HOUSE BILL ADOPTS MEASURE TO PROMOTE REAL ESTATE LENDING THAT WOULD SPUR HOME SALES
HOUSE BILL ADOPTS MEASURE TO PROMOTE REAL ESTATE
LENDING THAT WOULD SPUR HOME SALES
Expert Predicts Boost in Economic Recovery
WASHINGTON, Nov. 22 /PRNewswire/ -- Pending legislation to reduce the amount of capital that savings and loans must reserve for residential construction loans would spur home sales and begin to restore the consumer confidence needed to foster economic recovery, a leading finance expert told a gathering of the country's top developers today.
"Washington is finally responding to the concerns of the real estate and lending communities," said Stan Ross at the annual convention of the Urban Land Institute (ULI) in the nation's capital. Ross, a ULI trustee and managing partner of the real estate accounting firm Kenneth Leventhal & Company, told the group that an amendment recently tacked onto an RTC funding bill would repeal lending restrictions imposed by the August 1989 thrift recovery act.
"The House Banking Committee has approved legislation that would ease capital reserve rules for residential construction financing on projects with significant presales. The bill that will go to the House floor also would extend the transition period requiring S&L's to dispose of development subsidiaries from the current deadline of 1994 to the year 2000," he added.
Ross said the proposed legislation, backed by the Office of Thrift Supervision, will restore some S&L funds for real estate lending that had virtually dried up in response to the Financial Institutions Reform Recovery and Enforcement Act of 1989.
"New building will increase affordable housing inventory and stabilize existing home prices as more buyers enter the market," Ross predicted. "Halting the slide in home sales and values is key to bolstering consumer confidence and strengthening our economy."
Ross added that extending the time S&Ls have to divest themselves of investments in real estate development subsidiaries could avoid further disruption in the real estate industry caused by dispositions at depressed prices. It also would make available more capital for affordable housing.
Ross applauded the major regulating agencies for a recent policy statement which he called a "superb step in the right direction." The statement tells the nation's bankers to evaluate real estate loans based on the ability of a project to generate income over time not solely on its current performance in a depressed market. "Washington has put out the word that regulators reviewing bank loan portfolios should take into account the income that can be expected over a reasonable period of time as the market returns to stable conditions.
"Regulators are being urged to consider historical returns on properties in markets with no current transactions that are characterized by highly speculative or pessimistic attitudes. This action will help all of us to move forward," he predicted.
Ross warned, however, that unless these policies are fully implemented, a major portion of the capital of financial institutions in this country will be wiped out.
Kenneth Leventhal & Company is the nation's 10th largest certified public accounting firm and is known for its expertise in real estate and financial services.
/CONTACT: Stan Ross of Kenneth Leventhal & Co., 310-277-0880; or Francie Murphy of Casey & Sayre, 310-457-3676, for Kenneth Leventhal/ CO: Kenneth Leventhal & Company ST: District of Columbia IN: FIN SU: SE-EH -- LA008 -- 6248 11/22/91 09:02 EST