[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                  FULL COMMITTEE HEARING ON THE STATE 
                   OF THE NATION'S HOUSING SECTOR: AN 
                 EXAMINATION OF THE FIRST TIME BUYER'S 
                       CREDIT AND FUTURE POLICIES 
                         TO SUSTAIN A RECOVERY 

=======================================================================

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                            OCTOBER 7, 2009

                               __________

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
                               

            Small Business Committee Document Number 111-049
Available via the GPO Website: http://www.access.gpo.gov/congress/house

                               ----------
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52-889 PDF                       WASHINGTON : 2009 

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman

                          DENNIS MOORE, Kansas

                      HEATH SHULER, North Carolina

                     KATHY DAHLKEMPER, Pennsylvania

                         KURT SCHRADER, Oregon

                        ANN KIRKPATRICK, Arizona

                          GLENN NYE, Virginia

                         MICHAEL MICHAUD, Maine

                         MELISSA BEAN, Illinois

                         DAN LIPINSKI, Illinois

                      JASON ALTMIRE, Pennsylvania

                        YVETTE CLARKE, New York

                        BRAD ELLSWORTH, Indiana

                        JOE SESTAK, Pennsylvania

                         BOBBY BRIGHT, Alabama

                        PARKER GRIFFITH, Alabama

                      DEBORAH HALVORSON, Illinois

                  SAM GRAVES, Missouri, Ranking Member

                      ROSCOE G. BARTLETT, Maryland

                         W. TODD AKIN, Missouri

                            STEVE KING, Iowa

                     LYNN A. WESTMORELAND, Georgia

                          LOUIE GOHMERT, Texas

                         MARY FALLIN, Oklahoma

                         VERN BUCHANAN, Florida

                      BLAINE LUETKEMEYER, Missouri

                         AARON SCHOCK, Illinois

                      GLENN THOMPSON, Pennsylvania

                         MIKE COFFMAN, Colorado

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

                  Karen Haas, Minority Staff Director

        .........................................................

                                  (ii)

  


                         STANDING SUBCOMMITTEES

                                 ______

               Subcommittee on Contracting and Technology

                     GLENN NYE, Virginia, Chairman


YVETTE CLARKE, New York              AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana              ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon                W. TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois          MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois               GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
PARKER GRIFFITH, Alabama

                                 ______

                    Subcommittee on Finance and Tax

                    KURT SCHRADER, Oregon, Chairman


DENNIS MOORE, Kansas                 VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona             STEVE KING, Iowa
MELISSA BEAN, Illinois               W. TODD AKIN, Missouri
JOE SESTAK, Pennsylvania             BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois          MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, Pennsylvania, Chairman


HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana              LOUIE GOHMERT, Texas
PARKER GRIFFITH, Alabama

                                 (iii)

  


               Subcommittee on Regulations and Healthcare

               KATHY DAHLKEMPER, Pennsylvania, Chairwoman


DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia, 
PARKER GRIFFITH, Alabama             Ranking
MELISSA BEAN, Illinois               STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             GLENN THOMPSON, Pennsylvania
BOBBY BRIGHT, Alabama                MIKE COFFMAN, Colorado

                                 ______

     Subcommittee on Rural Development, Entrepreneurship and Trade

                 HEATH SHULER, North Carolina, Chairman


MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri, 
BOBBY BRIGHT, Alabama                Ranking
KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania

                                  (iv)

  













                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Graves, Hon. Sam.................................................     2

                               WITNESSES

Jacob, Mr. Mickey, Managing Principal, Urban Studio Architects, 
  Tampa, FL, on behalf of The American Institute of Architects...     3
Robson, Mr. Joe, Robson Companies, Broken Arrow, OK, President, 
  National Association of Home Builders..........................     5
Pryor, Mr. Michael B., President and CEO, Lenders Title Company, 
  Little Rock, AR, on behalf of The American Land Title 
  Association....................................................     6
Canfora, Mr. Joseph, Broker/Owner, Century 1 Selmar Realty, East 
  Islip, NY, on behalf of National Association of Realtors.......     8
Volm, Ms. Pamela, Owner, Annapolis Contracting, Annapolis, MD....     9

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    24
Graves, Hon. Sam.................................................    26
Jacob, Mr. Mickey, Managing Principal, Urban Studio Architects, 
  Tampa, FL, on behalf of The American Institute of Architects...    28
Robson, Mr. Joe, Robson Companies, Broken Arrow, OK, President, 
  National Association of Home Builders..........................    38
Pryor, Mr. Michael B., President and CEO, Lenders Title Company, 
  Little Rock, AR, on behalf of The American Land Title 
  Association....................................................    46
Canfora, Mr. Joseph, Broker/Owner, Century 1 Selmar Realty, East 
  Islip, NY, on behalf of National Association of Realtors.......    58
Volm, Ms. Pamela, Owner, Annapolis Contracting, Annapolis, MD....    69

Statements for the Record:
Clarke, Hon. Yvette..............................................    73
Appraisal Institute/ American Society of Appraisers/ American 
  Society of Farm Managers and Rural Appraisers/ National 
  Association of Independent Fee Appraisers......................    74
International Council of Shopping Centers........................    78

                                  (v)

  


                  FULL COMMITTEE HEARING ON THE STATE
                    OF THE NATION'S HOUSING SECTOR:
                    AN EXAMINATION OF THE FIRST TIME
                   BUYER'S CREDIT AND FUTURE POLICIES
                         TO SUSTAIN A RECOVERY

                              ----------                              


                       Wednesday, October 7, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:10 p.m., in Room 
2360, Rayburn House Office Building, Hon. Nydia M. Velazquez 
[Chair of the Committee] presiding.
    Present: Representatives Velazquez, Moore, Dahlkemper, 
Clarke, Graves, Westmoreland, Fallin, Luetkemeyer, and 
Thompson.
    Chairwoman Velazquez. I call this hearing of the House 
Small Business Committee to order.
    In the last few years, it has become increasingly clear 
that the health of our economy hinges on the state of the 
housing market. That is why Congress has placed such an 
emphasis on recovery in that sector. Already, we are seeing 
promising results, but our momentum remains fragile and we need 
to be sure it is allowed to continue, not just for the sake of 
homeowners but for the sake of our economy and the small 
businesses that sustain it.
    Housing is a small business driven industry. In fact, most 
mortgage brokers, realtors, home builders, home inspectors and 
architectural design firms are small ventures. For these 
businesses recent business upticks have gone a long way in 
restoring confidence and boosting the bottom line. In August, 
pending home sales rose 6.4 percent, marking 7 straight months 
of improvement. Meanwhile, July home values climbed at their 
highest rate in almost 4 years. But this progress is no pretext 
for complacency. Home values are still way below what they were 
3 years ago and industry businesses continue to face 
challenges, like tightened credit and slowed consumer spending.
    One year after the real estate bubble burst, the housing 
market is at something of a crossroads. While we have seen 
encouraging bright spots, small businesses in this industry are 
still struggling. This afternoon we have an opportunity to 
evaluate the state of the housing sector and the role that 
small firms are playing in its recovery. In doing so, we hope 
to pinpoint which policies are working and where we still have 
work left to be done.
    Even today, you don't need to look very far to see the 
impact of the housing crisis. In neighborhoods across the 
country, thousands of houses still sit empty. This glut in the 
market has dealt a heavy blow to virtually every firm in the 
industry, including small banks and lending institutions. For 
these businesses, measures like the First-Time Home Buyer's 
Credit have been a lifeline. That $8,000 incentive has 
galvanized consumers, sparking an increase in home purchases. 
Some experts predict it will generate an additional 350,000 
sales before December and are calling for its extension.
    Increased home sales will be a key component in the housing 
recovery, but it will not be the only means for revival. 
Entrepreneurs, like electricians and efficiency contractors, 
are already benefiting from measures that encourage green 
building. In a recent survey by the Air Conditioning 
Contractors of America, 75 percent of respondents said they had 
enjoyed improved sales as a result of Recovery Act tax credits. 
Increased incentives for green building could go a long way in 
continuing that growth and are worth considering.
    For the first time in years we have seen stabilization in 
the housing market. In order to build on this emerging 
recovery, economists have suggested extension for our most 
effective measures, some of which will soon expire. It is 
important that we have a chance to examine these incentives and 
determine their value moving forward. Meanwhile, we need to be 
certain that small firms have the capital they need to stay 
afloat. Loans to small businesses in the housing sector are 
down on most accounts. Efforts to get credit flowing again to 
both builders and buyers will mark an important step in 
addressing that issue.
    While it is clear that the housing market has come a long 
way, we are not out of the woods just yet. Entrepreneurs, 
ranging from realtors and appraisers and home builders and 
architects, are still facing challenges. These are the men and 
women who not only comprise the foundation of American real 
estate, but also of our economy. They will play a vital role in 
our Nation's recovery efforts and it is critical that they have 
all the tools they need to incite a rebound.
    I would like to thank all of the witnesses for being here 
and I know that we were supposed to start our hearing at 1 
o'clock, but I want to take this opportunity really to thank 
you for helping us come to terms to see what are the measures 
that are working in terms of the Recovery Act, and how can we 
be helpful to make sure that those tools are still here for 
months to come.
    And I will now will yield to Ranking Member Graves for his 
opening statement.
    Mr. Graves. Thank you, Madam Chair, and I would like to 
thank you for holding this hearing on the state of the Nation's 
housing sector and how temporary tax provisions have affected 
our Nation's ailing housing market. I also want to thank all of 
our witnesses for being here today. I know that you have come a 
long ways in many cases to be with us.
    Recent statistics point to a slight improvement in 
America's housing market. Buyers appear to be slowly reentering 
the market and housing prices seem to be stabilizing. However, 
the housing market is in no way robust and the current health 
of the housing market is still a great concern. Foreclosures 
remain close to record levels, with one in every 357 houses in 
the United States receiving a foreclosure notice in August. The 
aftershock of the market's downfall continues to be felt by all 
sectors of the economy.
    Across the country small lumber mills, contractors, 
electrical manufacturers, realtors, and others in the housing 
industry have been forced to shrink their workforce, cut 
workers' pay and employ a variety of creative methods just to 
stay in business. The First-Time Home Buyer's Tax Credit, 
signed into law in the summer of 2008, was intended to provide 
a jolt to the sluggish housing market, providing those would be 
first-time home buyers an incentive to make that first 
purchase.
    Many have attributed the slight uptick in the housing 
market in August to the First-Time Home Buyer's Tax Credit, 
which was increased and extended in the American Recovery and 
Reinvestment Act of 2009. The credit is set to expire on 
November 30th. With this date looming, we must now evaluate the 
success of this credit versus the cost of extending it and its 
long-term impact on the deficit. This hearing will provide an 
opportunity to hear from those effected directly by the housing 
market and examine how this credit and other incentives have 
impacted them.
    Again, thank you, Madam Chair, for holding this hearing and 
I thank the witnesses and I look forward to hearing the 
testimony.
    Chairwoman Velazquez. Thank you. Our first witness is Mr. 
Mitch Jacob, the Managing Principal of Urban Studio Architects 
in Tampa, Florida. Urban Studio Architects was founded in 1989 
as an architectural space planning and interior design 
practice. Mr. Jacob is testifying on behalf of the American 
Institute of Architects. The Institute has more than 83,000 
licensed architects and associate professionals. Welcome. You 
will have 5 minutes to make your presentation.

                   STATEMENT OF MICKEY JACOB

    Mr. Jacob. Madam Chairwoman Velazquez, Ranking Member 
Graves, and members of the Committee, I am Mickey Jacob, FAIA 
Managing Principal of Urban Studio Architects, a seven-person 
architectural and interior design firm located in Tampa, 
Florida, and I want to thank you for giving me the opportunity 
to testify today on behalf of my firm and the American 
Institute of Architects.
    As the global financial crisis continues to threaten the 
livelihood of American business, the American Institute of 
Architects, the AIA, strongly supports the Committee in its 
efforts to pursue policies that will allow small business to 
prosper in these times of economic crisis.
    A large majority of AIA's 85,000 members own or work for 
small firms. America's architects, like millions of small 
businesses around the country, have been particularly hard hit 
by the recent economic downturn. The tightening of credit 
markets has put the financing of construction projects at risk, 
resulting in reduced work for architects and in many cases the 
outright cancelation of ongoing projects.
    The AIA's Architecture Billings Index forecasts a 
significant reduction in activity within our sector over at 
least the next 12 months. Firms with a single family 
residential specialization have been reporting increased scores 
since mid-spring due in part to the $8,000 First-Time Home 
Buyer's Tax Credit. However, on the whole the architecture 
profession is reeling.
    As the building sector is responsible for 1 of every $10 of 
the United States GDP, a large portion of which is directly 
created by small business, continued stagnation within the 
economy will only further magnify the financial hardship and 
increasing job loss. As a small business owner I would like to 
share with you my firm's experiences in this economic climate 
as they are emblematic of the larger challenges we all face.
    Urban Studio Architects celebrated its 20th year in 
business this past August. Our business model of slow and 
steady growth during the first 18 years focused on projects in 
the commercial, institutional and residential sectors. The 
residential side of our practice represented about 65 percent 
of our total revenue. By 2007, we had a vibrant staff of 33 
people, creating an average of $300,000 a month in billings. 
However, in early 2008 our two largest residential projects, 
worth over a million dollars in fees to us, were suddenly put 
on hold due to the inability to acquire financing.
    The continuing decline in the real estate market has 
seriously affected our firm by making it almost impossible for 
our clients, most having a successful track record in 
development, to acquire financing and build. Additionally, the 
collapse of the housing market in Florida has put on indefinite 
hold all residential projects in our firm. Our revenue has gone 
from averaging $300,000 a month to $30,000 a month.
    The result of this real estate economic downturn is that 
our firm has laid off 25 people in the last 20 months, 
representing 75 percent of our workforce. We have slashed our 
overhead, renegotiated the terms of our lease and asked our 
employees to take three different pay cuts, the last of which 
reduced salaries to half what they were earning just 15 months 
ago.
    Our financial situation has left with us with only two 
choices: Merge with another firm to stay open and save jobs, or 
close our business.
    Sadly, our firm's story is not unique. Small design firms 
across the country are facing the same severe challenges and 
difficult choices. But America's architects believe that this 
economic crisis presents an opportunity not only to build but 
to build better. The AIA is launching a new campaign to bring 
about both short- and long-term recovery to our communities 
with programs that invest in our infrastructure and the built 
environment.
    Our plan, which is available at AIA.org/rebuildandrenew, 
focuses on five key areas: Making financing available for 
design and construction project; providing needed financial 
relief and access to affordable short-term credit to small 
businesses; making tax policy work for recovery and beyond; 
improving our Nation's infrastructure and built environment; 
developing incentive for a new sustainable economy that will 
save jobs.
    With these incentives the AIA is proposing a number of 
policy ideas that, if pursued by Congress, will assist 
architects, their small business firms, and the Nation as a 
whole to rebound from this economic crisis.
    In conclusion, small business does not want a bailout. We 
want access to low-interest or no-interest loans to bridge the 
economic downturn to help fund operational costs. We want 
relief from the skyrocketing premium increases of health 
insurance. We want tax incentives for people to build, buy, and 
renovate their homes and businesses. We want Congress to hold 
accountable the recipients of billions of dollars of stimulus 
money to ensure it reaches the local marketplace as it was 
intended to do.
    These "wants" by small business are not a stimulus package. 
They are an investment in the economic foundation of the 
country. My fellow architects and I are happy to utilize our 
knowledge and experience to work with you in creating realistic 
and attainable solutions to help small business recover and 
prosper. It is vital to the healthy future of our profession, 
our people, the healthy future of my firm, and the economy.
    So I thank you for the opportunity to participate today and 
tell you a story about our firm. Thank you.
    [The statement of Mr. Jacob is included in the appendix.]
    Chairwoman Velazquez. Thank you, Mr. Jacob.
    Our next witness, Mr. Joe Robson, is the President of the 
Robson Companies, a builder of residential and commercial 
properties in Broken Arrow, Oklahoma. Mr. Robson is testifying 
on behalf of the National Association of Home Builders. The 
National Association of Home Builders has represented more than 
800 State and local home builder associations since its 
founding in 1972.
    Welcome, sir.

                    STATEMENT OF JOE ROBSON

    Mr. Robson. Great. Thank you, Chairman Velazquez, Ranking 
Member Graves, and members of the Committee.
    The current housing recession is the worst since World War 
II. Housing starts are down 80 percent since January of 2006, 
and virtually every housing indicator reached an all-time low 
in the last 2 quarters. And while there are glimmers of hope 
that the 3-year decline in housing may have stabilized, there 
remain significant obstacles to recovery, including excess 
inventory, foreclosures feeding this inventory, continued 
downward pressure on home prices, constricted mortgage lending 
and low appraisals, and difficult financing terms and limited 
availability for acquisition development and construction 
loans.
    I am pleased to report that the First-Time Home Buyer Tax 
Credit is having a demonstrably positive effect on housing 
demand. NAHB estimates that 200,000 additional home sales are 
attributable to the tax credit and resulted in an increase of 
187,000 jobs. And as the November 30th deadline for the program 
approaches, NAHB urges extending and enhancing the tax credit.
    In particular, NAHB recommends extending the sunset date 
until December 1, 2010, and expanding the eligible buyer 
definition to include all purchasers of a principal residence. 
We estimate that these enhancements would increase home 
purchases by 383,000 in the next year, increase housing starts 
by 82,000, and create more than 347,000 jobs.
    On the topic of appraisals, there are increasing complaints 
of real estate appraisers using foreclosures and other 
distressed sales as comparables in determining values of single 
family homes without properly adjusting the comparable property 
values to reflect the relative condition of the properties. 
Further appraisal problems have been exacerbated due to the 
unintended consequences that resulted from the implementation 
of the Home Valuation Code of Conduct, which has called into 
question the experience and qualifications of appraisers. NAHB 
strongly supports the intent of the HVCC. However, we also 
strongly believe that additional clarifications and reforms are 
needed in order for the HVCC to work effectively.
    Further, Federal agencies and those that establish 
appraisal requirements for home mortgages should require 
appraisers to obtain sufficient information and make 
appropriate adjustments in the prices of comparable sales.
    Another persistent problem for home builders is the 
availability of credit for acquisition, development, and 
construction, or AD&C loans. Banks increasingly refuse to 
extend new AD&C credit or to modify outstanding AD&C loans in 
order to provide builders more time to complete their projects 
and pay off these loans. As a result more builders are being 
required to put up additional equity or collateral due to 
reappraisal of collateral or reevaluation of the loan. Since 
most home building companies are small businesses and do not 
have the capacity to meet significant equity calls, the result 
is often foreclosure on a loan that had been performing. This 
places more foreclosed properties on the market, blunting the 
housing recovery. NAHB is urging Members of Congress to tell 
the Federal banking regulators to put a halt to these short-
sighted practices.
    Lastly, I want to raise a recent development having to do 
with the Small Business Administration's ARC program. As you 
know, NAHB testified in support of this program in front of 
this Committee this past summer and at that time we were 
hopeful that ARC would help many of NAHB's members to stay 
afloat. Unfortunately, home builders are being told by bankers 
and SBA field staff that their businesses are not eligible for 
this assistance. We urge the Committee to encourage the SBA to 
revisit the way it views home builders and to reconsider the 
eligibility requirements for ARC program loans.
    Thank you. I look forward to answering questions.
    [The statement of Mr. Robson is included in the appendix.]
    Chairwoman Velazquez. Thank you.
    Our next witness, Mr. Michael B. Pryor, is the President 
and CEO of Lenders Title Company in Little Rock, Arkansas. Mr. 
Pryor is also the President of the Board of Governors of the 
American Land Title Association. ATLA was founded in 1907 and 
is the national trade association of the abstract and title 
insurance industry.
    Welcome.

                 STATEMENT OF MICHAEL B. PRYOR

    Mr. Pryor. Thank you, Chairwoman Velazquez, Ranking Member 
Graves, and members of this Committee. I operate a title 
insurance and settlement agency in Little Rock, Arkansas. I 
entered the title business over 20 years ago operating with 
just myself and two employees. We truly began as a small 
business.
    I am currently honored to be President of the American Land 
Title Association, and it is on behalf of our many small 
businesses that I am pleased to be with you today.
    At the outset, I wish to thank the chairwoman and so many 
members of this Committee for your support of America's small 
businesses. I could call the roster of this Committee and 
recollect your individual and Dear Colleague letters of support 
through many of our most difficult times, and we thank you.
    Nowhere in the world is the creation and transfer of 
interest in real property accomplished more efficiently and 
securely than in the United States. Economic success in America 
is entirely rooted in a clear system of property rights. 
Individual claims of property interest are transparently placed 
in the public records and daily reviewed by members of the land 
title industry whose active diligence alerts public officials 
and interested parties of recording errors, title defects, and 
attempts to fraudulently cloud or impair legitimate property 
rights. It is precisely this work by our industry that allows a 
family to sit at a closing table to buy or sell a home.
    No matter how many simplification rules we pass, 
transferring real estate is and always will be a complex 
process. In my experience, there is no such thing as a normal 
closing or title issue. Every property, every buyer, and every 
seller add uniqueness to every transaction. It is a credit to 
the superb job of title professionals that anyone might even 
think the closing process is routine.
    But we regularly face well-intended regulators who, seeing 
the hammer in their hand, consider every problem to be a nail. 
Many of the frustrations of our small business members come as 
a result of unintended consequences of simplification.
    New RESPA regulations by the Department of Housing and 
Urban Development have created serious new costs. 
Implementation of the new regulations is frantically under way 
and will be fully required less than 90 days from now. While we 
still have issues with the new RESPA rules, we have forged a 
productive relationship with HUD and hope to continue a 
constructive and consumer beneficial dialogue.
    Last year, this Congress provided badly needed assistance 
to the real estate economy with the passage of the First-Time 
Home Buyer Tax Credit. I would be reluctant to declare its 
effect a boom, but I can tell you without that action many in 
our industry would have closed their doors. Unfortunately, the 
threat of closure still exists. In fact, unless Congress acts 
quickly, I believe it will be a very long winter for many of 
us.
    As you know, the real estate economy is both cyclical and 
seasonal. We know the cycle is down, and recovering slowly. But 
the summer season, absent the tax credit stimulus, essentially 
did not happen. The lack of summer reserves, coupled with 
exhausted or unavailable credit, has left too many of our 
members struggling for their economic lives.
    The proposal for a new regulator, such as the Consumer 
Financial Protection Agency, could not come at a worst time. We 
simply cannot absorb or even effectively engage in a new 
regulatory regime at this time, especially one with such a 
vague and overreaching mission. America's small business owners 
do not have HR and IT departments. They do not have in-house 
general counsels or government compliance divisions. Those hats 
are all worn by the same small business owner/manager who is 
struggling to comply with existing regulations in a difficult 
economic time. The CFPA is simply ill-timed and ill-conceived.
    From my experience I know that optimism and hope are 
required traits for small business survival, and I can also say 
that right now neither is in great supply for America's small 
businesses. I ask this Congress for three things:
    First, raise the Fannie Mae and Freddie Mac conventional 
loan limits from the current $417,000 to $625,000. This will 
provide badly needed credit availability to the move-up buyers, 
thereby creating a velocity throughout the real estate column.
    Second, extend and expand the home buyer tax credit to 
include all buyers of principal residences.
    And third, to provide better consumer awareness enact a 
borrower's right of inspection, giving buyer borrowers a 
mandatory inspection period prior to settlement to review their 
completed closing statement.
    Again, I am deeply grateful for your time, your attention 
and the opportunity to be here. Thank you.
    [The statement of Mr. Pryor is included in the appendix.]
    Chairwoman Velazquez. Thank you, Mr. Pryor.
    Our next witness, Mr. Joseph Canfora, is the owner of 
Century 21 Selmar Realty, located in East Islip, New York. Mr. 
Canfora is testifying on behalf of the National Association of 
Realtors. Founded in 1908, the National Association of Realtors 
is the Nation's largest trade association with over 1.2 million 
members.
    Welcome.

                  STATEMENT OF JOSEPH CANFORA

    Mr. Canfora. Madam Chairwoman and Ranking Member Graves, I 
am Joseph L. Canfora, broker and owner of Century 21 Selmar 
Realty in East Islip, New York. I am pleased to appear here 
today on behalf of the National Association of Realtors. I 
serve as an elected volunteer officer of the organization as 
the Regional Vice President of New York and New Jersey and 
Pennsylvania.
    Our oral testimony will focus on the First-Time Home Buyer 
Tax Credit and the challenges our members and consumers alike 
are facing as new appraisal standards are being put into place. 
Our written statement will also include discussion of 
challenges in Federal Housing Administration, FHA, programs. We 
ask that the written statement be entered into the record.
    Chairwoman Velazquez. Without objection.
    Mr. Canfora. The tax credit has been a tremendous success. 
Over 70 percent of the purchasers coming into my company have 
been due to the tax credit, compared to 40 percent last year 
for first-time home buyers. So we have seen a tremendous 
increase. The demand to purchase and close by the tax cutoff 
date of November 30th is the prime reason buyers are entering 
the market. Properties that title cannot be delivered by 
November 30th are not even being considered for viewing.
    Right now in our area the tax credit is virtually shut off. 
And the reason I say that is because if we purchase a house 
today it takes normally 60 to 90 days to close. So we are into 
October already so we have seen a tremendous--we have seen a 
decline of people coming into the office. Nobody is going after 
the tax credit anymore because in their mind it is over. So it 
has to be addressed.
    I spoke with many of our closing attorneys who all 
virtually gave the same scenario. At closing buyers are asked 
what prompted them to move forward and 90 percent of the time 
it was because of the tax credit being offered.
    I make a point to question realtors throughout the Long 
Island area and the Pennsylvania and New Jersey area, and the 
buyer activity is due only to the tax credit. So this is 
important.
    Personally I would like to see the tax credit to be given 
to all buyers. The tax credit must be entered into the--must be 
extended to the end of 2010.
    I would like to talk about appraisal situations. It is a 
very stressful situation when people are selling and buying. 
Most often home sellers need every dollar from the equity in 
their home to be able to purchase their new home. They could be 
moving to a retirement community or they could be moving their 
families to either a smaller or larger property. Many of our 
sellers, due to the increase in the cost of ownership, come to 
a point where they have to sell their homes.
    Buyers are also in a very stressful situation where every 
dollar counts. When we have an appraisal come in and the 
appraisal is not accurate, then there goes the sale for both 
parties. I would like to give an example. I see that time is 
coming on me.
    We just had a veteran purchaser come into the office to 
purchase. The veteran offers 100 percent financing. The house 
went to contract for $335,000. It appraised for $315,000. The 
veteran purchaser was turned away from purchasing the house. 
The house was truly worth every penny of the $335,000. The 
appraiser did not come from the area. The comparables used were 
wrong.
    And we had another situation, very similar situation, that 
happened in Massapequa, where the appraiser came from the 
Brooklyn area, and we are in Long Island. And like we wouldn't 
know the Brooklyn area, they would not know Long Island as 
well. The appraisal was just the opposite. We sold the property 
for 260- and the appraiser brought it in--and it was worth 260- 
and 270-, and it was brought in for a very high amount. You can 
say, gee, why am I saying that it was a high amount? What is 
wrong with that? Well, the problem is that it is not accurate 
and the appraisal should be correct and each appraisal is 
important.
    I would like to ask Congress to pass language imposing 18 
months mandatory on the HVCC. Thank you.
    [The statement of Mr. Canfora is included in the appendix.]
    Chairwoman Velazquez. Thank you, Mr. Canfora.
    Next witness is Ms. Pamela Volm, the owner of Annapolis 
Contracting, located in Annapolis, Maryland. Annapolis 
Contracting provides residential and commercial framing in the 
Baltimore and D.C. area. The firm works with national home 
builders as well as local contractors.
    Welcome.

                    STATEMENT OF PAMELA VOLM

    Ms. Volm. Thank you, Chairwoman Velazquez, Ranking Member 
Graves, and members of the Committee for giving me the 
opportunity to be here today. It is a privilege to help provide 
you with a firsthand perspective on the housing market that 
goes beyond the statistics as we as a Nation struggle to 
recover from the worst economic crisis since the Great 
Depression.
    My name is Pamela Volm, and I am the owner of Annapolis 
Contracting. I am just located up the road. It was a short trip 
for me from Annapolis. I have been in the construction business 
since 1992. I founded my company in 2003, and we specialized in 
framing multifamily housing in the Maryland area until the 
downturn.
    Our small company started out with 31 employees and at our 
peak we grew to 37. We all worked together on numerous job 
sites each year. Approximately 95 percent of our workload was 
residential construction. The remaining consisted of light 
commercial. Our employees include foremen, carpenters, 
carpenter helpers, laborers, estimator, office manager, and a 
safety director. We also employed numerous framing crews.
    When the bottom fell out of the housing market in 2006, 
Annapolis Contracting went into survival mode. The multifamily 
work that had grown the company was hardly available. We began 
to build single family homes. We reached out to the commercial 
general contractors we were currently working for in search of 
replacement work. In 2007 our residential framing as a 
percentage of our business had dropped from 95 percent to 85 
percent. In 2008, it dropped to 73 percent. And this year we 
are at about 68 percent and we will do about 50 percent of the 
work that we did in 2005.
    Our jobs dried up in the residential market. We lost about 
20 employees. The framing crews that we once employed went from 
12 to 16 men crews to 4 to 5 men. Clients canceled jobs, 
condensed their subcontractor base. Banks pulled funding, and 
the small but successful firm that we had built over the past 6 
years faced the critical question of whether we could survive.
    We were forced to lay off another 17 employees and by the 
time 2008 came to a close many small businesses like mine were 
fearful that they would not make it through 2009. While we 
started this year fearing for our livelihoods, in March the 
First-Time Home Buyer Tax Credit gave oxygen to our ailing 
residential marketplace. The passage of the tax credit 
represented the proverbial light in the darkness as it jump-
started the market, pulling buyers off the sidelines and 
getting capital flowing in this critical segment of our 
economy.
    We started to see more housing starts from our home 
builders. It was really a welcome sign. It is by no means a 
full recovery for our company, but it is a sign that things are 
starting to turn around. I feel and my employees feel, even our 
customers feel, a certain momentum driving us back to a more 
stable economic footing.
    As of today, it seems like the worst may be behind us. But 
as those of us who work in the construction business know, 
winter is the toughest of times. I cannot imagine a worst time 
for the ending of the $8,000 tax credit.
    We are rebuilding and the growth of our small company does 
look possible again. My story is not unique. There are 
thousands of small businesses over all the country from 
builders, retailers, manufacturers, to landscapers, who are 
finally starting to feel that same momentum as the wheels of 
their company start turning again.
    We know we are not out of the woods, but the First-Time 
Home Buyer's Tax Credit gave us all a glimpse of economic 
security. We hope that anecdotal stories like mine help you to 
see beyond the facts and figures. But it should also be noted 
that our anecdotal experience is supported by those same 
studies and reports released from the housing market that will 
likely provide you evidence for the path ahead.
    Last week, Dr. Kenneth Rosen of the Haas School of Business 
at Berkeley released a study providing quantifiably that the 
tax credit was successful in jump-starting the industry. He 
found that the tax credit has accomplished one of the most 
important tasks in getting the market moving again: Reducing 
the supply of homes that are for sale. The inventory of for-
sale homes priced less than $300,000 has decreased by 26 
percent, meaning not only is the supply moving again but given 
the price of the homes that are being sold, America's working 
families are using that tax credit.
    Thank you for the time.
    [The statement of Ms. Volm is included in the appendix.]
    Chairwoman Velazquez. Thank you, Ms. Volm. I would like to 
address my first question to all the panelists.
    Recently there have been some encouraging signs in the 
housing market. In fact, home prices have been increasing on a 
month-to-month basis. Do you believe the recent price increases 
can be attributed to the first-time tax credit, Mr. Jacob? Or 
if you believe that there are some other factors that should be 
factored in.
    Mr. Jacob. I think that that has somewhat of a factor in 
it. I don't think it is "the" factor. I think it is giving an 
opportunity to young people--and I hire a lot of young people 
out of school--to have an opportunity to go and buy a home. And 
we are also looking at, in terms of what we are doing in Tampa, 
the urban environment where it is more high density urban 
living and those kinds of people are being given an opportunity 
to be in that environment as a first-time buyer with a 
condominium or a townhouse in an urban environment. So I think 
it is spurring it on along with other factors, but I think it 
is generating some optimism, which I think is very important.
    Chairwoman Velazquez. Mr. Robson.
    Mr. Robson. I don't think it is any coincidence that the 
timing of home sales and stabilization of home prices occurred 
at the same time that the $8,000 tax credit came into being. I 
think it is a primary driver. And actually if you look at some 
of the recent data--maybe it hadn't been published yet for 
September and that sort of thing--but you will see a leveling 
off of sales. Because like the other panelists have said, you 
cannot sign a contract today and take advantage of the $8,000 
tax credit. The housing recovery is very, very fragile, and I 
am afraid without the $8,000 tax credit we could slip back very 
quickly.
    Mr. Pryor. I am not familiar with the statistic and its 
genesis, so I can only relate my personal experience in 
response to your question. And that is that I don't see the 
price increasing going on. This is a very narrow range of--in 
our marketplace it is a very narrow range of stimulus that has 
taken place and we haven't really see it move throughout the 
column as it needs to because of credit availability in the 
upper ends of the market.
    I do think that coupled with the opportunity to increase 
the conforming loan limits, it is a very important step to 
increase and extend the tax credit and provide that credit 
availability through Fannie and Freddie to all home buyers.
    Mr. Canfora. The tax credit--when the tax credit went into 
effect, we saw immediate increase in activity. It was night and 
day that was the difference. And now we see it turned off. As 
far as prices are concerned, what we didn't see was continuing 
declining of prices. Had there not been that tax credit put in 
place, I don't know where we would be. Prices still would be 
constantly falling.
    Ms. Volm. I called numerous of our contractors that we 
build for, builders--national builders as well as the local 
builders that we build for, and in the communities that we have 
that are the first-time home builder communities we have seen a 
great increase in starts in those communities since the tax 
credit was started.
    I had several of them call me because I had asked for 
statistics or numbers and they said that--these were 
communities that we were building that had really kind of 
leveled off, there wasn't a lot of activity. And they actually 
see movement in these. We have a lot more starts in those 
first-time home buyer communities.
    Chairwoman Velazquez. Mr. Canfora, the percentage of home 
loans in foreclosure has been rising rapidly since 2006. How do 
foreclosed properties affect a local real estate market? And 
have the recent measures taken by the administration helped 
slow foreclosure rates?
    Mr. Canfora. Yes, I feel they have. Whenever you have 
foreclosures and short sales in any geographical area, it does 
have a negative impact on house prices. People look to buy the 
cheapest possible house they can get.
    But here again the tax credit--without the tax credit being 
in place, I think it would have been worse. I really do. And we 
really need to see it brought back and extended to 2010.
    Chairwoman Velazquez. Ms. Volm, we have conducted a lot of 
hearings here since we have been dealing with the Recovery Act, 
when we were drafting it, regarding the tightening of credit 
and the lack of access to credit for small businesses. And 
while so many industries have been faced with the credit 
crunch, the real estate sector particularly have been hit hard. 
Has your business found it difficult to obtain credit?
    Ms. Volm. We haven't had a need to obtain credit. We have 
been positioned very well, so--and had planned for and have 
worked through this downturn so far, but I know firsthand that 
we have had numerous jobs that we have contracted for ready to 
start and the credit for the jobs or the financing for the jobs 
has fallen out. To the point, Madam Chairman, where we had 
moved equipment to the job site and were informed that it 
wasn't going to start.
    Chairwoman Velazquez. Would any of the other witnesses like 
to comment on the question about obtaining credit in your 
industry?
    Mr. Robson. I would be happy to. It is virtually 
nonexistent as far as construction loans are concerned. The 
reality is in what, late 2007, coming into this downturn, the 
regulators implemented the commercial real estate concentration 
guidelines. That has exacerbated the ability to borrow money at 
this point where we are trying to recover.
    We have builders that are ready to build and they can't get 
financing. They have development loans. They have sold all of 
their inventory but they can't replace their inventory because 
they can't get a construction loan to replace the inventory 
that have already sold.
    Chairwoman Velazquez. What strategies have you employed to 
cope with this crisis?
    Mr. Robson. We have gone and begged to the regulators and 
we are pleading with Congress maybe to help us out, because we 
are not going to see a recovery, especially from small 
business, because they rely on credit, especially from the 
banks around the country.
    Chairwoman Velazquez. Thank you. Mr. Graves?
    Mr. Graves. Thank you, Madam Chair. I have got--there are a 
lot of questions back up on this side. If it is all right, I 
will reserve my time and pass to Mr. Thompson.
    Chairwoman Velazquez. Mr. Thompson.
    Mr. Thompson. Thank you, Madam Chairwoman, Ranking Member.
    Mr. Jacob, could you please--you talked about the impact of 
the stimulus. Could you elaborate further on what could have 
been done to make the stimulus more effective for smaller 
firms?
    Mr. Jacob. Yes, I can give you an example. We are going 
after a stimulus project right now, a GSA project in 
Gainesville, Georgia, a small courthouse renovation project. 
One of the problems is that the money that has been set aside 
they have not been able to figure out the exact amount yet or 
how to budget it with what they want to do with the project. So 
we were technically awarded this project 3 months ago, but we 
were told it is probably going to be 6 or 7 months before they 
finally get it under way.
    So the issue is not so much as the money coming down; it is 
how quickly we can get it acting the way it should be into the 
marketplace. And that is an example of what we are personally 
experiencing. If we had that project right now, it would 
certainly give some relief to us financially and we could have 
kept a few people working. It was a nice project for a firm our 
size.
    Mr. Jacob. But that is a good example of what we need. What 
I would like to see done is just how can we get that money 
quicker into the marketplace? And it has been coming.
    Mr. Thompson. Kind of following up with that personal 
experience you just had, or maybe others, what type of 
paperwork, what kind of reporting requirements has that been, 
and has that been easy to comply with? Is it a fairly easy 
process to cut through?
    Mr. Jacob. It is not a hard process, it is an arduous 
process. I mean, it takes time to do it. So you have to look at 
that, at what it does to your profitability on a project as you 
are doing time management on a project. It is more paperwork, 
but it is not hard paperwork, it is just more. And you have to 
make sure that you have all your numbers correct, from our 
side, of what we are doing with the contract portion of the 
stimulus money. But it is a time issue.
    Mr. Thompson. Okay. Thank you.
    Mr. Robson, in your testimony you stated that the sale of 
an additional 200,000 homes is attributed to first-time 
homebuyers' credit. Is it possible to estimate how many of 
these buyers accelerated their purchase to receive their credit 
or would not have purchased at all without it?
    Mr. Robson. I think those estimates are additional that 
would not have. I think those are the additional sales that 
would have happened without the tax credit
    Mr. Thompson. Okay, very good.
    Now, you expressed support for monetizing the credit. Would 
you explain why this, and why you feel it is important?
    Mr. Robson. I think any time you can help, especially with 
the mortgage criteria the way it is now, obviously for first-
time homebuyers, the down payment is the most difficult, you 
know. But monetization allows them to do it. There have been 
several States that have done it, and they have actually seenan 
increase in sales because of it. I think it is proven. FHA has 
certainly come out and helped create that. But it is a proven 
stimulus to help people come up with the down payment in order 
to buy a home.
    Mr. Thompson. Okay, thank you.
    Mr. Pryor, how would the borrower right of inspection, that 
you made reference to, protect consumers and provide better 
consumer awareness? And how does this help the housing sector?
    Mr. Pryor. The transparency of it is enormous. A family 
coming to a closing table that has not had advance notice of 
what their closing costs are going to be, or even how much 
money they are going to have to bring to the table, because of 
some delay in receiving closing instructions and the last-
minute preparation of the settlement statement, it creates 
confusion in the marketplace and dissatisfaction as people 
leave. So the confidence factor is impaired in an enormous way. 
That is an outstanding and very important way for consumers to 
regain confidence in the process, and once they do that, 
stability will ensue.
    Mr. Thompson. Thank you.
    Mr. Canfora, what is the average amount of time a closing 
is delayed since the inception of the Home Valuation Code of 
Conduct?
    Mr. Canfora. Well, it can be delayed--to canceled 
completely. We are having appraisals come in inaccurate. We 
have to then go out and question them. So the question is just 
absorbed. I would say anywhere from the transaction falling 
apart to at least 4, 4 weeks, you know, as far as delay is 
concerned.
    But remember, when somebody gets an appraisal that is not 
correct, it is a negative feeling on the house that they are 
buying. So with that, they are tarnished. And that is what we 
are seeing; we are seeing transactions falling apart.
    Mr. Thompson. Thank you. I yield back, Madam Chairwoman.
    Chairwoman Velazquez. Ms. Clark.
    Ms. Clarke. Thank you, Madam Chairwoman, Ranking Member 
Graves, and thank you to our panelists for coming to discuss 
this very important issue with us. I am pleased that we are 
discussing expanding this important first-time homebuyers' tax 
credit.
    It is no secret that the housing sector's continued 
weakness is causing a great deal of pain out there. With 9.8 
percent unemployment and rising, we need to explore all options 
available that will stimulate economic activity to put our 
people back to work.
    I believe it is important to be supportive of small 
businesses that benefit from the resurgent housing sector. The 
increased demand that will result from an extension of this 
credit will have positive effects on economic activity across 
many sectors. There are a slew of options on the table to 
strengthen this credit, and we will be studying all of them 
very closely.
    At a minimum, I think we should give deep consideration to 
extending the credit for at least another full year, and also 
to increasing the credit's value. Those that would criticize 
increasing the credit's value because of the revenue cost to 
Treasury would do well to remember that increased activity in 
the housing market will result in increased activities 
elsewhere, increasing government revenues ultimately.
    Perhaps we might explore a credit to incentivize purchases 
in areas most affected by high foreclosure levels and take a 
look at adjusting the income eligibility for the credit.
    As I said, there are a number of options available to us. 
Let me be clear; whatever we choose, we should study these 
options and make our decisions in an expedited fashion. People 
are hurting out there, and the extension of this credit would 
really be helpful.
    I look forward to working with my colleagues to act on this 
extension so that we can provide a shot in the arm to our 
economy. I want to thank you, Madam Chair.
    I have a question for you, Mr. Jacob. In your statement you 
say that the crisis is deeper and more profound than either you 
or your peers can remember, and it will take more than just a 
stimulus to help bring small businesses like yours back from 
this challenging place.
    I personally think we need to wait for the rest of the 60 
percent of the stimulus dollars to come down the pipeline. But 
generally, do you feel that the Federal Government needs to be 
more active in helping small businesses? And do you think more 
Federal Government resources can be devoted directly to 
supporting small businesses?
    Mr. Jacob. Yes, I do. I think there are a couple of things. 
One, as I discussed earlier about trying to get the stimulus 
money faster into the marketplace so it will affect more 
people. Secondly, I would like to look at how the Small 
Business Administration can provide short-term bridge loans at 
very low interest rates that can be paid back at a later date, 
a pushback date, so that businesses like mine can have enough 
money to make our expenses and get through this. And thirdly, 
it is getting the lending industry, the people who receive 
stimulus dollars, to lend that money back into the private 
sector so we can stimulate projects going on.
    Chairwoman Velazquez. Will the gentlelady yield?
    Ms. Clarke. Yes, Madam Chair.
    Chairwoman Velazquez. Mr. Jacob, when you mention the Small 
Business Administration providing bridge loans, do you have an 
average number of the size of the loan that will be helpful?
    Mr. Jacob. I could probably tell you that--I can tell you 
what my firm would need. My firm probably needs between $25- 
and $35,000 a month right now in a bridge loan for expenses, 
based on the revenues we have, to keep paying our people. I 
want to keep salaries as high as you possibly can without 
having to cut more people. But that would be an example of what 
you would have. And as we see movement in the economy, I am 
hopeful that there is going to be more revenue coming into our 
firm. But at this point, that would be the number.
    Chairwoman Velazquez. Would the gentlelady continue to 
yield?
    Ms. Clarke. Yes.
    Chairwoman Velazquez. So the Small Business Administration 
has a loan program that will provide a $35,000 interest-free 
loan, and the person will have up to 5 years to start paying 
it. Did you hear about that program?
    Mr. Jacob. I think one of the things that we haven't done a 
good job on is getting that information into the marketplace 
for those of us who don't utilize those resources as small 
business. And how do we get that information out would be my 
question; better communication in that regard.
    Chairwoman Velazquez. Thank you.
    Ms. Clarke. Just very quickly, my question is to Ms. Volm. 
I believe that the construction sector is one of the most 
dynamic and effective for small business and job creation. Do 
you think that the Federal Government can do more to be 
supportive of firms in the construction sector? And what are 
your observations in that regard?
    Ms. Volm. I think that the government has done a lot to 
support us. In Maryland, we have some programs that are 
available for women-owned businesses like mine, or minority-
owned businesses, that have helped in the construction 
industry.
    I am not quite sure what else they could do. We are seeing 
so many of my friends, so many companies that have folded and 
gone out of business and have lost employees. When you look at 
this tax credit, this $8,000 tax credit, and you realize the 
value of the housing industry, you know, it is such a mover of 
this economy. The people that it affects, from architects, 
designers, carpenter contractors, HVAC, plumbing, all the 
manufacturing, it is such a mover of our economy. What would 
help is let's extend this tax credit. Let's get people out here 
buying houses. Let's get people moving in this market. This is 
something that makes a huge difference to all of us.
    Trucking. We have to get these things to the houses, to the 
developments. We need that.
    Chairwoman Velazquez. Time has expired.
    Ms. Clarke. Thank you, Madam Chairman.
    Chairwoman Velazquez. Mr. Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    Mr. Robson, during your testimony you talked about the 
number of homes that are in inventory out there, that you have 
been able to bring them down as a result of the tax credit. Can 
you give me an idea of how many excess homes we have in America 
right now that we need to get rid of?
    Mr. Robson. Specifically, I have heard anywhere 2- to 3 
million. The problem is the pipeline kind of keeps filling.
    Mr. Luetkemeyer. What is the normal amount of inventory, 
let's say, over the last 10 years? What was the average 
inventory on something like that?
    Mr. Robson. The average inventory is around 6 months; so 
probably around 1 million.
    Mr. Luetkemeyer. So we are two to three times what we 
normally have; is that correct?
    Mr. Robson. Right.
    Mr. Luetkemeyer. If we don't extend the tax credit, how 
long will it take to get rid of that excess?
    Mr. Robson. I don't know. It is going to be a very, very 
slow recovery.
    Mr. Luetkemeyer. If we implement the tax credit, how long 
will it take to get rid of the inventory?
    Mr. Robson. It will certainly speed it up by 2 to 3 years; 
a couple of years, I would think. And it depends on whether you 
are just extending it or expanding it. If you expand it, it is 
going to shorten the time frame.
    Mr. Luetkemeyer. That was my next question. I was also 
getting to it looks to me like we don't need to go out and 
build any more. We have this excess. And because of this 
excess, we are holding prices down; is that a fair statement?
    Mr. Robson. Well, it is kind of hard to--it is a very broad 
brush. Certainly in specific markets and in specific segments 
of markets, we probably don't need to build any more. In 
Oklahoma, we need houses. So it depends on the market.
    I mean, real estate is very, very local in nature. And 
frankly, we are looking at low starts not seen since 1940. So 
essentially we are building no houses. And if you look at the 
new home inventory, it is down substantially. It is the 
foreclosures of existing inventory that is really swamping the 
market. It is not because of new construction, though new 
construction is where the jobs are.
    Mr. Luetkemeyer. Okay. Thank you.
    Mr. Robson. One other thing on the expansion, what we are 
seeing--and I think some of the other panelists have said--you 
are seeing the most activity in the entry-level market. We are 
not seeing the ripple effect up that we normally see. I think 
probably the reason for that is people are underwater on their 
home. They are going to sell their house, they have no money 
left.
    Mr. Luetkemeyer. Let me have a follow-up question on that. 
One of the suggestions was made here that we need to raise the 
Fannie and Freddie loan limits from 417 to 625. At what point 
do you no longer have an incentive to purchase a home? If 
somebody is going to buy a $1 million house, $8,000 is not 
going to be an incentive to buy that house. At what point is 
enough? Is the value of the home more than--and people that buy 
that level of house, is it no longer attractive? Is this 417 to 
465, is that where we need to be?
    Mr. Robson. I don't know where it needs to be. Certainly, I 
would be supportive of that. The problem is when you get past 
the conforming loan limits and into the jumbo market, there is 
no money. If you look at where the market is right now, FHA has 
33 percent of the market, and Fannie and Freddie have the rest. 
There is no other private mortgage money which normally would 
fund those mortgages on the higher end.
    Mr. Luetkemeyer. Okay. My time is about out here, but I 
have one other question.
    Mr. Pryor, you mentioned something about title folks are 
regulated. Can you tell us how you are regulated?
    Mr. Robson. Yes, sir. Most States regulate their title 
industry because of the locality of the State loss with regard 
to property rights; you have to know how property is 
transferred in a particular State, and you have State insurance 
departments that regulate those. In addition, at the Federal 
level, we have HUD under the Real Estate Settlement Procedures 
Act, that regulates the closing process.
    Mr. Luetkemeyer. Are there still discounted premiums going 
on?
    Mr. Robson. Premiums are not regulated in every State in 
the same manner. Some States do allow some discounting of 
premiums, other States require the premium to be at the 
published rate that the Department sets.
    Mr. Luetkemeyer. Because I know in the past, that is where 
some of the problems have been with title insurance folks is 
the fact that there is discounting going on; they are trying to 
go out and buy the business; as a result, that entity goes 
under because it prices itself right out of the marketplace.
    Mr. Pryor. That clearly is an issue that is and has been 
addressed. And it is localized in certain marketplaces where 
the State regulation is not as encompassing, shall we say, as 
it is perhaps in some other States.
    Mr. Luetkemeyer. What is the enforcement on something like 
that?
    Mr. Pryor. Well, it depends from State to State in that 
particular environment. Now, the Real Estate Settlement 
Procedures Act does take a look at the purpose behind the 
discounting, if there were a thing of value being given as an 
inducement--as you were calling--for the referral of business. 
So that is a Federal enforcement action.
    Mr. Luetkemeyer. Thank you, Madam Chair, appreciate your 
indulgence.
    Chairwoman Velazquez. Mrs. Dahlkemper.
    Mrs. Dahlkemper. My husband and I own a landscape, design, 
build business, so obviously selling of houses and building of 
homes is something that we are very connected with. We work a 
lot with architects, we work a lot with home builders and we 
work a lot with realtors.
    I have a couple of questions. And I guess I want to go back 
a little bit to the supply and demand thing, but I want to talk 
about something that is a little bit off the subject. I am from 
western Pennsylvania, and we have a lot of older communities. 
And what I see as I drive around through a lot of these older 
communities is there are a lot of empty homes and empty lots 
within these smaller communities that really are great 
communities, but people have kind of moved out.
    And as I said, this question is quite a bit off from what 
we are talking about, but if we are looking at somehow 
incentivizing people to buy new homes or build new homes, is 
there anything that we can do to actually try to infill rather 
than going further and further and further out, but trying to 
actually rebuild our cities while we are doing this, or rebuild 
our small communities? So take a crack at that.
    Mr. Canfora. You know, we talk about incentives. There are 
no two ways about it, the tax credit was an incentive and it 
worked and it is working very well. But it just stops it here. 
If we continue the incentive maybe to allow people who are 
purchasing homes for $600,000, or whatever the case may be, 
that will bring more people in the market.
    It has been very slow in the higher-priced as well. I know 
there was a question that somebody said concerning that. We 
have to take a look at incentives to help all people in all 
price ranges.
    Ms. Dahlkemper. Anybody else have an opinion on that?
    Mr. Robson. Yes. I think it is a wonderful idea. There are 
programs out there on a local level. I think Bowling Green, 
Kentucky has a great program.
    Ms. Dahlkemper. What is their program?
    Mr. Robson. It is community-based. But they have been able, 
where there are blighted homes or empty lots, the city has gone 
in and bought them, turned them over, maybe to Habitat for 
Humanity or some other thing, or for market houses. So infill 
is certainly important, and I think we ought to look at that.
    Ms. Dahlkemper. I have seen some of that on the local level 
in my area, too. But I am just wondering if there is anything 
that you think we can do here on the Federal level as we are 
doing these incentives and trying to get more people to look at 
purchasing their first home. A lot of those homes might be 
those infill homes in those older neighborhoods or in those 
communities.
    Mr. Pryor. Congresswoman, this is still a credit 
availability issue, fundamentally, because if you are going to 
infill and remodel, there has to be credit availability in 
order to carry forward that purpose. And that, again, is where 
we come back to the expansion of the homebuyer credit and the 
raising of the credit limits to allow for those things to 
happen on a conventional basis.
    Ms. Dahlkemper. Mr. Jacob, did you want to say something 
about this?
    Mr. Jacob. Yes. We are big believers in that you have got 
to reinvest in the infrastructure of what you have, whether it 
is transportation infrastructure or your building 
infrastructure. And that is a perfect example of how to do it.
    We have proposed in the past looking at how do you give 
incentives through tax credits to people that would take an 
infill project like that on a transportation system, and if 
they give up traveling by an automobile, how can we incentivize 
them for using public transportation and invest in that public 
transportation so we can more effectively move people around 
the country and into communities like yours and not have to 
rely on the automobile. That, I think, is the key to the 
success of getting greater density and a better urban 
population, and those projects will happen because of that.
    Ms. Dahlkemper. I have just one other question.
    Mr. Jacob, I know that some small businesses have expressed 
concern about the paperwork and reporting requirements 
associated with the Recovery Act contracts. And I apologize I 
was not here for all your testimony, I have another markup 
hearing that I am kind of running in between, but what has been 
your experience in dealing with the administrative burdens 
associated with those contracts?
    Mr. Jacob. We spoke about that earlier; but very quickly, 
it is more. It is not so much it is a difficult process, it is 
just that there is a lot more paperwork that we have to do in 
the accounting.
    Ms. Dahlkemper. Is there a way to reduce those burdens?
    Mr. Jacob. Go back to the way we normally did projects 
previously. The accounting of a project from my end on a 
contract, our normal process is sufficient and has been in the 
past with Federal projects that we have done several years ago. 
To put this on now just increases time, it increases our 
profitability.
    Ms. Dahlkemper. How much time would you say?
    Mr. Jacob. I would say it is probably 10 to 15 percent more 
time with my project manager on the project; not my production 
people, but my project manager.
    Ms. Dahlkemper. Thank you very much, I yield back.
    Chairwoman Velazquez. Mr. Westmoreland.
    Mr. Westmoreland. Thank you, Madam Chair. I want to thank 
you for having this hearing.
    I am a builder by trade, so I appreciate--I feel your pain, 
all of you. I have been in the framing business also.
    Let me say this. And, Madam Chair, you asked a question. 
There are builders out there right now that have qualified 
buyers, presale contracts that cannot get any loans to build a 
house. And so Ms. Volm was talking about going out on a job. 
Her builder may have told her that he had a presale, they are 
expecting to frame it, and then he can't get the construction 
loan. And this is a qualified buyer.
    And, Mr. Canfora, I know from a real estate standpoint, 
when you sell a house and are expecting to get a commission and 
the builder can't even get a loan to build it, it is quite bad.
    Let me say this. I hope that we will continue the tax 
credit of $8,000, but I hope we will expand it to an anytime 
buyer. When we did Cash for Clunkers, it was $4,500, and I 
think the maximum a car could cost was $45,000, which was a 10 
percent tax credit or really go toward a purchase. An $8,000 
tax credit on an $80,000 house--and there are just not that 
many $80,000 houses out there--I don't know what the average 
sales price is for a house, but if it is $160,000, let's say, 
which is probably low, you can see that there is just not the 
same percentage there that there is for somebody in the Cash 
for Clunkers. So I think it needs to be to an anytime 
homebuyer. But that is only a small part to me that needs to be 
helped.
    It is a credit issue that we have right now. Even if the 
tax credit was $20,000 to anybody, we are not sure what it 
would do to help, because the builder might not be able to get 
the money to do it.
    So while I appreciate what Mr. Robson said about the 
inventory--and that sounds about the numbers that I have heard 
too--even if we got all those houses off the market with some 
type of tax credit, we are not sure that the real estate 
business or the construction business would still be cranked 
up, because if credit is still frozen, it is not going to start 
back.
    I would like to ask Mr. Canfora another statement about the 
RESPA and the HVCC and the TILA. These are more regulations 
that are going into effect that are possibly going to slow down 
the home building business in itself. And these are just 
government regulations that are going into effect. Could you 
comment on those?
    Mr. Canfora. Yes. And again, I see the need for that, and 
the discussion to revise RESPA has been going on for how many 
years? Forever. But I don't think that this is the right time; 
all it can do is just slow down things. It certainly can't 
expedite the selling process.
    Mr. Westmoreland. Well, I believe that we need to have 
consumer protection. But I have been to many real estate 
closings where the attorney hands the purchaser a piece of 
paper and says, here is the security deed. I have yet to have 
anybody read all the paperwork. So having additional paperwork 
there for somebody to sign, to me is not real consumer 
protection. Some of the programs HUD and others offer where 
they can go to a pre-buying session is much better than some of 
the additional paperwork that they are adding.
    And one other quick comment. On the HVCC, I notice you 
mention a part of that that concerned me--I think you or Mr. 
Robson, one did--the fact that the lender had an ownership 
position in that appraisal business.That is definitely not the 
way to go.
    Mr. Canfora. Yes. And that is exactly how we see it. There 
should not be a lender having any process in the AMC at all. 
And we also feel that there should be a State regulation as we 
move forward. States should start regulating the AMCs of their 
State because there is a big difference between each State. It 
is not the same, and it does need State supervision. So we 
certainly would like to see that moved in that direction.
    Mr. Westmoreland. Well, I am trying to put together a piece 
of legislation now that will address some of the lending as it 
comes to the acquisition, development and construction of some 
of the community banks where we are having the most problem. 
And so I would welcome the input of any of your organizations 
into what we are trying to do. And any member, Madam Chairman, 
that is on this committee that would be interested in doing 
that--because I honestly believe until we get that addressed, 
this first-time homebuyer credit will be good, but it will be a 
very, very small part.
    With that, Madam Chair, I yield back.
    Chairwoman Velazquez. Ms. Fallin.
    Ms. Fallin. Thank you, Madam Chair. I would like to welcome 
our Oklahoma gentleman, Mr. Robson, for his testimony today. 
And all of you, thank you for attending this important hearing. 
It is very enlightening to hear your testimony from the 
industries that you represent.
    I have a question. We have been talking a lot about freeing 
up credit and how to get the home building business and all the 
different industries associated with that jump-started and back 
on its feet. And we can extend the tax credit and do some 
things that would encourage the continuation of purchase of 
homes, yet we talked about credit not being available.
    So a lot of you have mentioned about how the Feds have tied 
up the credit, and some of the standards and regulations and 
threshold levels that they put in place are hurting the credit 
market. So what would you recommend that the Feds do? What are 
they doing right? What are they doing wrong that is hurting the 
availability of credit? What would you like to see them do?
    Mr. Robson. Well, I think there are a couple of things. 
One, with the existing credit, they have got to help work out a 
loan; right now they are not. They are making reappraisals 
every 6 months, if not sooner, on loans.
    I will give you an example, a development loan in Tulsa, 
Oklahoma. Prices have not decreased in Tulsa, Oklahoma; we have 
actually had appreciation through this whole downturn--not 
much, but appreciation. Because of the slowing of the economy, 
the loan was revalued, and with the net present value, they 
went to the developers to say we want more money. Even though 
they are selling lots and the price per lot has never 
diminished, they are calling it a nonperforming loan. But you 
go through the whole country, and if you have problems in 
places that maybe aren't as good as, say, in Oklahoma, it is 
even worse; homes that are ready to be built that you can't 
build them.
    So there has got to be an easing of some credit somewhere. 
You have got to be able to look at the value of something and 
not look at other income. I mean, that is basically what a 
small business and home builder does, is they borrow the money. 
It is not that they have a CD that is going to go towards a 
construction loan. They just don't have it, and that is what 
you need in order to do it. So there has got to be a loosening 
of the credit in order to move things along, and they have got 
to work out some sort of system in order to work out existing 
construction loans.
    Ms. Fallin. Okay, Mr. Canfora.
    Mr. Canfora. As far as commercial is concerned, it is an 
issue. Commercial properties, commercial homeowners, commercial 
people who own properties, a lot of their tenants are 
disappearing due to the recession. Their rent roll is not what 
it used to be.
    Traditionally, a commercial loan would be a loan that every 
5 years is called in, and it wouldn't be a fixed-rate loan like 
residential loans are. And these commercial loans now are going 
to start hitting the market, and we are very fearful that you 
are going to see a lot of people go into foreclosure, a lot of 
buildings, a lot of property owners not being able to afford 
the properties anymore. And we have to address this, we have to 
do something.
    As far as the residential side, FHA has been wonderful--and 
it really has been wonderful, and we would like to see it 
increased. Fannie and Freddie products, we have to start 
bringing some of those Fannie and Freddie products back, 
because sometimes FHA doesn't handle for everybody. And unless 
the financing is in place, there is no home sale, there won't 
be a home sale. And we are kind of pushing people away that 
would want to enter the market, that would want to buy, but 
because the financing isn't there, they are not.
    Ms. Fallin. Mr. Pryor.
    Mr. Pryor. Congresswoman, I think everyone here that 
operates a business would tell you that they can design models 
based upon interest rates. Tell us what the interest rate is 
going to be for home credit and we can tell you approximately 
how our businesses will correspond to that.
    Without the government being involved in those expanded 
levels of conventional loans, the market right now is not 
supporting rates in a way that planning can be done. And that 
means that experienced framers or experienced title people or 
people that have experience, I can't keep those people. They 
can't keep their jobs because I can't plan long enough ahead. 
Credit rates and availability.
    Ms. Fallin. Thank you, Madam Chairman. I think my time is 
expired.
    Chairwoman Velazquez. Any other member who wishes to ask 
questions from this side?
    Well, let me take this opportunity. I think that the time 
couldn't be better. Since there are discussions regarding 
extenders that will expire now on December 31, we will have an 
opportunity to share with the Democratic leadership, at least 
from my side, as to those extenders that should be extended or 
expanded in a way that could continue to help small businesses, 
especially in the housing industry.
    I want to take this opportunity to thank all of you for 
being here. You shed some light into the challenges and 
obstacles that are still there.
    So with that, I ask unanimous consent that members will 
have 5 days to submit a statement and supportive materials for 
the record. Without objection, so ordered.
    Chairwoman Velazquez. This hearing is now adjourned.
    [Whereupon, at 3:30 p.m., the committee was adjourned.]

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