Monday Morning Briefing Letter - 10/08/2007 (Plain Text Version)

By Brian Catalde, NAHB President and
Jerry Howard, NAHB Executive VP and CEO

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NAHB-supported legislation to help ease the credit crunch situation

was approved by the House of Representatives on Oct. 4 in the form of a bill that eliminates taxes on forgiven mortgage debt when banks renegotiate the terms of a home loan.

This change in tax law, which would cap untaxable forgiven debt at $2 million and apply only to principal residences, will play a central role in helping American families avoid foreclosure and stay in their homes. The legislation is needed because existing rules under Sec. 108 of the Internal Revenue Code impel many struggling home owners to seek foreclosure over restructuring their loan with lenders due to the fact that forgiven mortgage debt can be taxed as ordinary income. The Mortgage Forgiveness Debt Relief Act of 2007 would remove this tax burden on mortgage indebtedness, encourage market-based restructuring between lenders and home owners, and discourage foreclosures. It's also in keeping with one of the key policy provisions approved at NAHB's Fall Board of Directors Meeting to address the mortgage credit crunch.

The same bill also includes an NAHB-supported provision that extends the deductibility of mortgage insurance, thereby making homeownership more affordable to thousands of additional families who would otherwise have to resort to more costly subprime or predatory alternatives. The current deduction, which is set to expire on Dec. 31, would be extended through 2014 under this legislation.

To cover the estimated $2 billion 10-year cost of the overall bill, it also includes a provision that would change the tax laws affecting second homes that are converted to primary residences. NAHB worked closely with members of the House Ways and Means Committee to minimize the negative impacts of this provision as much as possible – for example, we pushed for a "grandfather" clause that allows most existing second-home owners to live under the old rules. In the end, NAHB Senior Officers and members of our Taxation Subcommittee and Federal Government Affairs Committee analyzed the legislation in depth, concluding that it was structured in such a way that the huge benefit on debt forgiveness and the extension for the deductibility of mortgage insurance outweighed the tax changes for second homes. See the Oct. 8 edition of NBN Online for details and specific examples of how the bill would affect second-home owners, or contact Rob Dietz (x8285) or Greg Brown (x8421) for more information.

NAHB Member Benefit: NAHB lobbyists have been heavily involved in negotiations leading up to passage of this bill. And in a letter sent to all House members prior to consideration of the bill, NAHB designated the vote on final passage of H.R. 3648 as a "key vote" for the housing industry and the nation's home owners.

NAHB is fighting a flawed proposal by Rep. John Dingell (D-Mich.)

that would eliminate or curtail the mortgage interest deduction for a large swath of American home owners. Under the proposal, taxpayers owning homes larger than 3,000 square feet would lose at least a portion of their mortgage interest deduction, while owners of residences larger than 4,200 square feet would lose all of their mortgage interest deduction. Ostensibly intended to fight "sprawl" and encourage energy efficiency, the revenue raised from such deduction cutbacks would actually be used to expand the Earned Income Tax Credit. NAHB projects that Dingell's plan would result in a massive tax increase of over $13 billion per year for over 6 million families, representing a loss of more than 16% of the aggregate mortgage interest deduction value. Meanwhile, all home owners would be faced with housing price declines — particularly the nearly 10 million households who own homes larger than 3,000 square feet. Moreover, the proposal is not an effective method of achieving the goal of energy conservation, since new homes are far more energy efficient than older homes and a tax-related mandate for home size will only slow the replacement of older, less energy-efficient housing stock. NAHB research indicates that the amount of energy consumption — specifically electricity consumption — is not directly related to home size; rather, it is more a function of consumer behavior such as appliance usage. Not to mention the fact that the proposal's link to "sprawl" is very odd, since Census data reveals that the average lot size of new homes fell by more than 10% from 1992 to 2006.

NAHB is encouraging our members to contact Rep. Dingell with your concerns about his proposal – you can do so directly through this link. Read more in NBN Online, or contact Greg Brown (x8421) or Elizabeth Odina (x8570) for details. [return to top]

Continuing our battle over the jurisdiction of upland ditches,

NAHB filed an important legal brief on Sept. 28 with the U.S. District Court for the District of Columbia defending our "standing," or right to sue, the U.S. Army Corps of Engineers over its Section 404 Nationwide Permit 46. NWP 46, which was released by the Corps in March of this year, illegally expands the Corps' jurisdiction to reach upland ditches – features that are not "navigable waters" under the Clean Water Act. Upon release of this new NWP in March 2007, NAHB immediately filed suit on the matter. Rather than defend NWP 46 on the merits, however, the government then filed a motion to have our suit dismissed on grounds that we lack standing. Our newly submitted brief explains that NWP 46 has an immediate impact that causes injury to NAHB and its members, and that said injury may be redressed by the Court's review of the Corps's action. For details on this case, contact Tom Ward at x8230.

NAHB Member Benefit: NAHB is trying to restore common sense to the Clean Water Act's tremendous breadth and scope. Upland drainage ditches, after all, are not wetlands, and they aren't ponds. They are common drainage ditches that are not navigable water. The costs of such overzealous regulations to builders in terms of time and money also translate to significantly higher home prices that unfairly impact new home buyers. In the end, we hope to restore the integrity of the NWP program by obtaining a court ruling that says the Corps has gone too far. [return to top]

The NAHB Research Center has been awarded an OSHA grant

to conduct 40 four-hour training sessions in the 20 top home building markets across the United States to help identify and avoid fall hazards in residential construction. Announced on Sept. 24, the $241,248 grant is part of more than $10 million worth of Susan Harwood Training Grants going to 55 nonprofit organizations to conduct safety and health training and educational programs. The NAHB Research Center will use training materials that were developed under a previous Harwood grant in fulfilling this latest project, and five of its training sessions will be conducted in Spanish. The grants were named in honor of the late Susan Harwood, who was a director of the Office of Risk Assessment in OSHA's health standards directorate. Read more in OSHA's press release, or contact Kevin Cannon, x8590.

NAHB Member Benefit: NAHB works closely with OSHA to ensure the greatest level of worker safety possible while also ensuring that government rules are clearly defined, fairly enforced and mindful of the many differences between commercial and residential construction sites. [return to top]

The registration deadline for the Construction Forecast Conference

that happens Wednesday, Oct. 24 at the NAHB National Housing Center in Washington, DC is coming up fast. Online registration closes at 5 PM EDT on Oct. 10. With the uncertain status of today's housing market, our 75th Construction Forecast Conference is a can't-miss event, so even if you can't make it to DC, be sure and register to watch the live Webcast at www.nahb.org/cfc. Read more about about this always-popular conference, and register to attend, on our Web site, or contact NAHB's Office of the Registrar at registrar@nahb.com.

NAHB Member Benefit: NAHB's twice-a-year Construction Forecast Conference brings the expert analysis of the country's foremost economists within reach of our builder members, the media and financial analysts, who attend the one-day seminar to get the most accurate and up-to-date information on housing and economic trends available. As such, the conference solidifies NAHB's reputation as a primary source of information and aims to help participants make sound business decisions that will positively impact their bottom line. [return to top]

Happy 25th Anniversary, NAHB Remodelers!

The NAHB Remodelers Council celebrated its 25th anniversary on Oct. 3. Formed in 1982 in response to growing member demand, the council was created to promote professionalism, provide needed training, and spotlight the accomplishments of professional residential remodelers. Today, remodeling has grown to a $228 billion business and membership in the NAHB Remodelers tops 7,500. The council now provides everything from training courses and certifications to remodeling guides for consumers and advice for remodelers on expanding and maintaining their businesses. Read more about the NAHB Remodelers on our Web site, or contact Kelly Mack at x8451. [return to top]

NAHB offices will be closed on Columbus Day

this Monday, Oct. 8. We will be back in business right after the federal holiday on Tues., Oct. 9. Have a great, long weekend! [return to top]