San Diego, Calif.--In an emergency meeting of the NAHB's board of directors Wednesday morning in San Diego, the NAHB leadership voted unanimously to support the $700 billion financial bailout plan being debated in Congress.
Brian Catalde, immediate past NAHB president and president and COO of Paragon Communities, El Segundo, Calif., urged the crowd to support the measure, saying that the imperfections in the plan can be fixed later. “If we don’t, the outcome of this will be so dramatic, we’ll be beyond recession,” Catalde said.
Immediately after the NAHB vote, more than 1,000 builders rushed to call their Congressmen and senators, and also the Republican and Democrat leaders in both the House and Senate. The message, said NAHB CEO Jerry Howard, is that: “We’re behind them and the NAHB will do whatever we need to. Call your Congressmen and tell them to stop playing politics.”
NAHB President Sandy Dunn also told builders to take time Wednesday to make phone calls, as the measure is likely to be considered by Congress some time this week or this coming weekend. “This is a matter of life and death, you’ve got to make the calls today,” Dunn said as the builders left the ballroom
NAHB is urging builders to voice their support, in large part, because the rescue package--and its potential $700 billion price tag--is proving extremely controversial across the country. Some builders said radio stations in their areas are running advertisements urging residents to call their elected officials to tell them not to vote for the expensive bailout. But to pass, the bill will need bipartisan support: Neither the Democrats or the Republicans, in either the House or the Senate, have enough votes to pass the rescue package, according to Howard, who said he had been speaking with members of Congress.
Of course, builders have their own concerns with the plan, and they expressed them prior to the NAHB board of directors vote. One top concern: There is no tax benefit to homeowners or home builders included in the $700 billion bailout. Some builders asked that the $7,500 loan being offered home buyers in lieu of down-payment assistance could be turned into a tax credit to help boost economic activity.
Builders also had great worries over which troubled bank assets could be bought under Treasury Secretary Henry Paulson's proposal and how those assets would be handled. Acquisition, development and construction (AD&C) loans are one topic still under debate on the floors of Congress. In the current bailout plan, AD&C loans would be bought by the government.
But some builders feel that the government will bear too heavy a burden if it takes over the current batch of AD&C loans. “If the government wants to buy AD&C loans, they’re looking to take on a hornet’s nest,” said Larry Kush, founder of Montevina Estate Homes, Cave Creek, Ariz., and NAHB's Arizona state representative. Kush told the audience that since he has not been building any homes, he has been working with private investors looking to buy AD&C loans and has found them to be in particularly bad standing.
Builders also expressed concern over a provision that would allow bankruptcy judges to amend mortgage terms for people filing bankruptcy. However, Howard told the audience that after many phone calls with Congressional leaders, that provision was no longer up for debate and would be in the plan if it is passed.
Howard said that while the NAHB has a good working relationship with the Treasury and Federal Reserve, it has only been able to talk to members of Congress during this debate, because the federal agencies are so busy. “They’ve told us politely, ‘Leave us alone,’” Howard informed the audience.
One member of Congress that builders have spoken with is Sen. Kent Conrad (D-N.D.), who had just met with Federal Reserve Chairman Ben Bernanke before he spoke by telephone with a group of builders on Tuesday. Conrad told the builders than Bernanke had very dire warnings for them, including that if the bill is not passed, it will lead to many massive corporate failures, a lengthy and drastic stock market crash, and years of recession.
Against such a backdrop, NAHB's leadership agreed without a single vote of dissent to support the existing rescue package. Their hope is Congress will revisit the subject again, possibly as soon as November, and perhaps add additional stimuli for consumers and builders or other changes.
Ethan Butterfield is senior editor, business, at BUILDER magazine.