Monday Morning Briefing Letter - 11/17/2008 (Plain Text Version)

By Sandy Dunn, NAHB Chairman and
Jerry Howard, NAHB President and CEO

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NAHB has filed an appeal with the International Code Council (ICC)

asking it to set aside the vote at September's Final Action Hearings approving code changes to mandate fire sprinklers in all new one- and two-family homes constructed under the 2009 International Residential Code.

Citing a failure to provide a fair and open voting process at the Final Action Hearings, NAHB's appeal, filed on Oct. 30, asks the ICC to "take immediate action to eliminate the influence of third-party funding in the voting process" and "undertake corrective action ... by restoring the principle of balance of interest in the selection of Governmental Member Voting Representatives." Other organizations have also called for similar reforms. For example, the Washington Association of Building Officials has written that "special interests dictated the outcome of the code changes" that will allow sprinkler manufacturers and installers "to reap millions, if not billions, of dollars in profits." NAHB agrees with the Washington state building officials' assessment that "the integrity of the ICC is at stake" and we are encouraging others to voice their concerns to the ICC as well. The Code Council has not yet set a date for hearing NAHB's appeal, but we'll keep you informed as events unfold in this matter. Read more in the next Nation's Building News Online. Contact: Steve Orlowski, x8303.

Urging banks and thrifts to lend to credit-worthy borrowers,

federal regulators issued new guidance this week via a joint statement. In that statement, the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision avoided establishing any new mandates but urged banks to follow broad principles of good lending practices. "The agencies expect all banking organizations to fulfill their fundamental role in the economy as intermediaries of credit to businesses, consumers and other creditworthy borrowers," they said. "If underwriting standards tighten excessively or banking organizations retreat from making sound credit decisions, the current market conditions may be exacerbated, leading to slower growth and potential damage to the economy as well as the long-term interests and profitability of individual banking organizations." While the new guidance does not go far enough in addressing the credit crunch for acquisition, development and construction financing (AD&C), it does provide a good foothold for NAHB to seek more assertive action by the regulators on this subject – which will be a central topic in NAHB's upcoming discussions with the Office of Thrift Supervision. Contact: Dave Ledford, x8265. [return to top]

The government's new mortgage rescue plan

focusing on Fannie Mae and Freddie Mac could serve as a model for stabilizing the housing market and stemming the tide of foreclosures. Together, Fannie Mae and Freddie Mac own or back approximately 31 million mortgages worth a combined $5 trillion. Both government sponsored enterprises have been placed in federal conservatorship. Under the plan unveiled on Nov. 11, qualifying home owners whose mortgages are held by the two entities will be able have their mortgage payments adjusted through lower interest rates or longer repayment schedules to bring them to below 38% of monthly household income. Those eligible would have to be at least 90 days late in their mortgage payments, owe at least 90% of their home's current value, live in the home on which the mortgage was taken and have not filed for bankruptcy. In some cases, interest rates on those owners' loans could be lowered for five years and then raised to a predetermined level. In others, loan terms could be lengthened to 40 years.

The hope is that such standards for loan modifications will speed up the process of adjusting troubled borrowers' payments, and that other banks and mortgage investors will follow this model. Under the program, loan balances will not be lowered and loans will not be forgiven, but rather paid back at more affordable terms, said representatives of the Federal Housing Finance Agency, Hope Now coalition and FHA, who announced the plan. While some experts have questioned the potential impact of the program, hopes are that it could significantly increase the number of loan modifications completed, with several hundred thousand borrowers potentially eligible. Read more on CNN.com. Contact: Dave Ledford, x8265.

In late-breaking news, the Federal Deposit Insurance Corp. (FDIC) unveiled its own foreclosure prevention plan on Nov. 14. Aimed at preventing 1.5 million foreclosures in the next year, the plan would offer financial incentives to companies that agree to sharply reduce monthly payments on mortgage loans. Borrowers who have missed at least two monthly payments would be eligible for a reduction in their payment. The new payment would require that they spend no more than 31% of their monthly income. Read more on the FDIC plan here. [return to top]

Newly finalized RESPA rules are still concerning to NAHB

although they do contain some improvements from what was previously proposed. Specifically, HUD did make some changes to the proposed rule to address NAHB concerns on the required use definition, and the clarifications do clearly permit a home building company to offer incentives through the financing process for use of the company's finance or title affiliate, including reduced fees and interest costs. However, the revised language would prohibit a home building company from offering price reductions and upgrades on the home as an incentive for the buyer to use an affiliated company. Going forward, NAHB will continue to work with the mortgage finance affiliates of our member companies to develop strategies on this concerning issue.

Other significant changes resulting from the new RESPA language are as follows:

1) For the first time ever, HUD will require mortgage lenders and brokers to provide
borrowers with an easy-to-read standard Good Faith Estimate (GFE) that will clearly
answer key questions such as what the term of the loan is, whether the interest rate
is fixed or may change; whether there is a pre-payment penalty; whether there is a
balloon payment and what are the total closing costs.

2) HUD has withdrawn a proposed requirement that closing agents read and provide a "closing script." Instead, there will be a new page on the HUD-1 Settlement Statement that allows consumers to easily compare their final closing costs and loan terms with those listed on the GFE.

3) HUD's new Good Faith Estimate has been reduced from 4 down to 3 pages, including an instructional page to help borrowers better understand their loan offer. The GFE will also consolidate closing costs into major categories to prevent junk fees and display total estimated settlement charges prominently to allow for easy comparison of loan offers. HUD will specify the closing costs that can and cannot change at settlement, and will limit the amount that certain costs may change.

HUD estimates that by improving upfront disclosures on the GFE and limiting the amount that estimated charges can change, it will save consumers nearly $700 in closing costs. For more information, contact Bill Renner at x8597. [return to top]

Remodeler perceptions of market demand

for current and future residential remodeling projects sank further in this year's third quarter, according to the latest reading of NAHB's Remodeling Market Index (RMI) on Nov. 11. The RMI's current market conditions indicator declined to 33.5 in the third quarter from 41.8 in the previous quarter. Meanwhile, the index gauging future expectations of remodeling work also slid, to 27.7 from 38.0. Both indexes are now at their lowest levels since the RMI was first introduced in 2001. While a slight increase was detected in minor remodeling projects for owner-occupied homes, customers are seen as cutting back on home improvement spending in these shaky economic times. Even the index gauging maintenance and repair jobs in the current market declined, from a 39.06 reading to 30.92. According to NAHB Chief Economist David Seiders, "The remodeling market declines follow the pattern of the home building slowdown to a lesser degree." Meanwhile, the remodeling field is seen as tightening due to more home builders taking on remodeling work and creating a more competitive marketplace. And while the Midwest posted a significant increase in its current market conditions (the only region to do so this time around), all regions posted declines in the index gauging future expectations.

Energy Efficiency Update
Special questions asked as part of the RMI survey focused on energy efficiency products, finding increased customer calls for work to improve home energy efficiency. While low-energy windows remain the top customer request, 50% of remodelers reported installing water-saving faucets and fixtures (up from 38% the last time that such questions were asked one year ago) and 38% installed on-demand water heaters (up from 29% before).

Read NAHB's press release on the RMI or see the RMI tables online. Contact: Kelly Mack, x8451. [return to top]

A redesigned Move.com site

aims to make it easier for potential home buyers to find exactly what they're looking for. As reported in NBN Online last week, the online real estate site has added new and more engaging features. Visitors to Move.com will find a variety of changes geared to enhancing their search experience, including a comprehensive search box that can take them straight to new construction and rentals, as well as existing homes featured on Realtor.com. Intuitive search features are designed to reduce the number of times consumers must click as they proceed, while personalization options offer timely alerts so they can remain current with new information. Move's executives describe the new site as "a comprehensive, single-site gateway to all things real estate." Read more in NBN Online. [return to top]

Search and post construction-related jobs online

using NAHB's Career Center that is a valuable member resource. Offered in collaboration with ConstructionJobs.com, the site offers NAHB members a 20% discount off of standard rates for job postings. You can easily create an Employer or Job Seeker account for the NAHB Career Center – which you'll need in order to take advantage of the site. Please note that this account is different from your www.nahb.org Username and Password. Read all about it here, or contact Tiffany Lindsley at x8273 for more information. [return to top]