Washington Briefs May/June 2004

The Good, The Bad, And The Ugly
Sausage and laws are two things too ugly to see being made, pundits say. As proof, trying to keep the housing industry from being eaten for breakfast by Wall Street or ground up by federal legislation has been a full-time job for the National Association of Home Builders (NAHB) of late. NAHB execs have been making many trips to Capitol Hill to argue for and against a variety of causes with far-ranging implications.

The Ugly: Senate Reform Of GSEs

The debate over regulatory reform of government-sponsored enterprises (GSEs) Fannie Mae, Freddie Mac and the Federal Home Loan Bank System took a turn in early April as the Senate Banking Committee released draft legislation that includes full receivership powers for the new GSE regulator. NAHB strongly opposes this approach, saying it would undermine housing, raise mortgage rates and dismantle the one pillar that’s holding up a shaky economy. ‘This bill is very hostile to housing’, says NAHB CEO Jerry Howard . ‘It will radically alter investors’ perceptions of government sponsorship,’ place the housing mission in a backseat position, add an unnecessary capital drag and stymie new innovation of affordable loan products. An immediate impact will be upward pressure on housing costs for millions of working families.

NAHB is calling on other housing groups to unite against the bill, and is contacting all Senate Banking Committee members to urge them to oppose the measure.

The Good: Zero Down Payment Act
NAHB execs applauded the Zero Downpayment Act of 2004 (H.R. 3755), recently introduced by Rep. Patrick Tiberi (R-OH). If this bill becomes law, it would eliminate the minimum 3% down payment for FHA-insured, single-family loans to first-time home buyers. In doing so, it would address one of the single greatest obstacles families face on the road to homeownership. ‘The legislation will help working families, particularly minority households, to achieve the American dream of owning a home by removing this financial barrier, Rayburn told members of the Housing and Community Opportunity Subcommittee of the House Financial Services Committee on March 24.

Rayburn noted that this bill will help meet America’s housing needs and increase homeownership opportunities for minority and low- and moderate-income families. At the same time, he highlighted the important elements that must be in place to mitigate risk to borrowers and the FHA: a strong housing counseling program requirement, appropriate underwriting standards and a comprehensive evaluation of each borrower’s financial capacity to succeed as a homeowner. Rayburn urged Congress to make one critical improvement to it- namely, to include condominium and cooperative loans, so that the legislation applies to all forms of homeownership and helps as many households as possible.

The Bad: Housing Bubble Full Of Hot Air

We’re not buying what you’re selling. That’s the message from top economists to those on Wall Street trying to drum up business in the stock market by predicting a dramatic plunge in housing prices. While home prices have been rising at a rapid clip nationwide, the gains are in synch with rising household incomes and exceptionally low inflation and interest rates. These factors, in addition to the sound demographics of the housing market, provide ample foundation for the current home prices, says Jim Glassman, senior economist at JP Morgan Chase. David Seiders, NAHB’s own chief economist, agrees. Economists addressed journalists through a teleconference that attracted more than 80 listeners, including the New York Times, Bloomberg, CNN, Money Magazine, National Public Radio and other mainstream news outlets.

The Darn Good: Lawmakers Urged to Reauthorize National Flood Insurance
Builders depend on a strong national flood insurance program that is annually predictable, universally available and fiscally viable. That’s what NAHB representative Steve Feldmann told the Senate Banking Committee’s Subcommittee on Economic Policy in his March 25 testimony advocating reauthorization of the program for the next five years. Feldmann is community affairs director of Fischer Group (Louisville, KY), which includes FischerSIPs, a pioneer in the structural insulated panel industry. Feldmann urged Congress to address repetitive loss properties in order to ensure the long-term viability of the National Flood Insurance Program (NFIP).

Although Congress recently extended FEMA’s statutory authority to issue flood insurance policies until June 30, a lapse in authority after that date will have severe repercussions for a vast number of landowners. Allowing FEMA’s authority to limp from one short-term authorization to the next does not instill confidence or consistency for policyholders, future home buyers or industries that depend on a viable national flood insurance program, Feldman told lawmakers.

Congress should reauthorize the NFIP for a full five years in order to allow the home building industry to continue to deliver safe, decent, affordable housing to consumers in a location of their choice. Unfortunately, the stability of the program is threatened by a small percentage of properties that have suffered multiple flood damages. Approximately 48,000 currently insured properties have incurred two or more floods within a 10-year period. These properties, which make up only 1% of the current 4.4 million policyholders, cost the NFIP approximately $200 million annually and account for roughly 25% to 30% of the claims paid by the program.

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