Having watched, studied and analyzed the Enterprises’ actions for nearly four decades, and having been involved, engaged-in and instrumental in the drafting and passage of the DTS law, it is my personal opinion that Fannie and Freddie, whether by chance or by design, or a combination of both, have initiated, perfected and ultimately exploited a three-pronged approach to their interpretation, implementation and handling of the DTS law. And when these three approaches overlap, as they have since 2008, they create a platform-of-operation and a comfort zone which allows them to defy the law and its mandate to satisfy their own view of manufactured housing (see, Q & A of March 9, 2020) while, at the same time, richly benefiting their favored clients at the expense of the industry’s small businesses and the moderate and lower income American consumers that they are supposed to serve.

And what are the three prongs of this approach? They are:

1-The Government Sponsored Enterprises (GSEs) of Fannie Mae and Freddie Mac continuing home-financing (particularly chattel financing) discrimination against a class of American consumers who depend on today’s federally regulated manufactured housing (MH) as their principal and, in some cases, only source of homeownership;

2-Fannie’s and Freddie’s utter disregard for the well-established parity between the construction/manufacturing of today’s MH and all other types of single- family dwellings; and

3-The GSEs unholy alliance with — and green lights given to them by — unexpected quarters, which provide them with just enough cover to continue the unacceptable status quo.

Now, let’s delve a bit more into each of these three factors.

1-   It is a well-known and long-established fact that the large majority of manufactured home (MH) purchasers are young couples, moderate and lower income consumers and elderly Americans. Fannie and Freddie have and continue to routinely question the credit-worthiness of these groups as an excuse for not securitizing MH loans. And their biggest excuse, of course, is that they do not have any relevant data available to justify their risk-taking in securitizing such loans – and particularly chattel loans. But this is nothing more than a bogus excuse, because they have had twelve years with the best available tools and an army of home-financing experts at their disposal to actually develop such data themselves. For them, this should be an easy task and something that would not take twelve years, with no end in sight.  For example, in one of its countless number of comments on the implementation of DTS, the Manufactured Housing Association for Regulatory Reform (MHARR) provided Fannie, Freddie and FHFA with a suggested program that would start with a small but market-significant number of chattel loans which would vigorously be reviewed and evaluated periodically. If the results were satisfactory, they would then gradually increase the number of loans and continue with their close monitoring. Now, if MHARR could formulate a workable approach like this, why can’t Fannie Mae and Freddie Mac? Instead, Fannie and Freddie have wasted twelve years and all they have to show for it are meaningless, miniscule, dead-end “pilot programs” that have discouraged and driven away industry participation, and forced the consumers into very high-rate private chattel loans … something that DTS was supposed to change for the better, but has instead become worse. And if these private companies can earn profits on such high-rate loans, why can’t Fannie and Freddie, at the very least, start one lower-rate loan program, while still earning a profit? For the Enterprises, whose careless and unimaginative programs (remember sub-prime loan programs?) cost American taxpayers trillions of dollars and brought the world economy to near-collapse to worry about high risks and potential defaults on a miniscule number of manufactured housing loans is hypocrisy at best and pure discrimination against some 80% of manufactured home consumers at worst. Given Fannie and Freddie’s checkered history with the manufactured housing industry, one would have to conclude that it is the latter.

2- The DTS law and its mandate are clear, unambiguous and unwavering. Simply stated, with the DTS law Congress told Fannie and Freddie that they have miserably failed to serve the federally-regulated manufactured housing industry and consumers of affordable housing since they were created, and with the DTS mandate, they now have to start serving both — i.e., not site-built, or modular, or sectional, or any other type of single-family dwelling built in compliance with other types of building codes, but today’s quality, well-built and affordable manufactured homes constructed in full compliance with the HUD Code and regulated by the federal government. They must provide securitization programs that would enable finance companies to offer lower-rate loans for manufactured housing AS IS WHEN IT LEAVES THE FACTORY AND IS PURCHASED BY A HOME BUYER…as simple as that. But that is not good enough for Fannie and Freddie as they have decided to re-invent the wheel by demanding that the code and materials be substantially upgraded to the point that the bottom-line price of the home would make it prohibitively costly to the average consumer who would otherwise depend on a manufactured home for his or her homeownership. A very clever way of avoiding the securitization of mainstream manufactured housing loans, right? And to make matters worse, as if they are ashamed of the name “manufactured home,” or in an effort to look down at the product, or in an attempt to confuse homebuyers (or, possibly, a combination of all the above) they, with the help from some within the industry, have invented meaningless and unrelated names such as “High-End Initiative,” “MH Select,” “New Type” of home, “New Generation” of home, “New Class” of home, “Advantage Home,” “Choice Home” and the worst name of all, “Cross-Mod^TM home!!” (As an aside, the CrossMod^TM name appears to have been invented by a wannabe individual totally devoid of any and all knowledge, and without the slightest understanding of the rich heritage and history of this great industry…not to mention the difficult and cumbersome evolution that it has endured to get where it is today.) So, Fannie and Freddie must be educated to understand that when a manufactured home leaves the factory with that federal-seal-of-approval affixed to it, it is on par and in full parity with — and, in many cases superior to — any and all other single-family dwellings built to any other building code in the United States of America.

3- One of the main reasons that Fannie and Freddie have been able to yank-around the manufactured housing industry and consumers with a perceived legitimacy for their dodging and evading all these years, is due to their alliance with — and a green light given to them by — a segment of the industry and their regulators (i.e., the Manufactured Housing Institute (MHI) and FHFA).While MHI was a loyal and integral partner with MHARR and the rest of the industry and consumer coalition during the drafting and passage of the DTS law, it went off the reservation (as it did with the landmark Manufactured Housing Improvement Act of 2000 reform law) when it came to the full and proper implementation of the DTS law. I have been around this industry and Washington, DC long enough to know for a fact that Fannie and Freddie would have not been able to do what they have done with this industry and its consumers all these years had it not been for the wink and nod given to Fannie Mae and Freddie Mac by MHI, and their half-hearted support for DTS.

To be sure, and according to the available information, MHI has had its limitations and shortcomings in pulling their punches, often saying one thing publicly, but doing something different privately, going along to get along, as one, or two, or possibly three of their largest conglomerate members are the only companies utilizing Fannie and Freddie’s wild-goose-chase securitization programs — or should I say “pilot programs” or whatever is the name of the latest program that they offer these days.

I am not aware of any small businesses in this industry using a Fannie or Freddie program. Furthermore, MHI’s membership includes two of the largest finance conglomerates that provide higher-rate chattel loans and have no incentive at all to support the full and proper implementation of DTS that would attract competition from smaller companies which would utilize DTS to support lower-rate chattel loans. (Incidentally, here is another major set-back for the post-production sector of the industry when there is no independent, national collective association to represent their views and interests on critical matters such as this.)

As for the green light that FHFA has given to Fannie and Freddie to continue their evasion of and failure to fully and properly implement the DTS law, there are several words that would perfectly describe FHFA’s action or lack thereof prior to the arrival of its current Director, Mark Calabria and his team. Unfortunately, none of those words are pleasant enough to be listed here, thus we’ll spare them.  Since Director Calabria’s arrival at FHFA, though, and given the fact that I personally have known and worked with this gentleman for nearly three decades with positive results, I use the word “disappointing” to describe FHFA’s efforts to regulate and fully and properly implement the DTS law. I say this because Director Calabria is a trusted and serious federal government regulator. He and his team have a large reservoir of credibility with our industry, and with me, personally. They were quite helpful and indeed instrumental in the passage of the landmark 2000 reform law. They respect and admire this industry for the quality homes that it builds and the affordable homeownership opportunities it offers to moderate and lower-income consumers. They, along with other relevant agencies, have an aggressive mandate and the full protection of President Trump and Congress to increase and expand the supply of affordable housing for American consumers — a huge undertaking that rightfully must start with affordable HUD Code manufactured housing. Why is it, then, that after nearly two years in charge of FHFA he has not been able to reign-in the renegade Fannie Mae and Freddie Mac, and fully and properly implement the DTS law for the benefit of consumers and the industry’s small businesses? Thus, my disappointment at the continuing green light that FHFA is seemingly providing to these Enterprises along with the perceived legitimacy that allows them to continue with their evasion. Although I don’t hold my breath, it is obvious that drastic decisions must be made by FHFA to end the unacceptable status quo and put the vital DTS mandate back on track.

The proverbial ball is clearly in FHFA’s court, to use its full power and authority to put an end to the nonsense and evasion that Fannie and Freddie have gotten away with for 12-plus years (and counting) regarding DTS.

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