BLOG VIEW: Imagine receiving a frantic telephone call from a borrower whose home was seized by federal law enforcement agents. The reason for the seizure: The borrower's home builder constructed the residence with wood that was harvested and/or exported in violation of the laws of the nation where the lumber originated. And forget about trying to fight the matter in court: The law prevents the homeowner from using the courts to regain the seized property.
The law in question is the Lacey Act of 1900, which was designed to prohibit commerce in fish, wildlife and plants that were illegally taken, transported or sold. The Lacey Act was amended in 2008 to prevent the importing of wood that was illegally exported under another country's laws.
Last year, the Lacey Act was in the news when federal agents raided the facilities of Nashville-based Gibson Guitar to determine if they were using illegally imported wood. The raid created a media brouhaha due, in large part, to the preeminence of Gibson Guitar's product line in the history of U.S. music, but it also raised legal issues regarding the forfeiture of property even if the wood had been acquired without the knowledge of its problematic background.
If federal agents can seize guitars made from illegally harvested or imported wood, what is stopping them from seizing houses? It has yet to happen, thankfully, but the National Association of Home Builders (NAHB) is not waiting to find out how such a scenario would play out.
Last week, NAHB Chairman Barry Rutenberg testified before the House Natural Resources Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs that the Lacey Act is written in a way that holds home builders and homeowners personally liable to certify that the timber product used in the construction of a house did not come from a forest that was illegally harvested in another part of the world.
‘Builders have no way of knowing the origin of a particular piece of lumber, a component of a cabinet, a closet door or crown molding,’ said Rutenberg. ‘The sheer number of different sources of wood that could be included in the finished home makes it nearly impossible for a builder or remodeler to know with certainty where and under what circumstances the individual components were sourced."
The NAHB has urged Congress to amend the Lacey Act by passing H.R.3210, the Retailers and Entertainers Lacey Implementation and Enforcement Fairness Act (RELIEF Act), which enables innocent parties to go to court and seek the return of their property that was seized in Lacey Act enforcement.
‘Unequivocally, we do not support illegal logging in any place at any time,’ Rutenberg added. ‘However, honest business owners, including home builders who exercise due care and had no knowledge that a seized product contains illegal wood, should have the right to seek the return of those goods.’
In addition to protecting innocent people from the government's confiscation of their property, the RELIEF Act also requires the federal government to create an Internet database of forbidden wood sources, thus providing a fair warning that currently does not exist.
The legislation was introduced in the House of Representatives via a bipartisan trio: Reps. Jim Cooper, D-Tenn., Marsha Blackburn, R-Tenn., and Mary Bono Mack, R-Calif. A number of prominent trade groups have publicly supported the bill, including the National Association of Manufacturers and the National Federation of Independent Business. To date, however, no financial services industry trade group has publicly backed the RELIEF Act.
Imagine being the lender, servicer or investor that makes history by having the first loan portfolio with Lacey Act-seized properties. Perhaps the industry should consider paying more attention to the NAHB's concerns and consider following its lead in supporting the RELIEF Act.
No, this bizarre situation has not occurred yet – but, hey, there's a first time for everything!
– Phil Hall, editor, MortgageOrb
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