North Carolina Representative Brad Miller (D-NC) who was the House Member that introduced the pending legislation is most concerned about the building industry’s job drain through out the United States.
As our contractors and builders through out the country struggle to get banks and other lenders to loan money for land development and construction, a North Carolina House of Representative Member has asked the U.S. Government to step up to the plate and start guaranteeing loans for viable construction and building projects.
"We’ve gone from indiscriminate lending to indiscriminate refusal to lend, and it’s killing jobs," says Brad Miller.
Congressman Miller in concert with Congressmen Joe Baca (D-CA) and Steny Hoyer (D-MD) introduced the House of Representatives Bill 5409 (H.R. 5409), officially known as the Residential Construction Loan Guarantee Program.
"We can’t tell 16% of the [Gross Domestic Product] to just hang around and wait for a while," says Miller, referring to the housing industry and its economic output.
H.R. Bill 5409 would require that the U.S. Government set aside $15 billion over a three (3) year period to be used for loan guarantees for land and building projects. H.R. Bill 5409 is an amendment or tack on to another House of Representatives Bill that is currently moving through the House that, if passed, would extend $30 billion to small commercial banks for small business loans (SBA Loans).
The House Bill aims to reduce commercial bankers' or other lenders' risks by providing them with U.S. Government loan guarantees for eligible projects deemed to be "viable" by commercial banks and other lenders and the U.S. Department of the Treasury. The builder or developer (borrower) must have a minimum financial net worth equal or greater than the guaranteed loan amount, and the loan itself can be used only for the acquisition, development, and construction of approved residential real estate projects.
The current House Bill provides the following:
- Loan to value ratio cannot exceed 75%
- Actual loan amount can not exceed the total building and development costs or 80% of the FMV of the real estate project
- 80% of the loan amount would be covered by the Federal loan guarantee
One-third of the guarantees would be made in areas where the lack of financing is most pronounced, as determined by the Department of the Treasury Secretary. The loan guarantee program would expire three years after it is enacted.
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