Bush Plan To Ease Foreclosures Supported By Home Builders

December 6, 2007 - A plan put forth today by President Bush to limit foreclosures by working with key mortgage lenders and investment firms to freeze interest rates for five years on certain subprime mortgages is supported by the National Association of Home Builders (NAHB).

“The Administration’s plan to help struggling borrowers stay in their homes is one of several steps that can help stabilize the housing market and reassure consumers and investors in the mortgage market,” said NAHB President Brian Catalde, a home builder from El Segundo, Calif. “We applaud this action and urge Congress to follow up quickly on pending legislation that would provide additional help in easing the credit crunch and restoring confidence in the marketplace.”

Specifically, Catalde called on Congress to:

- Enact FHA reform legislation to allow the agency to insure more home loans and help subprime borrowers.

- Strengthen regulatory oversight of Fannie Mae and Freddie Mac and allow them to purchase mortgages in high-cost markets.

- Enact legislation that eliminates taxes on mortgage debt that is forgiven as part of a loan workout.

The Bush plan to stave off foreclosures, which emerged from discussions with various groups including lenders, builders, investors, consumer activists, housing economists and regulators, is aimed at borrowers with loans that were originated between Jan. 1, 2005 and July 31, 2007, with rates that are scheduled to reset between Jan. 1, 2008 and July 31, 2010.

Home owners with steady incomes who have been making timely payments on their mortgages, but who cannot afford the higher adjusted rate, could qualify for a freeze of up to five years on their current interest rate if they meet certain conditions. They could also be placed on a fast-track approach that would enable them to refinance or modify their loans.

To ensure that the break is not granted to real estate speculators or investors, the plan would only be available for owner-occupied homes.

Separately, a UCLA Anderson Forecast study concluded that the U.S. and California economies will weather the housing downturn without a national recession and another report by Harvard said that even with today’s excess supply of unsold homes on the market, the underlying demand for new housing will ultimately rebound to robust levels through 2014.
On the opposite coast, a report from Harvard University’s Joint Center for Housing Studies, “Projecting the Underlying Demand for New Housing Units: Inferences from the Past, Assumptions About the Future,” found that even with the large inventory of unsold homes on the market today, the long term demand for conventional new housing units will run at a strong clip of 1.82 million per year between 2008 and 2014.

“The basic market fundamentals for housing are still very strong,” said Sandy Dunn, NAHB president-elect and a builder from Point Pleasant, W.Va. “Once we work down the inventory of unsold units and put the credit crunch behind us, demand among both first-time and trade up buyers will return to more normal and sustainable levels.”

The Harvard report concluded: “Do not mistake short-term reactions to the housing slowdown as a harbinger of things to come for the long-term. On the strength of demographically-driven demand for housing, the market will bounce back from its currently suppressed levels.”