Home Industry, Politics, & Legislation

by Joel Barkman

Ending a rancorous political stalemate, the bipartisan debt ceiling bill was signed into law just hours before the nation faced an alleged and unprecedented "default" on its financial obligations. But the two parties are expected to remain sharply divided over tax hikes and spending cuts as they enter the next phase of deficit reduction required by the new law.

The measure &emdash; S. 365, The Budget Control Act of 2011 &emdash; was passed by the House on Aug. 1 by a vote of 269 to 161 and cleared the Senate the following day by a comfortable 74 to 26 margin.

The National Association of Home Builders (NAHB) sent a letter to House and Senate Republican and Democratic leaders urging them to approve the measure.

"While no plan can be perfect, we believe that the agreement is an important step to getting the nation's financial house in order and ensuring that the fragile housing market is not further devastated by another economic collapse or economic uncertainty," the letter said.

Noting that the plan would identify additional savings by Thanksgiving, the letter urged lawmakers to "give careful consideration to how those measures will impact the health of the housing sector."

"What the housing markets needs now is more, not less, certainty with respect to housing policy and access to capital via the mortgage markets," the letter said.

"Making the right decisions will help stabilize housing prices and give American households the chance to repair their balance sheets and set the stage for more robust economic growth."

The bill, far from ideal, will authorize the President to increase the debt limit by at least $2.1 trillion in three steps, with nearly $1 trillion of spending cuts over 10 years to be implemented immediately through discretionary spending caps.

A bipartisan committee of 12 lawmakers has been formed to tackle spending and revenue however, the same ideological divide that nearly drove the government into "default" does still exist.

House Speaker John Boehner has told House Republicans that the panel "effectively" cannot raise revenues and other leaders have voiced their opposition to any type of tax reform that might emerge from the committee.

It is more likely that the debate that has raged in Washington for the past few weeks will continue through the fall within the select committee.

All the same, as the federal government continues to spend the general fear is that taxes will be increased to cover the expenses while at the same time some tax deductions are proposed to be eliminated, such as the mortgage interest deduction.

NAHB will be reaching out to the committee and urging it to support the association's key housing tax incentives &emdash; including the mortgage interest deduction and low income housing tax credit.

Meanwhile the home industry is still bracing for the potential impact from the proposed Credit Risk Retention rule better known as the "20 percent downpayment" rule. NAHB suggested that the regulators should go back to the drawing board to come up with a plan for mortgage lending that would not hinder the housing recovery that is slowly beginning to materialize.

Under an unduly narrow definition, qualified residential mortgages would require a 20 percent downpayment, impose very conservative debt-to-income ratios and be limited to borrowers with sterling credit histories, making mortgages unavailable or unnecessarily expensive for many creditworthy borrowers.

NAHB has also joined with a diverse coalition of more than 40 consumer organizations, civil rights groups, lenders, real estate professionals, insurers and local governments in developing a white paper that presents a thorough analysis of the impact of the proposed definition of a qualified residential mortgage on the fragile housing market.

The coalition submitted this paper as a comment letter in which the regulators were urged to redesign a QRM so that it encourages sound lending behaviors that support a housing recovery, attracts private capital and reduces future defaults without punishing responsible borrowers and lenders.

While the many issues of the day are being shuffled around congress, credit to home builders is still all but "frozen" and there is much to be done.

NAHB is urging every member of the association to contact their members of Congress to help build support for the Home Construction Lending Regulatory Improvement Act of 2011 (H.R. 1755), which represents a significant advancement in efforts to solve the AD&C lending crisis.

The bipartisan legislation would direct federal and state banking regulators to take specific steps that would restore liquidity, ensure that financial institutions that provide financing to America's home builders are permitted to make loans, and provide stable financing to the residential building sector.

Over the past several months, during which feels like an all-out assault on small businesses, the home industry and homeownership in general, NAHB has been at the forefront of many pressing topics and will continue the fight to stabilize the industry and promote homeownership.

Because when comes to time to "hammer out" the issues &emdash; just "Ask a Builder."

As always e-mail your questions or comments to joel@goldenrulebuilders.com or write to "Ask a Builder" at P.O. box 294, Catlett, VA 20119.

Barkman is past president of the Fauquier Chapter of The Northern Virginia Building Industry Association.

Read Joel's column weekly in the