Tight Credit Conditions Impeding Housing and Economic Recovery, Fed Chairman Tells Home Builders

February 10, 2012 – Restraints on credit for home buyers andhome builders alike continue to impede the housing and economicrecovery, Federal Reserve Chairman Ben Bernanke said today in an address to the National Association of Home Builders (NAHB) Board of Directorsin Orlando.

Banks remain reluctant to make loans, both to mortgage borrowers andhome builders,” said Bernanke, who noted that current credit conditionsare too tight for the financial system, for the construction industryand the economy.

The Fed chairman said that his message to regulators is for them to take a balanced approach and to approve loans for those who meet soundunderwriting standards.

“Do not turn away creditworthy borrowers, and that includes home builders,” he said.

“Chairman Bernanke understands that today’s tight credit conditions arepreventing qualified buyers from obtaining home loans and builders fromgetting financing for the construction of viable new home buildingprojects – and that this is harming the housing market as well as theoverall economy,” said Barry Rutenberg, the newly elected chairman ofthe National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.

Noting that many local markets have an overhang of empty and foreclosedhomes, the current harsh lending environment, and that the weak housingmarket is impairing the financial health of home owners, Bernanke saidthat the “state of the housing market has been a key impediment to afaster recovery.”

“For these reasons, and because the troubled housing market depressesconstruction activity and employment, we need to continue to develop and implement policies that will help the housing sector get back on itsfeet,” the Fed chairman said. “No single solution will be sufficient.But sustained efforts to address the many interlocking factors holdingback the housing market will pay dividends in the long run.”

He also added that the Fannie Mae and Freddie Mac limits on investorloans are counterproductive in the current economic climate and thatpolicy should be to encourage more loans to help ease the inventory ofdistressed properties.

Bernanke’s remarks on the need to take more aggressive action to support a housing recovery confirms what the nation’s home builders have beensaying for some time and reiterates similar themes in a Jan. 4 whitepaper provided to Congress, in which the Federal Reserve noted that“restoring the health of the housing market is a necessary part of abroader strategy for economic recovery.”

Fixing the nation’s housing woes is taking on a sense of increasingurgency in Washington. In unveiling a new plan last week, PresidentObama cited the important role that housing plays in the economy.

“A lack of building demand has kept hundreds of thousands ofconstruction workers idle,” said Obama. “Everybody involved in the homebuilding business – folks who make windows, folks who make carpets –they’ve all been impacted. The challenge is massive in size and scope,because we’ve got a multi-trillion dollar housing industry.”

Yesterday, the President reiterated the high value that Americans placeon homeownership and the need to help home owners while commenting onthe mortgage settlement agreement reached between the states and fivemajor banks.

“We can’t wait to get things done and to provide relief to America’shome owners,” Obama said. “We need to keep doing everything we can tohelp home owners and our economy.”

“You work and you save your entire life to buy a home,” Obama added.“That’s where you raise your family, that’s where your kids’ memoriesare formed. That’s your stake, your claim on the American Dream.”

With the proper policies in place, housing can serve as an engine of job growth, said Rutenberg, who noted that building 100 homes creates morethan 300 full-time jobs and generates $8.9 million in federal, state and local revenues to fund local schools and strengthen communities acrossthe nation.

“In this key election year, the voters are calling on the Administration and Congress to take actions to restore the health of the housingindustry in order to create jobs, increase household wealth and keep the economy on an upward trajectory,” he added.