in the business, Grayson Homes was gradually able to close in on achieving its goals. From 1999 to last year, net sales profits increased from 3.2% to 10.8%; customer satisfaction grew from 89% to 96%; employee satisfaction rose from 89% to 100%; scores on pre-delivery inspections for defects climbed from 79.1% to 92.1%; and outstanding service issues dropped from 225 to 35. “It’s the culture, stupid; it’s the people that matter,” McAuliffe said in describing the philosophy that turned things around. On the employee front, the corporate overhaul started by going to business casual and providing production supervisors with shirts bearing the Grayson logo. In stages, more resources were applied to employee training and employee bonuses were tied more closely to customer satisfaction. Other initiatives to improve employee satisfaction included profit sharing, semi-annual employee satisfaction surveys, employee of the month awards, a monthly newsletter, cross-training between departments, mid-year development reviews, a quarterly money-saving campaign, and picnics and other planned events for employees. In a paradigm shift, review of key measures of the company’s success — including a monthly tracking board of “success drivers” behind customer satisfaction and profit enhancement — were shared with all employees, not just the company’s senior management. Production supervisors and community sales managers are now trained together to ensure consistency in a 10-step process for customer satisfaction that includes meetings and follow-ups with customers at various phases of the home building and buying process. All supervisors have been equipped with computers and production supervisors' offices were relocated to models, with a separate entrance on the lower level. And employees put together a compendium of some 170 company policies and procedures online. “They aren’t printed so that they are up-to-date all the time,” McAuliffe said. A design center was opened for customers, McAuliffe said, “because we want our sales people selling homes, not options.” Option sales per house rose from $6,500 to $29,000 by last year, she reported. The company now systematically tracks defects. Starting this year, defect tracking and prevention meetings are being held monthly with the trades. This year, Grayson also hopes to win the Gold NHQ award. The 11th Annual National Housing Quality awards were presented by the NAHB Research Center and Reed Business Group, publisher of Professional Builder and Professional Remodeler magazines. Green Building Moving Into the Mainstream at Austin ConferenceMainstream and specialty builders can learn more about resource-efficient, environmentally sensitive and cost-effective “green” building at the 2004 National Green Building Conference in Austin, TX, on March 14-16. The NAHB conference is being held in the heart of the city that gave birth to the green building movement, and some 500 attendees are expected to be on hand to exchange green building ideas, see the latest in green building products and technologies from 67 exhibitors and participate in educational sessions on green mortgages, green land development, water conservation, trends in green building design and more. Tours will be available on the first day of the conference, including visits to award-winning infill subdivisions, Austin’s first SMART housing development and:
The conference is being held at The Hilton Austin Hotel and Convention Center, which is located at 500 East 4th Street in downtown Austin. For registration information, contact the NAHB University of Housing at 800-368-5242 x8EDU, or click here to download the conference program. For hotel reservation, call 800-236-1592 or 512-482-8000, or click here to visit the hotel's Web site. GAO Report Suggests Need for Scrutinizing Housing NonprofitsNonprofits often perform necessary and worthwhile functions, and many have established productive working relationships with NAHB members. But a recent report by the U.S. General Accounting Office (GAO) analyzing HUD’s Discount Sales Program demonstrates why NAHB members should not simply assume that the behavior of nonprofits is above reproach and that they do not need to be scrutinized the same way as any other link in the chain of affordable housing providers. The Discount Sales Program gives approved nonprofit organizations a discount when they buy single-family homes from HUD, under the condition that the nonprofits rehab the properties and sell them to low- or moderate-income buyers at a restricted price. The program has been difficult to monitor, largely because few nonprofits submit required reports to HUD on time and with complete information. Nonetheless, of the 44 nonprofits that did submit the latest round of reports on time, HUD was able to determine that 28 had violated program requirements by overcharging buyers. GAO estimates that 76% of buyers under the program would have spent less had they bought the homes directly from HUD and paid for the rehab work themselves. To read the report, click here. NAHB Forming 20 Club for Seniors Housing ProfessionalsNAHB is forming a 20 Club for single-family and multifamily builders, developers and architects involved in 50+ seniors housing. NAHB’s 20 Clubs serve as a networking opportunity for CEOs, presidents, owners, principals and partners in the building industry. NAHB members meet with other industry leaders from non-competing markets whose companies are similar in size to exchange ideas and develop business, strategic and marketing plans that position their companies for success. “The networking and education in a 20 Club is second to none,” said Randy Rinehart, a custom builder from Charlottesville, VA, who specializes in universally designed homes. “It allows the owners and decision-makers from companies to exchange information, find out what others are doing across the country and pick up ways to improve operations and increase their bottom line. The best way to learn is through others’ experiences.” NAHB currently offers 20 Clubs for custom, production and small volume builders and remodelers. The 50+ market is the fastest growing segment of the housing industry. With the influx of the boomer generation, the demand for active adult and seniors communities is greater than ever. “Seniors housing is a unique market in itself,” said Rinehart, chair of NAHB’s 20 Clubs and a trustee for the NAHB Seniors Housing Council. “It’s important for companies who serve the 50+ consumer to have the latest information. 20 Clubs allow members to share information, look for trouble spots, and receive valuable advice on how to increase profits and improve their performance.” For more information on the 50+ Senior Builder 20 Club, e-mail Kristin Peck or call her at 800-368-5242 x8105. Visit www.nahb.org/20clubs for more details.
Learn More About Seniors Housing Through the Seniors Housing Council To learn more about seniors housing, join the NAHB Seniors Housing Council. The council provides information, education, networking and recognition opportunities for its members and represents NAHB on seniors housing issues. For more details, e-mail Jeff Jenkins or call him at 800-368-5242 x8292. BuilderBooks.com Has Publications About Seniors Housing BuilderBooks.com offers a variety of publications about the seniors housing market. To view or purchase these publications, click here and type “seniors” in the search engine. 2004 Seniors Housing Symposium To learn more about the seniors housing market, plan to attend the 2004 Seniors Housing Symposium, Building for Boomers & Beyond in Chicago from April 14-16. The symposium will focus on the lifestyle component of 50+ seniors housing. My Competitor Just Paid My Membership DuesCan you believe that one of my biggest competitors in town just renewed my Remodelors™ Council membership? It’s true! Actually every year since our company joined in 1995, I have found a different remodeler — usually a Certified Graduate Remodelor (CGR) — to pay my membership for the coming year. And in Houston, that cost is substantial: $550 ($75 for the Remodelers™ Council and $475 for the HBA). I know what you’re thinking, “How is this possible?” No, I did not win a bet to find myself the beneficiary of such largesse. I just shared my knowledge and experience, as I have ever since I joined. And my fellow remodeler, like every other remodeler in our council, did the same. In my particular case this year, I sought her recommendation for a tile contractor, and the advice she gave me saved me more money than the cost of my dues — and that's after only one project. Here’s what happened. Our firm’s relationship with our regular tile contractor was waning. We had been with him for a number of years, but we felt his quality was not keeping pace with the needs and desires for more sophisticated and intricate designs from our increasingly affluent clientele. We wanted to find a new tile installer and knew that the Yellow Pages was not an effective option. So we asked council members if they could recommend someone and they responded. Our first contract using the recommended contractor was for more than $8,000. We expected a slippage of some 4% (which amounts to about half the cost of our membership), based on the labor problems that we experienced with our former tile contractor, but there were no problems and no extra costs. Add to that the good will we accrued with out client, the time we saved because our project manager did not have to solve any tile-related quality issues and — “boom!” — our coming dues again were paid in full for another year. Today, 90% of trade contractors and more than 90% of our vendors are members of the Remodelers™ Council. Most important of all, however, through the sharing and mentoring atmosphere that permeates our council, 90% of those partnerships came about through the referral from a fellow remodeler. If you think you are too busy to renew your membership, or that you can afford not to do so, you are completely wrong. You can’t afford not to. Michael Strong, CGR, is vice president of Brothers Strong, Inc. in Houston. The company was voted as the 2003 Houston and Texas Remodeler of the Year. For more information, contact Strong via e-mail.
BuilderBooks.com Offers Publications for Remodelers BuilderBooks.com offers a variety of publications about remodeling. To view or puchase these publications online, click here, or call 800-223-2665 to order by phone. University of Housing Offers Courses and Designation Programs The NAHB University of Housing offers a variety of business management courses and professional designation programs that set builders and remodelers apart from the competition. For a complete list of current offerings, click here. Make Your Connection With www.nahb.org Make your connection to the latest housing industry news and information with www.nahb.org — the official public and members-only Web site of NAHB. Log in today to register for educational seminars, meetings and networking events; find important economic and housing data; and learn the latest developments in NAHB’s efforts to promote housing. It’s all available to you 24 hours a day at www.nahb.org. Just click the "Member Log In" button to get started. If you are a member and need information about NAHB products and services, use the NAHB Staff Contact Directory to look up the direct telephone extensions for NAHB staff experts. Three Remodelors™ Council Members Receive Council HonorsDuring the Chairman’s Dinner at the International Builders Show in Las Vegas last month, MM (Mike) Weiss, 2003 Remodelors™ Council chairman, honored three council members for their ongoing service to the council and industry. The remodelers honored included: Robert Bell, CGR, CAPS, of Bell’s Remodeling in Duluth, MN, who received the Remodelors™ Council Distinguished Service Award, for lifetime achievement. Bell, an educator by degree and a remodeler by choice, spent his entire career promoting the importance of education to the industry. “Bob is the champion of the smaller contracting company, and everyone who is in a small town or a small market probably owes him a debt. He has served for many years as the watchdog to make sure the ethics of theindustry are upheld,” said Weiss. “As the winner of almost every leadership and quality award Minnesota and NAHB have to offer, he will no doubt spend the rest of his career continuing to look out ‘for the little guy.’ Robert Bell is one of the biggest ‘little guys’ in the industry.” Brothers Robert Hanbury, CGR, and Alan Hanbury, CGR, CAPS, of the House of Hanbury Builders in Newington, CT, received the Chairman’s Award for their outstanding contribution to the industry. The Hanbury brothers have held or currently hold leadership positions within their local Remodelors™ Council, the Home Builders Association of Hartford County and NAHB. Both have chaired the NAHB Remodelors™ Council and played a role in the creation of the first NAHB Remodeler 20 Club. Robert Hanbury has served on the NAHB Budget and Construction, Codes and Standards Committees. He also worked on lead regulations and the proposed Lead Safe Work Practices. He is currently the NAHB State Representative for Connecticut. Alan Hanbury served on the NAHB Education Central Task Force that led to The NAHB University of Housing and chaired the NAHB Board of Education. He currently serves on the CAPS Board of Governors. “In addition to all their volunteer achievements, they run a top notch, third-generation remodeling company,” said Weiss. Photos by Oscar & Associates
BuilderBooks.com Offers Publications for Remodelers
BuilderBooks.com offers a variety of publications about remodeling. To view or puchase these publications online, click here, or call 800-223-2665 to order by phone.
University of Housing Offers Courses and Designation Programs The NAHB University of Housing offers a variety of business management courses and professional designation programs that set builders and remodelers apart from the competition. For a complete list of current offerings, click here. Make Your Connection With www.nahb.org Make your connection to the latest housing industry news and information with www.nahb.org — the official public and members-only Web site of NAHB. Log in today to register for educational seminars, meetings and networking events; find important economic and housing data; and learn the latest developments in NAHB’s efforts to promote housing. It’s all available to you 24 hours a day at www.nahb.org. Just click the "Member Log In" but |