New Report Exposes Multi-Billion Dollar Handout for Corporate Homebuilders Who Helped...

Mon Mar 31, 2008 3:48pm EDT

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New Report Exposes Multi-Billion Dollar Handout for Corporate Homebuilders Who Helped Cause the Housing Crash and Mortgage Crisis

   Under the Foreclosure Prevention Act, Taxpayers Will Pay as Much
                as $33 Billion to Reward Those at Fault
WASHINGTON--(Business Wire)--
Corporate homebuilders - including those responsible for the
mortgage and housing crisis - would receive billions of dollars in tax
breaks under a provision of the Foreclosure Prevention Act currently
pending in Congress, according to a report released today.

   The report, A Multi-Billion Dollar Bailout for Those at Fault:
Corporate Homebuilders, the Housing Crash and the Mortgage Crisis, was
released by LIUNA - the Laborers' International Union of North America
- which represents workers in the construction industry. Hundreds of
thousands of construction workers have lost their jobs due to the
housing and mortgage crisis, including 232,000 jobs lost in 2007
alone.

   The Foreclosure Prevention Act is being held up as a way to help
struggling homeowners, and LIUNA supports many provisions of the bill.
But under the bill's little publicized "carry-back" provision builders
would get billions in tax breaks. The carry-back provision would allow
homebuilders to apply losses from 2006 and 2007 as far back as five
years against taxes paid on profits - a three-year extension of the
current carry-back allowance - even though much of the builders'
profit came from their own subprime lending and speculative
over-heating of the market.

   According to the report, the 15 largest corporate homebuilders
would receive a third of the benefit of the carry-back provision. The
report notes that the largest homebuilders made $16 billion in profits
on $100 billion in revenues in 2006, much of it from a dramatic
increase in subprime and high-risk lending, and from feeding
speculators.

   The report also shows that the carry-back provision could further
decimate the housing market by providing an incentive for builders to
dump existing inventory at any price, knowing they could carry back
the loss.

   "This bill will force American taxpayers who are already
struggling with foreclosure, job loss and shrinking retirement savings
to pay again for homebuilders' reckless and unethical behavior," LIUNA
General President Terence M. O'Sullivan said. "Corporate homebuilders
are tone deaf to even ask for it and Congress should not acquiesce to
it. This bill needs to be fixed so it does not cause further damage by
rewarding those who helped cause the crisis and who can well fend for
themselves."

   The report outlines how corporate homebuilders steered more and
more of their customers to subprime and high-cost mortgages through
their own mortgage subsidiaries as the housing bubble grew.

   For example, subprime loans through the nation's fifth-largest
builder, Los Angeles-based KB Home, increased 405 percent from 2005 to
2006. At the nation's second-largest builder, Miami-based Lennar,
subprime loans increased 158 percent during the same time period.

   As the builders pushed more risky mortgages, they also fed the
housing bubble with record housing starts absorbed by speculators. In
major markets such as Phoenix, Las Vegas and Fort Lauderdale, one in
six new homes was sold to investors, artificially inflating housing
costs.

   "Corporate homebuilders profited from the creation of this
crisis," O'Sullivan said. "They should not be further rewarded with a
multi-billion dollar bailout."

   The half-million members of LIUNA - the Laborers' International
Union of North America - are on the forefront of the construction
industry, a powerhouse of 10 million workers who produce 5 percent of
the U.S. economic output.

   For copies of A Multi-Billion Bailout for Those at Fault:
Corporate Homebuilders, the Housing Crash and the Mortgage Crisis, and
a state-by-state look at the mortgage and housing crisis impact on
jobs and foreclosures, email jhay@liuna.org or call 202-942-2285.

Laborers' International Union of North America (LIUNA)
Jacob Hay, 202-942-2285
jhay@liuna.org

Copyright Business Wire 2008
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