NAHB Chairman Barry Rutenberg told Congress this week that an unwieldy federal regulatory process is hampering the housing and economic recovery.
Testifying on July 19 before the House Committee on Oversight and Government Reform, Rutenberg said that “housing serves as a great example of an industry that would benefit from smarter and more sensible regulation.”
For example, the Dodd-Frank Act required significant changes to mortgage lending practices, including an “ability to pay” provision that requires lenders to establish that home buyers have a reasonable chance of paying back the loan at the time that a mortgage is written. The law states that certain high-quality, low-cost loans known as qualified mortgages (QM) are presumed to meet this standard.
The new QM standard, which is currently being developed by the Consumer Financial Protection Bureau, will define the mortgage market for years to come, Rutenberg said. For that reason, NAHB supports regulatory changes aimed at more rational lending practices, greater lender accountability and improved borrower safeguards.
“However, it is critical that such reforms are implemented in a manner that causes minimum disruption to the mortgage lending process,” he cautioned. “New reforms should not limit consumer financing options, increase the cost of financing or reduce the availability of mortgage credit.”
Overly restrictive rules for the forthcoming QM standard will prevent creditworthy borrowers from entering the housing market even as owning a home remains an essential part of the American dream, added Rutenberg.
Another key factor in housing’s current depressed state has been an ongoing lack of acquisition, development and construction lending.
“Our members are caught in an ‘argument’ between banks and federal regulators, who take turns pointing fingers at one another when we try to determine who is to blame for the serious lack of lending to the construction sector,” said Rutenberg.
Regardless of who is at fault, with many housing markets now showing signs of recovery, Rutenberg said it is essential that Congress works with regulators and financial institutions to encourage banks to provide sound construction loans so that builders can construct viable home building projects in communities across the land that want and need them.
“Restoring the flow of credit to home builders will not only help to put America back to work, it will help provide badly needed tax revenues that local governments need to fund schools, police, firefighters and other public services,” said Rutenberg.
Meanwhile, changes to the Environmental Protection Agency’s Lead: Renovation, Repair and Painting (RRP) rule have constrained small businesses in the home building and remodeling industry. The final rule, which went into effect on April 22, 2010, requires renovation work that disturbs more than six square feet in a home built before 1978 to follow new lead-safe work practices supervised by an EPA-certified renovator and performed by an EPA-certified renovation firm.
“Poor development and implementation by the EPA has resulted in excessive compliance costs and has hindered both job growth and energy efficiency upgrades,” said Rutenberg.
In 2010, the EPA removed the “opt-out” provision in the RRP rule that allowed remodelers working in a home built prior to 1978 to forego more expensive work practices according to the owner’s wish if no children under the age of six or pregnant women were living in the home.
By removing the opt-out provision, the EPA more than doubled the number of homes subject to the RRP, and the agency has estimated this will add more than $500 million in compliance costs to the remodeling community in the first year alone, without making young children any safer.
Moreover, the EPA has not approved reliable lead testing kits, and in many cases consumers are needlessly paying additional costs for work practices that are unnecessary, he added.
Builder Review Daily is highlighting your HBA’s Top 12 actions this Spring on behalf of home builders.
Number 2, NAHB Chairman Rutenberg testifies before Congress on the Lacey Act:
One of the most important things that NAHB does for its members is to serve as your voice in Washington, and ensure that our industry’s concerns are taken into account when changes that will affect your businesses are being debated by Congress and regulators. One such instance of this representation was Chairman Barry Rutenberg’s testimony before Congress on May 8 regarding needed changes to the Lacey Act to protect businesses that unknowingly purchase illegal wood products from having their property seized and being exposed to civil and criminal liability.
Due to its representation of more than 140,000 members of the housing industry, NAHB is a recognized force and authority in the nation’s capital, and our senior officers are frequently invited to testify before Congress as laws impacting our industry are debated. NAHB Chairman Barry Rutenberg appeared before the House Natural Resources Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs on one such occasion this May. Making it clear that NAHB supports the goals of the Lacey Act and the prevention of trade in illegally harvested plant and wood products, Rutenberg called lawmakers’ attention to the fact that “honest business owners, including home builders who exercise due care and had no knowledge that a seized product contains illegal wood, should have the right to seek the return of those goods.” Under the current statute, innocent companies are left without legal standing to challenge a government taking in court. “Builders have no way of knowing the origin of a particular piece of lumber, a component of a cabinet, a closet door or crown molding,” Rutenberg explained. That is why NAHB is urging Congress to amend the Lacey Act to include reaffirmation of civil forfeiture law so that innocent consumers and businesses would have the opportunity to seek the return of their property in court if it was seized as a result of any enforcement actions under the law. Contact: Suzanne Beall (800-368-5242 x8407).
The following editorial appeared Wednesday, February 22, 2012, in the Washington Times
A plan to end government support for homeownership (“Get the Fed out of the housing market,” Commentary, Friday) is a recipe for economic disaster that would surely throw the economy back into recession.
Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) currently guarantee or insure more than 90 percent of all home mortgage activity. Even those arguing to abolish Fannie Mae and Freddie Mac admit this would need to be a years-long transition because the private market is not operating today. Private lenders have shown little inclination to step up to the plate and fill the void that would result if the government backstop essential to ensuring liquidity and stability for homeownership were abruptly halted.
Housing is the key to long-term prosperity. Residential construction usually accounts for 5 to 6 percent of total economic output, yet it stands at a meager 2.5 percent today. We don’t have an excess supply of housing; we have record-low new home inventories and a dearth of housing demand resulting from high unemployment, stagnant income growth and a drop in household formations.
The Federal Reserve is offering ideas to stimulate demand because Fed policymakers understand that there can be no sustainable economic recovery without a housing recovery. Building 100 homes generates more than 300 full-time jobs and $8.9 million in federal, state and local tax revenues that sustain local schools and communities across the land. New homes are needed in scores of markets that are experiencing renewed growth and confidence, but this demand is going unmet because of a lack of credit for homebuyers and homebuilders alike.
Maintaining a federal role for housing and providing credit for qualified homebuyers and builders with viable homebuilding projects is a necessary first step to restore the health of the housing market, create jobs and to keep the economic expansion moving ahead.
National Association of Home Builders
Last month more than 900 housing professionals visited the South Carolina State House to rally to support homeownership in South Carolina. Featured speakers included Presidential Candidate Newt Gingrich, Congressman Jim Clyburn, State Treasurer Curtis Loftis, Columbia Mayor Pro Tem Leona Plaugh, NAHB Chairman Elect Barry Rutenberg, and HBASC President David Gully.
The video features statements from S.C. Governor Nikki Haley and Columbia Mayor Steve Benjamin.
Watch the NAHB Board video featuring the S.C. Rally for Homeownership by clicking here.