Industry Should Stay the Course in Duty to Serve Efforts

I appreciate the way that MHAAR respectfully criticized my commentary on the Federal Housing Finance Agency’s (FHFA’s) final rule to implement the “Duty to Serve” (DTS) requirements as being “far too charitable,” but the criticism was misdirected.  My comments neither praised nor denigrated the FHFA for the DTS final rule.

I learned early in my career that you play the hand that you’re dealt.  Sometimes you’re in a strong position and other times you’re not.  The situation dictates your actions and response.

With respect to DTS, the industry was not dealt a strong hand, but I am proud of the way the industry responded.  Because of that, the industry is closer today than at any time in recent years to getting a pilot program for chattel manufactured home loans through the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac.

The FHFA made up its mind a long time ago that it didn’t have the legal authority to require the GSEs to create a secondary market program for chattel manufactured home loans.  Whether this is true or not doesn’t make a difference for all intents and purposes.

I agree with MHAAR that “If Congress had meant the “Duty to Serve” to be optional, it would not have called it a “Duty.”

But anyone involved with laws and regulations for any length of time understands that laws are not always black and white.  In fact, many times they are not.

For arguments sake, let’s say that the law specifically requires the GSEs to create a loan program for chattel manufactured homes.  Where does that get us? The industry could spend tens or even hundreds of thousands of dollars and years litigating this point.  Even if the industry prevailed, the GSEs would still be in the driver’s seat.  They could create a program that satisfies the legal requirements, but is so safe and sound that it is impractical and unusable.

The only way for the industry to get the GSEs to create a secondary market program for chattel manufactured home loans is to convince them that it is good business and the right thing to do.

This requires a different approach than continually chastising the FHFA for not mandating the GSEs to create a secondary market program for chattel.

MHARR does an excellent job as the industry’s conscience.  MHARR serves an important role in forcefully and articulately weighing-in on every proposal that adversely affects the industry.  But, this is only one element of a strategy, not the whole strategy.  In this situation, a different approach is needed and that approach is to continue doing what we’re doing.

We were all disappointed that it took nine years from the date of enactment of the DTS legislation to get a proposed rule and we were even more disappointed when the proposed rule did not provide “Duty to Serve” credit for chattel loans.  The silver lining was that it was a catalyst for industry members to submit over 3,100 comment letters to the FHFA.  Those letters certainly got the attention of the FHFA and the GSEs.

As a follow-up, the FHFA held an unprecedented public hearing last April to receive input from the industry on how to structure a successful chattel loan program.  The hearing was not to hear testimony on why a chattel program was needed, that fact was already established from the volume of public comments submitted.

The industry’s efforts resulted in a final rule that opened the door a crack by providing the GSEs “Duty to Serve” credit for purchasing manufactured housing loans, but not mandating that they do so.  Considering where we started from in December 2015, the final rule shows the positive impact that an industry can have when its members are engaged and energized.

The FHFA scheduled three “listening sessions” in January and February of this year to take additional testimony from industry stakeholders. This indicates that the FHFA and the GSEs have an interest in exploring the possibility of creating a secondary market for chattel manufactured home loans.

The most important development over the past thirteen months has been the GSEs meeting with industry stakeholders. The meetings started last spring and are continuing today.

The GSEs have shown a genuine interest in understanding today’s chattel housing market. Industry representatives have made a concerted effort to educate the GSEs about chattel manufactured homes and available loan products, and to understand the GSEs concerns, offer suggestions and convey a willingness to be open to new requirements.

From where I sit, all parties are working hard to try to develop a pilot program for chattel manufactured home loans.  I am optimistic that it will become a reality if we continue doing exactly what we’re doing.  ##

James R. Ayotte, CAE
Executive Director
Florida Manufactured Housing Association
1284 Timberlane Road
Tallahassee, FL  32312