The US House of Representatives Bill, HR 5409, aims to protect the home building industry by offering government backed protection on residential construction loans. The proposed bill is receiving support from industry leaders who say that the bill will free up restricted credit in the market. See the following article from HousingWire for more on this.
The Government Printing Office has yet to publicly forward a copy of HR 5409, but the bill, which seeks to establish a construction loan guarantee program for residential builders, is already gaining support from the trade body representing the industry.
“We applaud these lawmakers for taking the lead to address the housing production credit crisis that is jeopardizing the housing and economic recovery now under way,” said National Association of Home Builders (NAHB) chairman Bob Jones, himself a home builder in Michigan.
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The legislation, available to view as early as tomorrow, was introduced this week in the House of Representatives by Brad Miller (D-NC), Carolyn Maloney (D-NY) and Joe Baca (D-CA). Yesterday, the bill was referred to the House Committee on Financial Services for review. The goal of the legislation is to have the US Government guarantee loans made to “viable construction projects,” a release from the NAHB states.
As it stands, the Residential Construction Lending Act would put the Treasury on the hook for any losses these loans may experience. With this as a backstop, the NAHB believes that credit will free up in a market that is currently restricted. They say that banks continue to reduce exposures to this industry, subsequently freezing lending and sometimes calling performing loans.
“This is causing unnecessary foreclosures and losses on these loans,” the release states. “Performing loans are also being reappraised, reducing the value of the collateral and forcing borrowers to come up with large amounts of cash to keep their loans current.”
The picture for housing starts is steadily improving, according to the Census Bureau and the Department of Housing and Urban Development, up nearly 40% year-on-year, as of April 2010.
This article has been republished from HousingWire. You can also view this article at HousingWire, a mortgage and real estate news site.