It is absolutely vital to get credit flowing to the housing sector again. In the current regulatory climate, lenders have drastically cut back on acquisition, development and construction (AD&C) loans that are necessary to allow builders to construct new homes. Credit is the lifeblood of housing. Home builders cannot keep their doors open and create jobs in their communities if they cannot get credit to build even pre-sold homes. And when lenders call in performing loans, everyone suffers. Workers get laid off, sound projects go uncompleted and banks take possession of unfinished property.
Federal bank regulators maintain that they are not encouraging institutions to stop making loans or to indiscriminately liquidate outstanding loans. However, NAHB members who are dealing with banks all across the country suggest that bank examiners in the field are adopting a significantly more aggressive stance on AD&C loans out of fear of the regulators coming into the banks and targeting them.
With inventories of new homes nearly depleted in many markets, builders should be gearing up to meet demand, create new jobs and keep the economic expansion moving forward. The only thing holding builders back in these locations are traditional lenders, who still aren’t providing the credit needed to renew the production process.
NAHB worked with Reps. Gary Miller (R-Calif.) and Carolyn McCarthy (D-N.Y.) to introduce legislation to address the credit issue for home builders. On March 19, the House lawmakers unveiled H.R. 1255, the Home Construction Lending Regulatory Improvement Act of 2013. The measure represents a substantial step forward in the effort to restore the flow of credit to the housing industry and is identical to legislation championed by Miller in the last Congress. See NAHB’s press release for more details.