At a crucial juncture for the nation’s emerging housing recovery, restoring the flow of acquisition, development and construction (AD&C) lending to sustain new housing activity took center stage as 500 builders from across the country converged on Capitol Hill for the annual NAHB Legislative Conference.
“Our message to Congress is simple and straightforward,” said NAHB Chairman Bob Nielsen. “Unless we resolve the ongoing credit problems for home builders — the vast majority of whom are small business owners who employ less than 10 workers — the industry will lose even more jobs, resulting in longer-term economic damage.”
NAHB members who were unable to attend the day-long conference participated by calling the Capitol Hill offices of their representatives and senators to deliver the same message.
In the current economic climate, lenders have basically stopped making AD&C loans and many are calling existing loans, even when the borrower’s payments are current. Financial institutions are also requiring additional equity for existing loans, and are refusing to modify loans to give borrowers an opportunity to regroup.
Overly conservative appraisals are presenting further challenges by limiting home sales and refinancing opportunities and exacerbating pressure on outstanding mortgage and housing production loans. Lenders are often citing regulatory requirements or pressure from bank examiners to reduce AD&C loan exposure as the rationale for their actions.
“As a result of this regulatory pressure, the home building industry is having extreme difficulty in obtaining credit for viable projects,” said Nielsen. “In short, the credit window seems to have been slammed shut for builders all over the country.”
Starting off the day, Reps. Brad Miller (D-N.C.) and Patrick Tiberi (R-Ohio) addressed the builder delegation at the National Housing Center and pledged to work with NAHB to help restore credit for housing production and get the industry back on track. (For a related story in this issue of NBN, click here.)
In 250 individual meetings with their representatives and senators, builders urged their members of Congress to become an original cosponsor of legislation by Rep. Gary Miller (R-Calif.) designed to end the lending crisis.
The measure proposes a legislative fix to specific instances of regulatory excess to allow the banking industry to restore lending for viable home building projects and discourage lenders from curtailing or calling construction loans where payments are current.
As the nation’s housing finance system undergoes comprehensive reform in the aftermath of the collapse of government sponsored enterprises Fannie Mae and Freddie Mac, builders also called on Congress to ensure that the federal government continues to provide a backstop for a reliable and adequate flow of affordably priced housing credit under all economic and financial conditions.
On the issue of tax reform, NAHB urged lawmakers to oppose any changes to the tax code that would increase taxes on home owners, renters or home builders.
Curtailing or eliminating the mortgage interest deduction, the capital gains exclusion, the deduction for property taxes, the Low Income Housing Tax Credit and other housing tax incentives would further depress home prices, leaving countless more home owners owing more than their homes are worth and triggering a new wave of foreclosures, they said.
Reprinted with permission from Nation’s Building News, the online newspaper of the National Association of Home Builders