Yep, your little pair of feathered freinds are building a nest. Birds have a mirriad of ways to hide their nests from predators and even the most skilled eye can have trouble finding them in the thick leaf cover. The best way to know if there are baby birds in your area is sound. Young birds make diffrent sounds than adult birds. Usualy their call is a single repetative note that tends to be high pitched. After working in the nursery for a week I was able to walk down the street and tell you which tree had babies and what kind. However even with the vocal cue I rarely saw nests.

As for cat fur they might just take it. Birds (make that MOST birds) have a very poorly developed sense of smell and do not use it to detect predators. I'm sure with a big fluffy kitty like that the he is an indoor animal and poses no threat to young one. So I repeat the stuff about keeping cats inside during the season.

If you have any other questions, please ask!

Cheers,
Tigeress