NAHB, Administration in Sync on Housing Legislation Need
With NAHB working tirelessly for the past several weeks to urge Washington policymakers to take aggressive action to stabilize financial markets, jump-start the housing sector and get the economy moving, significant developments occurred on Jan. 22 when the Federal Reserve Board moved decisively by cutting interest rates by 75 basis points.
“This action sends a strong signal to the world financial markets that the Fed is prepared to inject liquidity into the credit markets and do its part to help the U.S. economy avoid a recession,” said NAHB President Brian Catalde. “Further rate cuts may still be needed and we urge Fed policymakers to monitor the situation closely with this possibility in mind when they meet at the end of the month.”
In a speech to the U.S. Chamber of Commerce that same day, Treasury Secretary Henry Paulson agreed with NAHB when he called on Congress to move swiftly to address the current housing situation by enacting an economic stimulus package and passing the following legislation ― FHA modernization to increase the availability of affordable FHA mortgages; comprehensive reform of Fannie Mae and Freddie Mac that allows them to temporarily buy larger home loans in high-cost markets; and allowing cities and states to issue tax-exempt mortgage bonds to refinance existing loans to help troubled borrowers.
NAHB believes that any stimulus plan must also address housing as a key component to moving the economy in the right direction.
For example, NAHB continues to urge Congress to establish a tax credit for first-time home buyers and expand the net operating loss (NOL) deduction. Enacting the tax credit would increase housing demand, particularly in a period of tightening mortgage lending requirements.
On the supply side, by expanding the NOL tax deduction, Congress would help builders weather the current downturn. Under present law, a business loss can only be deducted from taxes paid from the previous two years. If the loss cannot be carried back, it must be used in the future.
Expanding the carry-back to five years would enable builders to receive an immediate rebate on taxes paid in previous years and provide a much needed infusion of capital to their businesses.
NAHB, HPC Urge Hike in Conforming Loan Limit
Joining forces to take a leadership role in breaking the deadlock in Congress over reform of the regulatory framework for the housing government sponsored enterprises (GSEs) — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — NAHB and the Housing Policy Council (HPC) of The Financial Services Roundtable last week called on lawmakers to act quickly to allow Fannie Mae and Freddie Mac to temporarily purchase larger home loans to boost the housing market.
“Because we are seeing continued liquidity problems in the jumbo mortgage market, NAHB and HPC support a temporary increase in the conforming loan limit to allow Fannie Mae and Freddie Mac to purchase mortgages in high-cost areas as part of prompt action on GSE reform legislation,” the two groups said.
Specifically, NAHB and HPC are calling on the Senate to swiftly approve legislation similar to House-passed H.R. 1427, which would reform the oversight of Fannie Mae and Freddie Mac and allow them to increase liquidity in the nation’s mortgage markets.
While H.R. 1427 includes a provision calling for a permanent adjustment for high-cost loan areas based on the area median home sales price up to 150% of the national limit, NAHB and HPC believe that the increase should be temporary for two years. At the end of that period, the increase would be terminated if the jumbo market has returned to a normal spread between conforming and non-conforming mortgage rates.
“With the potential for an economic recession increasing, now is the time for all of us to put aside our parochial interests and focus on the job of stabilizing the housing market and getting the economy back on track,” said Catalde. “The Housing Policy Council and NAHB are committed to doing just that by working with other industry stakeholders, the Administration and the Senate to move GSE reform now and get the job done.”
“Fannie Mae, Freddie Mac and the Federal Home Loan Banks play an important role in the mortgage finance system, assisting in maintaining the mortgage market’s stability and promoting affordable housing,” said John H. Dalton, president of the Housing Policy Council. “Therefore it is crucial that Congress complete action on comprehensive legislation to strengthen oversight of these vital GSEs.”
The joint NAHB-HPC effort is significant, as the HPC, which represents many large bank lenders, has previously opposed increases in the conforming loan limit.
To view the House bill, click here and enter H.R. 1427 in the box at the center of the page.
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.
NAHB, Treasury Agree — Pass This Legislation
In a speech to the U.S. Chamber of Commerce on Jan. 22, Treasury Secretary Henry Paulson agreed with NAHB that Congress needs to act now to pass the following legislation:
- FHA modernization to increase the availability of affordable FHA mortgages
- Comprehensive reform of Fannie Mae and Freddie Mac that allows the GSEs to temporarily buy larger home loans in high-cost markets
- Allow cities and states to issue tax-exempt mortgage bonds to refinance existing loans to help troubled borrowers