Mortgage and financial markets continue to slow housing activity, builders testifyMortgagePress.comNational Association of Home Builders, Congress, housing downturn, Joe Robson, House Financial Services Subcommittee on Financial Institutions and Consumer Credit,
The National Association of Home Builders (NAHB) told Congress
that the housing sector is still being significantly affected by
the upheaval in the financial and mortgage markets that started in
2007, and there is deep concern that these financial dislocations
will increase the depth and length of the housing downturn.
Testifying before the House Financial Services Subcommittee on
Financial Institutions and Consumer Credit, NAHB Chairman Joe
Robson, a builder from Tulsa, Okla., said that coordinated
regulatory efforts among federal and state agencies are necessary
to ensure prudent lending practices and effective consumer
protections while facilitating efficient operation of the
residential mortgage markets.
"NAHB supports efforts to ensure that mortgage lending occurs in
a safe and sound manner and that abuses in lending practices are
properly addressed," said Robson. "However, it is imperative that
any steps taken in this effort do not inadvertently or
unnecessarily disrupt the mortgage lending process or consumer
financing options, or increase the costs or reduce the availability
of mortgage credit."
NAHB urged Congress to implement a clear national framework for
mortgage origination standards to replace the current patchwork of
state and local laws, which often lead to unnecessary restrictions
on mortgage credit.
"Specifically, Congress should establish a federal pre-emption
statute creating essential uniformity in mortgage market
standards," said Robson.
NAHB also supports efforts to improve consumer education on
financing and owning a home and believes it is important that
efforts to ensure prudent mortgage lending and risk management
practices as well as adequate consumer disclosures are
comprehensive and uniform for all organizations involved in
providing mortgage credit.
Single-family appraisal problems are an area of concern for home
builders, and are contributing to the current housing and credit
crisis. "Appraisers have often used sales of homes in foreclosure
or other distressed property sales as comparables for appraisals of
new homes without making the appropriate value adjustments," said
Robson.
At its most recent board of directors meeting, NAHB adopted
policy expressing the following principles for mortgage
lending:
• Underwriting standards and decisions should be based on
documented borrower credit and repayment capacity rather than
expectations of rising collateral value.
• There should not be overly rigid adherence to
loan-to-value limits that results in inappropriate rejections of
creditworthy borrowers.
• Underwriting decisions should be based on mortgage
quality and not driven by fee income.
• Mortgage brokers and lenders should be subject to
adequate oversight.
• Mortgage originators, lenders and investors should have
appropriate accountability and liability for the instruments in
which they are involved.
• The process for mortgage securitization must be more
transparent, providing adequate collateral and risk information for
investors and regulators.
• Credit rating organizations must have adequate oversight
and restrictions to ensure objective evaluations and avoid
conflicts of interest.
• Appraisals should be undertaken by fully qualified
individuals and should accurately reflect values under orderly
market conditions.
• The appraisal system should not exacerbate price
volatility.
• Distressed sales should not be used to determine
value.
The nation's home builders also strongly support the use of
alternative dispute resolution techniques, including binding
arbitration, as the most rapid, fair and cost-effective means to
resolving disputes.
"Invalidating binding arbitration provisions in contracts would
undermine decades of jurisprudence strongly favoring arbitration of
disputes where the parties have agreed to use the arbitration
process," Robson told lawmakers. "NAHB opposes any attempt to
prohibit the use of pre-dispute arbitration in contracts."
For more information, visit www.nahb.com.
