Everybody knows that Congress tends todrag its feet when making decisions on the major issues of the day. But as we saw by the tail end of last year, that definitely was not the case when it came time to consider what to do to stop the nation’s deepening mortgage credit crunch and build a new foundation to support homeownership opportunities in the aftermath of the subprime meltdown. In the autumn and winter of 2007, with housing in trouble, Washington didn’t resemble the usual political morass. And the surge in bipartisan activity centered around housing wasn’t limited to Capitol Hill. The White House and such key players as the Federal Reserve Board, the Treasury Department, and HUD all sprang to life, tackling hard issues with a tenacity and resourcefulness not always seen in our government.
Devising a comprehensive plan to restore a healthy flow of mortgage credit was a top priority when our board of directors assembled in Seattle for its annual fall meeting. Only a few weeks earlier, we had seen an implosion in the credit markets as investors in mortgage-based securities pushed the panic button, sending reverberations around the world. Our job was to galvanize the leadership in Washington to address this issue on several fronts. Immediately following deliberations of the NAHB board, we met with federal decision makers, and our suggestions were heard with a receptive ear.
By and large, the movers and shakers started doing what needed to be done. The Fed cut interest rates, reassured the markets, provided liquidity to the system, and encouraged lenders to lend. On the regulatory front, the Fed issued common-sense rules to protect subprime borrowers in the future from some of the practices that resulted in households receiving loans that they ultimately would not be able to afford. The White House put forth an ambitious plan to limit foreclosures, and Congress changed the law so that borrowers in trouble could work things out with their lenders and not face adverse tax consequences. Congress pushed forward with legislation to rejuvenate the FHA and step up its role to provide credit for first-time buyers and others and fill the vacuum left by subprime financing.
Reform of Fannie Mae and Freddie Mac is the next piece of the puzzle. In my home state of California and in other parts of the country where home prices are high, the current $417,000 limit for the loans they are allowed to purchase is woefully inadequate. Those ceilings need to be raised to alleviate the credit crunch in these markets. The NAHB’s annual legislative conference arrives early this year, on April 30, and it is imperative for as many builders as possible to participate and urge their representatives in Congress to finish the vitally important work they started so that we can begin climbing out of the current cyclical slowdown later this year.
2007 will be remembered as the year of the credit crunch when builders worked down their inventories. Looking forward, 2008 is the year we will begin to implement our plans to build for the emerging marketplace driven by growth in our population, households, jobs, and income. There is not one shred of doubt that the future holds a return to good times for housing. You’ve made it this far, so hang in there and meet me at the International Builders’ Show in Orlando, Fla., where an inspiring abundance of products and ideas paints the portrait of a powerful industry on the rise. B