Back in January, The Federal Housing Finance Agency (FHFA) issued a request for input (RFI) on its duty to serve (DTS) underserved markets ‘pilot program’ to finance manufactured homes, with a deadline of March 21st.
According to commentary from the Manufactured Housing Association for Regulatory Reform (MHARR), the request was an adjunct to its December 29, 2016 final rule implementing the Duty to Serve Underserved Markets provision of the Housing and Economic Recovery Act of 2008 (HERA), seeking public input on considerations that Fannie Mae and Freddie Mac should include in their determinations of whether to include manufactured home chattel loan pilot programs in their Duty to Serve Underserved Markets Plans. And if so, how such pilots could be designed, taking into account policy, safety, and soundness considerations.
As the deadline arrived, there was no shortage of commentary and feedback from the industry and interested parties.
“I am writing to you in regard to the Request for Input on Chattel Financing of Manufactured Homes. Overall, NAFCU supports the steps the Federal Housing Finance Agency (FHFA) has taken to increase the liquidity of the mortgage market and improve the distribution of investment capital available to very low-, low-, and moderate-income families,” said Ann Kossachev Regulatory Affairs Counsel for the National Association of Federally-Insured Credit Unions (NAFCU).
“Nonetheless, NAFCU’s members have expressed concerns regarding the entrance of Fannie and Freddie into the chattel loan market given the history of manufactured housing loans in the secondary market.”
Kossachev continued with a cautious tone to the FHFA.
“Therefore, NAFCU requests that the FHFA diligently evaluate the chattel loans market prior to requiring the GSEs to decide whether they should pursue a pilot program, thereby extending the time allotted for the GSEs to make such a decision,” sais Kossachev.
“NAFCU also requests that the FHFA continue to be transparent in the implementation of the chattel loans pilot program through regular updates and opportunities for stakeholders to provide feedback so the industry may closely follow the progression of the program.”
Kossachev also shared that there is, potentially, very serious danger in moving forward too quickly, and that more time was the key to permit GSEs to evaluate the chattel loans marker.
“There is serious trepidation among NAFCU’s member credit unions that the implementation of the FHFA’s chattel loans pilot program will cause a negative disruption in the mortgage market. Namely, credit unions are worried that lenders will increasingly enter the chattel loan market because of the associated higher interest rates, ignoring the fact that there is typically a higher rate of delinquency for manufactured housing loans,” said Kossachev.
“Delinquencies in the chattel loan market often occur later in the life of the loan, such that the manufactured home is worth much less than the outstanding unpaid loan balance. This type of circumstance creates a risky environment susceptible to a crash.”
The full response from the NAFCU is linked here.
It should be noted that NAFCU references the same documents that MHProNews published earlier this month in a feature story on DTS, linked here.
A Response From an Innovative Community Operator
Brian Gallagher, COO, CPA, JD, MBA, of Santefort Real Estate Group in Westmont, Illinois, and owner/operator of 11 manufactured home communities located in Illinois and Indiana, comprising 3,000 home sites, also provided commentary to the FHFA.
“We are very confident that the Enterprise’s support of a secondary market for manufactured home community (MHC) chattel loans would be a win-win-win,” said Gallagher.
“Secondary Market Investors (SMI) would receive higher yield investments with mitigated risk characteristics. Consumers would have access to more lending sources which, among other key benefits, would lower borrowing costs and unlock the equity value in their manufactured homes. MHC chattel home loan originators would have a source of funds to replenish their lending pools, leading to greater activity, jobs, and more Quality Affordable Housing for a presently unsubsidized and underserved consumer market.”
Gallagher continues, stating that he sees a particular, innovative, method leading to success.
“The Enterprises could bring this about through leading the development of ‘template transactions’ – standardized documents, PMI, and ‘Park Agreements’, pursuant to which the MHC’s in which the loan collateral is located agree to cooperate with originators and SMI to mitigate the risk of loss arising from borrower default. In sum, the Enterprises’ promotion of a chattel loan secondary market would satisfy their ‘Duty to Serve’ the lower economic classes which are disproportionately dependent upon manufactured home community living for their quality affordable housing needs.”
The full response from Gallagher is linked here.
For a deeper dive into understanding GSEs, Duty to Serve, and manufactured home lending, including Eagle One Financials Titus Dare and his “4S’” of good lending, click here. ##
(Editor’s Note: a special review of MHI’s comments is planned after the Tunica Manufactured Housing Show.
(Image credits are as shown above.)
Submitted by RC Williams to the Daily Business News for MHProNews.
