WASHINGTON -- The National Association of Home Builders (NAHB) urged the Administration and Congress to take a balanced approach in disposing of the large inventory of real estate owned (REO) properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration to avoid further disruptions to pricing and markets and to limit further losses to the two government sponsored enterprises and the FHA.
Testifying before the Senate Subcommittee on Housing, Transportation and Community Development on new ideas to address the glut of foreclosed properties, NAHB Chairman Bob Nielsen, a home builder from Reno, Nev., said that Fannie, Freddie and the FHA should avoid bulk sales to large investors that have no stake in the neighborhoods in which these properties are located.
"Local and small businesses that have a stake in the future of the affected communities should be the driving force behind the disposition of the REO inventory. This will result in the creation of jobs and the stabilization of neighborhoods," said Nielsen.
NAHB also urged Congress to extend the current conforming loan limits for Fannie Mae, Freddie Mac and the FHA, which are due to be lowered on Oct. 1.
"This is not a time to reduce loan limits as the lower limits will exclude many homes and home buyers from FHA and Fannie and Freddie loan programs, particularly in areas like California where there is substantial foreclosure inventory," said Nielsen.
Given that many potential buyers who lack sterling credit are unable to take advantage of today's record-low mortgage rates, Nielsen said that mortgage financing terms for home buyers need to be more reasonable than the overly restrictive standards that are currently in place.
In addition, NAHB urged the regulators to allow modifications to a number of existing federal housing programs, particularly altering rules that restrict or prohibit for-profit investors, in order to effectively reduce foreclosures.
"With the scale of the problem so large, it is necessary to deploy all resources in both the for-profit and nonprofit sectors," he said.
To further help reduce excess inventory, NAHB also offered suggestions for a new investment fund and lease-purchase program.
"We support the goals to maximize value for taxpayers and increase private investment in the housing market," said Nielsen. "Stabilizing home values will improve the balance sheets of financial institutions and will reassure home owners that their biggest asset will retain its value."