Monday Morning Briefing Letter - 12/17/2007 (Plain Text Version)

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

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NAHB applauded Senate passage of an FHA reform bill

on Dec. 14 that would help alleviate the current housing downswing by improving the capacity of that agency to serve the credit needs of subprime and other challenged mortgage borrowers.

The NAHB-supported FHA Modernization Act of 2007, S. 2338, was approved by an overwhelming 93-to-1 margin. It would:

1) Increase the current limit for FHA-insured mortgages to enable deserving potential buyers to purchase homes in more markets across the country.

2) Grant the FHA authority to establish greater flexibility in setting downpayment requirements for its single-family programs.

3) Simplify requirements for condominium loans, which are often burdensome and differ significantly from the rules applied to mortgage loans for detached single-family homes.

4) Allow the FHA to insure more "reverse mortgages" and increase the maximum loan amount for such transactions.

NAHB is now urging the House and Senate to move quickly to iron out differences between their FHA reform bills and bring this legislation to the President's desk to be signed into law before the year's end. Read more in our press release, or contact Scott Meyer, x8144.

NAHB Member Benefit: NAHB lobbied extensively on behalf of this legislation and designated it as a "key vote" for the housing industry.

The Federal Reserve moved for a third consecutive time

to cut short-term interest rates on Dec. 11 in a decision that was applauded by NAHB as a means of helping ensure that the economy is not derailed by ongoing problems in the subprime mortgage market. The 25 basis-point reduction should help boost consumer confidence and increase liquidity in credit markets. Along with the Bush Administration's plan to help subprime borrowers that was announced by Treasury Secretary Henry Paulson a week ago, the Fed's move shows that the government realizes the importance of housing to the nation's economy and the need to get housing back on track. The next step, said NAHB President Brian Catalde in an official NAHB statement hailing the Fed's move, is for Congress to follow up with some swift action of its own. In particular, he said, the Senate must stop dithering and move quickly to approve several pieces of House-passed legislation that are aimed at helping ease the credit crunch, including an FHA modernization bill (which has since gained Senate approval – see story above), a GSE oversight reform bill and a bill that would eliminate taxes on debt forgiven as part of a mortgage loan workout. Read our press release for more.

Separately, the Fed announced on Dec. 12 that it is forming an alliance with other central banks – including the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank – as a way to help ease the credit crunch situation in this country. Through a newly created temporary auction facility and new lines of credit, the Fed hopes to provide additional liquidity for banks making loans to businesses and consumers. Read more about this newly minted agreement on CNNMoney.com. [return to top]

Tune in for a year-end teleconference on housing and the economy

on Dec. 20 and hear NAHB CEO/EVP Jerry Howard and Chief Economist Dave Seiders discuss what to expect in the new year with regard to a market recovery, congressional actions and the upcoming election season. Seiders will share his housing forecast for 2008 and beyond, while Jerry will present the builder member perspective and discuss how political issues will affect the housing market in months to come. The event is a media teleconference in which members of the press will have an opportunity to ask questions at the end – but readers of this report and other NAHB members are welcome to listen in and download the related reference materials that will be offered to media participants.

The call happens at 2:00 p.m. on Thursday, Dec. 20. To hear the proceedings, just dial 1-800-860-2442 (toll free) and ask for the "NAHB Year-End Housing Conference Call." Related presentation and reference materials will be available for download at www.nahb.org/teleconference as of 10 minutes prior to the conference.

Or, if you can't make the call in real time, you'll be able to hear a full replay after the teleconference has concluded by phoning 877-344-7529 and entering 414427 followed by the # sign when prompted for the account number. This replay will be available until 4:00 p.m. on Jan. 3. For more information, contact Liz Warin at x8495.

NAHB Member Benefit: NAHB's economic teleconferences help provide the media with a better perspective of current market trends and where they are headed, and help firmly establish NAHB as the credible source of information on the housing industry nationwide. This credibility with the media ensures that accurate data on the housing market is transmitted to potential home buyers and the public at large, thereby discounting sensationalized accounts and discouraging uninformed and unfair reports on market conditions. [return to top]

Congress must NOT expand the Clean Water Act's scope

to cover all intrastate waters, NAHB Staff Vice President for Legal Affairs Duane Desiderio told the Senate Environment and Public Works Committee this week. In testimony representing the nation's home builders on Dec. 13, Desiderio explained that proposals to expand Clean Water Act jurisdiction are not consistent with the original legislative intent of the Act. Moreover, they would represent a marked departure from recent Supreme Court decisions in the SWANCC and Rapanos cases and raise significant constitutional questions. He said that it would be highly controversial and constitutionally questionable for Congress to amend the Clean Water Act in a manner that protects all intrastate waters,like upland ditches and ephemeral washes, particularly at a time when the housing industry has been experiencing one of the greatest downturns in recent memory. Instead, NAHB believes that Congress should focus its limited time and resources on legislation to help home owners overcome the current financial crisis, rather than restrict the industry's ability to recover. Read more in the next NBN Online, or contact Annie Raymond (x8307).

NAHB Member Benefit: NAHB supplied expert legal testimony in this hearing with the goal of discouraging legislative amendments or changes to the CWA that would vastly increase federal regulatory power over private property, open the door to increased litigation and permit requirements and negatively impact the home building industry. [return to top]

A new "adverse market delivery charge" by Fannie Mae

on all mortgages purchased by the GSE after March 1, 2008 is generating substantial opposition from NAHB. Calling the fee "a broad tax on homeownership that ultimately will be passed along to consumers," NAHB EVP/CEO Jerry Howard noted that it's certain to be more difficult for the housing market to regain its footing when steps are being taken to drive up mortgage costs. "This is the exact opposite of what needs to be done and underscores the importance of Congress quickly enacting legislation that would strengthen regulatory oversight of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac while also preserving their vital housing mission," Jerry noted.

The plan is to charge lenders an additional 25 basis points across the board for loans purchased for portfolio as well as for loans delivered into Fannie Mae's guaranteed mortgage-backed securities. Apparently this action is being taken to ensure that Fannie Mae meets a 30% minimum capital surcharge imposed by the Office of Federal Housing Enterprise Oversight (OFHEO) as a result of financial difficulties Fannie Mae has been working through since 2004. "This is like a mini perfect storm created by Congress's inability to pass meaningful GSE reform and OFHEO's regulatory inflexibility in a time of crisis," noted Jerry. "It should be of little surprise to anyone that, under these circumstances, a GSE would resort to a mortgage surcharge to meet capital requirements. This is no time for Fannie Mae's business interests to take precedence over its mission responsibility." Read more in NBN Online, or contact Dave Ledford, x8265.

NAHB Member Benefit: NAHB's actions on GSE oversight reform are aimed at safeguarding a reliable and affordable flow of capital to the nation's housing markets. This is beneficial to our members because affordable credit is the lifeblood of the housing industry, allowing both for the development of much-needed affordable rental housing and for a large portion of the American public to obtain mortgages in pursuit of homeownership. [return to top]

A high-level meeting of the minds on mortgage finance issues

occurred Dec. 10-11 in New York as NAHB representatives joined with senior executives of major lending institutions, rating agencies and home building companies to discuss the credit crunch situation and strategies for resolving it. This Mortgage Roundtable meeting, which normally convenes twice a year, provides an ideal forum in which the best minds in the business can convene for the purpose of floating ideas and exchanging information.

NAHB Member Benefit: NAHB continues to reach out to Wall Street, government agencies and key policymakers in an effort to press for solutions to the current credit crunch situation, provide recommendations for action, and build consensus and coalitions among various stakeholder groups. All such efforts ensure that home builders have a seat at the table as policies and strategies are being formulated that will affect our industry and members. [return to top]

Honoring the AARP/NAHB Livable Communities Award winners

was on the agenda this week when our two organizations held a joint press briefing at the National Housing Center on Dec. 11. Representatives of each of the award-winning projects spoke at the briefing about various innovations they had incorporated with the concepts of universal design, ease of use, safety and comfort, and energy efficiency in mind. Each winner gave a personal presentation of their project and later received their award at a special dinner ceremony. Presenters included John Wesley Miller of the John Wesley Miller Cos. based in Tucson, Ariz..; Roy Wendt of Wendt Builders, Inc. based in Atlanta; Peggy Ann and David Mackowski of Quality Design and Construction in Raleigh, N.C.; Vicki Lundy Wilbon of The Integral Group in Atlanta; and Greg Rosenberg of the Madison Area Community Land Trust in Madison, Wisc. Upcoming editions of NBN Online will include feature articles on each of the winning projects, so stay tuned. For more information, see our press release or contact Blake Smith, x8583.

NAHB Member Benefit: NAHB is drawing attention to the "best of the best" of the building industry by partnering with AARP to spotlight the most attractive and well-crafted projects nationwide while helping refute negative builder stereotypes and providing models for future development across the industry. [return to top]

A newly updated report on infrastructure finance options

is now available free of charge to NAHB members online. Infrastructure Finance: Does your state encourage innovation? is part of a three-publication series first published several years ago. It looks at state enabling authority for 12 of the most commonly used infrastructure finance tools. The newly updated version captures significant movement across the states since 2005, highlighting which states have amended their enabling authority and which have added new authority to use alternative tools. This information can be used by local governments to determine their financing options for roads, schools, parks, water and wastewater services and other public facilities. Topics covered by the publication include Community Development Districts, Certificates of Participation, Design/Build, Electronic Road Pricing, GARVEE Bonds, Partnership Schools, State Revolving Loan Funds, State Infrastructure Banks, Small-Scale Water and Wastewater Systems, Special Districts, Tax-Exempt Municipal Lease Financing and Tax Increment Financing. To download this free publication, click here. Two companion reports are also available free online from NAHB. They include: Building for Tomorrow: Innovative Infrastructure Solutions and Infrastructure Solutions - Best Practices from Results-Oriented States. Contact: Blake Smith, x8583.

NAHB Member Benefit: Numerous additional resources on impact fees and alternative financing strategies, including the new Guidebook to Impact Fee and Infrastructure Finance Alternatives, are available at www.nahb.org/infrastructurefinance. [return to top]

Happy Holidays! The Monday Morning Briefing returns in 2008.

NAHB offices will be closed for the holidays on Monday and Tuesday, Dec. 24-25 and also on Monday and Tuesday, Dec. 31 and Jan. 1. The Monday Morning Briefing will not appear in those weeks, but we'll be back in circulation on Monday, Jan. 7. Until then, we wish you a very happy, healthy, safe holiday season! [return to top]