July 2014

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Sector Point of View 26 | www.cedmag.com | Construction Equipment Distribution | July 2014 homebuilders now? Kelly: We survey our members regularly and they say it is improving, but it is improving slowly and pain- fully. The improvement varies from region to region in the country. There needs to be a lot more loans being made. That remains a challenge. CED: The struggles for the industry began with the housing bubble and collapse. Is there a definitive explanation for who was to blame – Congress, banks, regulators? Kelly: Rather than point a finger at any one group, I would say there are a lot of people who can share responsibility for it. Underwriting standards went right out the window. When that happened we had to live with the consequences for it. CED: Weren't those lax standards encouraged by Congress? Kelly: Some mortgage products were concocted by lenders them- selves. Frankly, there was too much latitude in designing mortgages before. Now there is not enough latitude. We are looking for the pendulum to be right in the middle, right in the sweet spot. We need prudent underwriting standards that will protect the system. CED: Yet the NAHB is against a mandated minimum down payment. Isn't that more of the "lax standards" problem? Kelly: To isolate a minimum down payment as an end all and be all is not a solution. Some state housing finance agencies have a very, very low downpayment point, sometimes zero. What they do have is very tight underwriting standards and a housing counseling component to educate buyers. A prudent underwrit- ing standard is the prime determinant of the soundness of a mortgage. CED: You are a developer and advocate of affordable housing. Are there still barriers to construction of such housing? Kelly: The fact of the matter is, excessively burdensome land use approval processes and regulations negatively impact all housing, from most affluent to less affluent. I do both rental and affordable for-sale. That for-sale market typically makes up 28 percent of all new home purchases. That's down to 15 percent today. It is a very significant compo- nent of the traditional market that currently can't access credit because of too-rigid standards. We need to see some loosening of them. I am not suggesting we ever go back to the insanity that occurred in the mid- 2000s. My buyers didn't get interest- only loans, or no-document loans. They all got fixed-rate mortgages and have done well. The fundamental thing is a sound, prudent under- writing standard that ensures that someone is qualified to buy a home. CED: In the recently passed farm bill, NAHB argued that 900 communities should continue to be considered "rural" even though their populations grew. If the communi- ties no longer are rural, why should they continue to qualify for rural housing programs? Kelly: The greatest challenge for people in rural America is to secure loans to buy homes. Changing the definition of what was a rural community would have eliminated availability of certain loan programs for the 900 communities. We argued for retention of the defini- tion to keep those communities under the program until after the 2020 census. That will mean hundreds of thousands of mortgage loans that wouldn't otherwise have been available. CED: But isn't that part of the federal government's budgetary problem – not allowing programs to change in the face of subsequent realities? ('As Housing Goes, So Goes the Nation' continued from page 25) (800) 875-0326 www.directcapital.com WITH OUR TEAM SELLING APPROACH, YOU SELL THE EQUIPMENT AND WE STRUCTURE THE DEAL. (800) 875 0326 Close Sales Faster With Financing Programs for new & used heavy construction equipment t$Pmpetitive rates t8JEF$SFEJU8JOEPX t'MFYJCMF5FSNT t'BTU3FTQPOTF t'JSTU$MBTT4FSWJDF

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