Restoring the flow of acquisition, development and construction (AD&C) lending that has been choking off credit for home builders and impeding job growth took center stage last week as a South Carolina delegation of 18 HBA members from across the state took visited South Carolina elected officials on Capitol Hill for the annual NAHB Legislative Conference.
“Our message to Congress is simple and straightforward,” said Mike Lowman, HBASC president from Columbia. “Unless we resolve the ongoing credit problems for home builders – the vast majority who are small business owners who employ less than 10 workers – the industry will lose even more jobs, resulting in longer-term economic damage.”
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.
All Builders visiting with their lawmakers urged their members of Congress to become an original cosponsor of legislation crafted by Rep. Gary Miller (R-Calif.). 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.
Builders also called on Congress to enact comprehensive reform legislation regarding the future of government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac that ensures the federal government continues to provide a backstop for a reliable and adequate flow of affordable housing credit in 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.