Mortgage, Financial Markets Slowing Housing, Builders Say
The nation’s home builders on March 11 told Congress that the housing sector is still being significantly affected by the upheaval in the financial and mortgage markets that started in 2007, and there is deep concern that these financial dislocations will increase the depth and length of the housing downturn.
Testifying before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, NAHB Chairman Joe Robson said that coordinated regulatory efforts among federal and state agencies are necessary to ensure prudent lending practices and effective consumer protections while facilitating efficient operation of the residential mortgage markets.
“NAHB supports efforts to ensure that mortgage lending occurs in a safe and sound manner and that abuses in lending practices are properly addressed,” said Robson. “However, it is imperative that any steps taken in this effort do not inadvertently or unnecessarily disrupt the mortgage lending process or consumer financing options, or increase the costs or reduce the availability of mortgage credit.”
NAHB urged Congress to implement a clear national framework for mortgage origination standards to replace the current patchwork of state and local laws, which often lead to unnecessary restrictions on mortgage credit.
“Specifically, Congress should establish a federal pre-emption statute creating essential uniformity in mortgage market standards,” said Robson.
NAHB also supports efforts to improve consumer education on financing and owning a home and believes it is important that efforts to ensure prudent mortgage lending and risk management practices as well as adequate consumer disclosures are comprehensive and uniform for all organizations involved in providing mortgage credit.
Single-family appraisal problems are an area of concern for home builders, and are contributing to the current housing and credit crisis. “Appraisers have often used sales of homes in foreclosure or other distressed property sales as comparables for appraisals of new homes without making the appropriate value adjustments,” said Robson.
At its most recent board of directors meeting, NAHB adopted policy expressing the following principles for mortgage lending:
- Underwriting standards and decisions should be based on documented borrower credit and repayment capacity rather than expectations of rising collateral value.
- There should not be overly rigid adherence to loan-to-value limits that results in inappropriate rejections of creditworthy borrowers.
- Underwriting decisions should be based on mortgage quality and not driven by fee income.
- Mortgage brokers and lenders should be subject to adequate oversight.
- Mortgage originators, lenders and investors should have appropriate accountability and liability for the instruments in which they are involved.
- The process for mortgage securitization must be more transparent, providing adequate collateral and risk information for investors and regulators.
- Credit rating organizations must have adequate oversight and restrictions to ensure objective evaluations and avoid conflicts of interest.
- Appraisals should be undertaken by fully qualified individuals and should accurately reflect values under orderly market conditions.
- The appraisal system should not exacerbate price volatility.
- Distressed sales should not be used to determine value.
The nation’s home builders also strongly support the use of alternative dispute resolution techniques, including binding arbitration, as the most rapid, fair and cost-effective means to resolving disputes.
“Invalidating binding arbitration provisions in contracts would undermine decades of jurisprudence strongly favoring arbitration of disputes where the parties have agreed to use the arbitration process,” Robson told lawmakers. “NAHB opposes any attempt to prohibit the use of pre-dispute arbitration in contracts.”
For more information, e-mail Scott Meyer at NAHB, or call him at 800-368-5242 x8144.
Attend the Crucial 2009 NAHB Legislative Conference on March 24
Builders and housing industry professionals should attend the 2009 NAHB Legislative Conference on Tuesday, March 24 in Washington, D.C. to tell members of Congress that housing deserves 100% of their ongoing attention so housing can once again lead the nation out of this troubled economy.
With policymakers in Washington confronting the most difficult financial crisis since the 1930s, attending this year’s conference could be one of the most important decisions that builders make this year — especially considering the growing downward momentum in housing and the nation’s job market.
This year’s NAHB Legislative Conference on March 24 will take place earlier than the NAHB spring board of directors meeting because of the depth of the downturn and the need for a solution.
For more information and to register for the legislative conference, click here; or e-mail Molly Murray at NAHB or call her at 800-368-5242 x8282.