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Congress, White House Step Up Efforts to Rescue Economy
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President George W. Bush delivers remarks on the economy to the Economic Club of New York on March 14. White House photo by Chris Greenberg | In the midst of more troubling news for the nation’s economy, members of Congress and the Administration worked steadily last week on measures to stabilize the housing market, restore confidence in the financial markets and avert a recession.
In a March 14 address to the Economic Club of New York, President Bush touched on the success of steps his Administration has taken to limit the number of households who will lose their homes to foreclosure and he called on Congress to do a number of things to address the current downturn in the housing market, which he called “a root cause of the economic slowdown.”
Members of Congress, the President said, “need to move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow state housing agencies to issue tax-free bonds to home owners to refinance their mortgages.”
Bush cited efforts by the Federal Reserve Board and the Treasury Department to help financial institutions make more credit available to businesses and home buyers, and he said that consumer spending will receive a boost in the second week of May when income tax rebates start going out to 130 million households.
“I’m coming to you as an optimistic fellow,” he said. “I’ve seen what happens when America deals with difficulty. I believe that we’re a resilient economy, and I believe that the ingenuity and resolve of the American people is what helps us deal with these issues.”
Fixing What Went Wrong
On March 13, the day prior to Bush’s trip to New York, the Treasury Department released a report by the President’s Working Group on Financial Markets on what went wrong leading up to the collapse of the subprime mortgage market last summer and what actions are needed to prevent a recurrence.
Commenting on the report, Treasury Secretary Henry Paulson signaled a need for greater transparency and other reforms to prevent the kind of sudden downturn that has struck credit markets in recent months. The changes include tougher disclosure requirements for banks and Wall Street firms, a nationwide licensing system for mortgage brokers and new rules for credit rating agencies.
Waiting for an FHA Bill
On Capitol Hill last week, NAHB lobbyists held several meetings with key lawmakers and their staffs to help move Federal Housing Administration modernization forward. In addition, grassroots members of the association were actively involved, reaching out to members of Congress to urge them to get the job done.
While both Senate Banking Committee Chairman Chris Dodd (D-Conn.) and House Financial Services Committee Chairman Barney Frank (D-Mass.) reported progress, ultimately House and Senate negotiators failed to approve a final bill before Congress adjourned for a two-week recess. It appeared, however, that important groundwork had been laid to move this legislation forward upon Congress’s return.
More Plans to Limit Foreclosures
In another development on the housing front being monitored closely by NAHB, Frank on March 13 announced a plan to let the FHA insure and guarantee refinanced mortgages that have been significantly written down by mortgage holders and lenders. Frank said he wanted the FHA to provide up to $300 billion in new guarantees to get borrowers into viable mortgages, which he predicted could help refinance between 1 and 2 million home loans and help these families stay in their homes. In exchange for accepting a writedown of principal, lenders or mortgage holders would receive a payment from the proceeds of a new FHA loan if the borrower "can reasonably be expected to pay" the restructured mortgage.
In announcing the new proposal, Frank cautioned that the bill text could change before it was introduced.
Dodd also unveiled his own legislative plan to help strapped home borrowers. Under the "HOPE for Homeowners Act of 2008," new mortgages that are offered by FHA-approved lenders will refinance abusive loans at a significant discount for home owners facing difficulty meeting their mortgage payments.
“This is the worst housing crisis of our lifetime, and we’re in a recession as a result of it,” said Dodd. “Property values decline sharply when a home in the neighborhood is foreclosed upon. In order to stabilize neighborhoods, we must take actions to prevent foreclosures. This proposal will help provide much-needed relief for people on the brink of foreclosure, keeping families in their houses and neighborhoods financially stable.”
Meet With Members of Congress While They’re Home
With Congress off for the Easter holiday, home builders are encouraged to set up meetings with their representatives and senators in their home districts and urge their lawmakers to take immediate action to shore up home prices, which will stabilize housing and the financial markets.
Specifically, builders should call on their federal lawmakers to create a temporary home buyer tax credit to boost sales, enact FHA and GSE reform, expand the mortgage revenue bond program and allow businesses to carry back net operating losses for five years.
For more information on these issues, and for help in setting up an appointment with your lawmaker in your home district, e-mail Molly Murray at NAHB, or call her at 800-368-5242 x8282.
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