Legislation would Remove Lending Barriers for Home Builders

Representatives Gary Miller (R-CA) andrnCarolyn McCarthy (D-NY) have introduced legislation to increase the access of homebuildersrnto credit.  HR 1255, The HomernConstruction Lending Regulatory Improvement Act of 2013, addresses specificrnregulatory obstacles to the credit needed by builders for home buildingrnprojects.  </p

The text of the bill introduced onrnTuesday is not yet available through the Library of Congress but is said to bernidentical to HR 1755 introduced by Miller in the 112^{th</supCongress.  That bill required thernappropriate federal banking agencies to coordinate rulemaking for banks thatrnmake real estate loans to home builders. rnIts provisions would:</p<ul class="unIndentedList"<liEliminaternthe 100 Percent of Bank Capital Measurement so that regulators could no longerrnprohibit a qualified financial institution that holds real estate loans representingrn100 percent of more of its total capital from continuing to make such loans tornhome builders. </li<liNornlonger allow federal banking agencies keep arnqualified financial institution from making a real estate loan to a homernbuilder for a viable project.</li<liRequires appraisers valuing collateralrnfor a real estate loans associated with any viable project to use an "asrncompleted" valuation and use comparable sales involving arms lengthrntransactions.</li<liProhibits federal banking agenciesrnfrom compelling a financial institution from calling or curtailing a realrnestate loan of a home builder that is in good standing.</li<liIn general, where a home builder isrnin good standing on a real estate loan but the collateral for that loan hasrndecreased in value, the appropriate federal agency should permit a financialrninstitution to work with such home builder to realize the maximum currentrnmarket valuation of such collateral using workout methods or other appropriaternmeans.</li<liIn no case shall any real estaternloan be required to be charged off until the financial institution holding suchrnloan has worked in good faith to exhaust all workout methods or otherrnappropriate means.</li<liThe appropriate Federal bankingrnagency shall not require a financial institution to reclassify any real estaternloan in this paragraph on such institution's balance sheet, unless there is arnsignificant reason under Financial Accounting Standards Board AccountingrnStandards. </li</ul}

The National Association of Homebuildersrn(NAHB) issued a statement regarding the Miller/McCarthy Bill.  Rick Judson, chairman of NAHB said, “Werncommend Reps. Miller and McCarthy for acting to remove a major impediment tornthe housing recovery by promoting legislation that will enable home builders tornobtain construction loans in order to put construction crews back to work andrnto meet rising demand across much of the nation for new homes.  </p

The NAHB statement noted that in manyrnhousing markets demand is increasing and new home inventories are near recordrnlows but builders cannot obtain construction loans.  “As a result, jobs are being lost and homernbuilders are unable to meet the needs of home buyers in scores of local marketsrnwhose economies are on the mend,” said Judson. rnThis is also placing an additional burden on cash-strapped state andrnlocal governments that rely on a robust property tax base to fund essentialrnservices, including schools, police and firefighters. Constructing 100 newrnhomes creates more than 300 full-time jobs and $8.9 million in federal, staternand local tax revenue, NAHB said.

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