Washington, D.C., March 16, 2016 – The Manufactured Housing Association for Regulatory Reform (MHARR) in strong written comments submitted on March 15, 2016 (copy attached), has admonished the Federal Housing Finance Agency (FHFA) for failing, once again, to include manufactured housing personal property or “chattel” loans in a proposed rule to implement the “Duty to Serve Underserved Markets” (DTS) provision of the Housing and Economic Recovery Act of 2008 (HERA) – thereby depriving millions of lower and moderate-income families of the American Dream of home ownership. MHARR’s comments, noting that the exclusion of chattel borrowers from DTS participation is diametrically opposed to the fundamental mission of the FHFA-regulated Government Sponsored Enterprises (Fannie Mae and Freddie Mac) (GSEs) – to provide home ownership opportunities for lower and moderate-income Americans – describe that proposal as “fundamentally flawed” and call on FHFA to withdraw and correct its already long-delayed implementation of DTS.
Adopted by Congress in response to the 2008 credit crisis, DTS is both a finding that the GSEs have failed to properly serve purchasers of federally-regulated manufactured homes in accordance with their respective Charters and their statutorily-prescribed mission, and also a remedy, directing the GSEs to materially increase their participation in the manufactured housing market (among others).
Although Congress — aware of the fact that manufactured homes purchased through chattel loans comprise the vast majority (80%) of the manufactured housing market and provide lower-income purchasers with access to the industry’s most affordable homes – specifically authorized FHFA to fully include both chattel loans and much-less-numerous manufactured home real estate loans in a new DTS program, FHFA’s December 2015 proposed DTS implementation rule (like an FHFA proposed rule published in 2010) would completely and improperly exclude chattel loans from DTS participation. Such an approach to DTS would leave the vast majority of actual and potential purchasers of manufactured homes – the nation’s most affordable housing – subject to ongoing discrimination by the GSEs, effectively excluding millions of mostly lower and moderate-income consumers from the American Dream of home ownership, while needlessly subjecting millions more to higher-cost loans with interest rates unnecessarily inflated by the lack of GSE securitization or secondary market support for such loans.
MHARR’s comments methodically and thoroughly detail five specific aspects of the FHFA proposed rule that, if adopted in final form, would not only have a devastating impact on the manufactured housing industry as it slowly begins to recover from historic production lows in 2009, but, more importantly, on American homebuyers, who are ready and willing – if financing is available – to purchase today’s safe and affordable manufactured homes. These unacceptable aspects of the FHFA proposed rule are as follows:
(1) The proposed rule favors large industry businesses at the expense of smaller businesses. The industry’s largest manufacturer and its captive finance subsidiaries (which can self-finance manufactured home loans – albeit at higher-cost interest rates) currently dominate the manufactured housing industry and the manufactured housing finance market. Excluding 80% of the industry’s market from DTS would continue that domination and limited market competition – at the expense of smaller industry businesses.
(2) The proposed rule favors industry competitors. By excluding 80% of the industry’s market from DTS, while offering securitization and secondary market support for loans on other types of homes, the proposed rule would maintain the discriminatory, uneven playing field that currently exists between manufactured homes and other types of housing.
(3) The proposed rule would harm consumers. By prohibiting GSE securitization or secondary market support for 80% of manufactured home borrowers following closed-door discussions in 2015 between FHFA officials and representatives of the industry’s largest businesses – including its two dominant portfolio lenders — the rule would maintain restricted competition within a manufactured home financing market dominated by those large portfolio lenders, effectively forcing consumers into higher-cost chattel loans provided by those same lenders.
(4) The proposed rule is disingenuous and misleading in failing to properly acknowledge or detail the history of the GSEs’ experience with manufactured housing loans and their long-time aggressive opposition to properly serving the manufactured housing market. MHARR’s comments address these facts – and particularly Fannie Mae’s reckless purchase of loans originated by one lender on the verge of bankruptcy – and demonstrate that the performance of those loans is an aberration that cannot serve as a guide for current-day FHFA policy.
(5) The “Pilot Program” for chattel loans referenced in the proposed rule is, effectively, a sham, designed to divert attention from the exclusion of chattel loans from DTS. By making the establishment of such a program discretionary with the GSEs – with their long track record of aggressive opposition to support for manufactured housing chattel loans – the “Pilot Program” will be useless window-dressing, at best.
Based on these points — and others addressed in its comments — MHARR calls on FHFA to withdraw its fundamentally-flawed proposed rule and replace it with one that would include full securitization and secondary market support for manufactured housing chattel loans by Fannie Mae and Freddie Mac.
