MHI News

MHI’s CFPB and Financial Services Update

Bipartisan Effort Unveils Manufactured Housing Relief Legislation

Senators Joe Donnelly (D-IN) and Tom Coburn (R-OK) have introduced thePreserving Access to Manufactured Housing Act (S. 1828) to reduce regulatory burdens that impede access to affordable manufactured housing finance. The legislation would remedy provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that impact consumers’ ability to obtain the mortgage financing needed to purchase a manufactured home.

The bill is similar to legislation (H.R. 1779) introduced in the House of Representatives in April by Reps. Stephen Fincher (R-TN), Bennie Thompson (D-MS) and Gary Miller (R-CA), which currently has 105 cosponsors. Both bills minimize disincentives to serving the financing needs of low- and moderate-income manufactured home buyers – the very consumers that are often in greatest need of access to both affordable housing finance and technical assistance in the manufactured home-buying process. Without revision, there would remain the very real, unintended consequence of eliminating access to sustainable manufactured housing for millions of families.

For more information about the legislation, click here to view MHI’s Action Alert.

Agencies Issue Final HPML Appraisal Rules; Adopt Exemptions for Manufactured Housing

On December 12th, the Federal Reserve Board, CFPB, FDIC, FHFA, NCUA, and OCC issued final rules amending the Higher-Priced Mortgage Loan (HPML) Appraisal Rules under the Truth in Lending Act (TILA; Regulation Z) to adopt exemptions originally proposed July 10, 2013 for manufactured housing and certain types of refinancing and transactions of $25,000 or less.

The rules provide a temporary exemption of 18 months (until July 18, 2015) for all loans secured in whole or in part by a manufactured home. Starting on July 18, 2015, transactions secured by a new manufactured home and land will be exempt from the requirement that the appraisal include a physical inspection of the interior of the property; transactions secured by an existing manufactured home and land will not be exempt from the rules; and transactions secured solely by a manufactured home and not land will be exempt from the rules if the creditor gives the consumer one of three types of information about the home’s value.

Any Qualified Mortgage is exempt from the rule. Only non-QMs that are HPMLs are subject to the requirements.

In general, an HPML is a loan with an APR that exceeds the Average Prime Offer Rate (APOR) by more than 1.5 percent. Key components of the rule with regard to manufactured housing include:

• All transactions under $25,000 (adjusted annually to CPI) are exempt from HPML appraisal requirements. There are no conditions attached to this exemption.
• A temporary exemption for all transactions secured whole or in part by a manufactured home until July 18, 2015
• Rules effective July 18, 2015 (for transactions $25,000 or greater)—

– Loan secured by existing manufactured home AND land: fully subject to the HPML appraisal requirements (no exemptions)
– Loan secured by new manufactured home AND land: is subject to the HPML appraisal requirements MINUS the requirement that the appraisal include a physical visit of the interior of the property
– Loan secured by new or existing manufactured home AND NOT land: is exempt from the general HPML appraisal rules if the creditor provides the consumer with a copy of one of three specified types of information, no later than three days prior to consummation of the transaction, which are:

• The manufacturer’s invoice for the home (date of manufacture must be within 18 months of the creditor’s receipt of the consumer’s application)
• A cost estimate of the value of the manufactured home from an independent cost service; or
• A valuation of the manufactured home by a person who has no direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is performed and has training in valuing manufactured homes

• Transactions that are Qualified Mortgages under rules prescribed by HUD, VA, and USDA are also exempt even in they are not defined as QMs under the CFPB’s guidelines.

Title I and II Manufactured Home Loans Exempt from HUD/FHA QM Definition

On December 11th, the Federal Housing Administration (FHA) released its final rule which defines a Qualified Mortgage (QM) that is insured, guaranteed or administered by HUD. The final rule will be effective on January 10, 2014 and will apply to mortgages with a case number assignment on or after that date. To view the final rule, click here.

The Dodd–Frank Act requires HUD to propose a QM definition that is aligned with the Ability-to-Repay criteria set out in the Truth-in-Lending Act (TILA). HUD’s rule builds off of the existing QM rule finalized by the CFPB earlier this year. In general, to meet HUD’s QM definition, mortgage loans must:

• Require periodic payments without “risky features”
• Have terms not to exceed 30 years
• Limit upfront points and fees to no more than three percent with adjustments to facilitate smaller loans (except for Title I, Title II Manufactured Housing, Section 184, Section 184A loans and others as detailed below)
• Be insured or guaranteed by FHA or HUD

The rule establishes two types of QMs that have differing legal status – aRebuttable Presumption Qualified Mortgage or Safe Harbor Qualified Mortgage. The loan’s status is determined by the loan’s APR in relation to the Average Prime Offer Rate (APOR), the rate for the average borrower receiving a conventional mortgage.

Rebuttable Presumption Qualified Mortgages will have an APR greater than APOR + 115 basis points (bps) + on-going Mortgage Insurance Premium (MIP) rate. Legally, lenders that offer these loans are presumed to have determined that the borrower met the Ability-to-Repay standard. According to FHA, consumers can challenge that presumption by proving that they did not have sufficient income to pay the mortgage and their other living expenses.

Safe Harbor Qualified Mortgages will be loans with APRs equal to or less than APOR + 115 bps + on-going MIP. These mortgages offer lenders the greatest legal certainty that they are complying with the Ability-to-Repay standard.

HUD’s rule covers Title II manufactured housing, Title I manufactured housing and property improvement loans, Indian Home Loan Guarantee Program mortgages and Native Hawaiian Housing Loan Guarantee Program mortgages. The rule designates loans insured under these programs as Safe Harbor Qualified Mortgages regardless of upfront points/fees and APR to APOR ratio so as not to “interfere with current lending practices until appropriate parameters can be determined.”

In general, manufactured homes insured under Title I and Title II are automatically considered to be Safe Harbor Qualified Mortgages and would be essentially exempt from the new underwriting standards set out by the agency. As such, a Title I or Title II manufactured home loan would also be exempt from the HPML appraisal rules.

FHA Extends Recertification Deadline

FHA recently issued Mortgagee Letter 2013-42 extending the annual recertification filing deadline for Title I and Title II lenders and mortgagees that have a fiscal year end of December 31, 2013. The temporary extension is necessary because the Lender Electronic Assessment Portal (LEAP) (which mortgagees must use going forward to submit the annual certification, financial reports, and recertification fees) will not be deployed until after March 31, 2014.

The filing deadline is extended until 30 days after deployment of the LEAP recertification functionality. While that deployment date is not yet clear, the mortgagee letter states that lenders and mortgagees subject to the extension should be prepared to complete the recertification process, including the submission of financial information and fees, no later than May 31, 2014. To view the notice, click here.

FHA Considering Premium Reduction for Housing Counseling

On December 12th, FHA Commissioner Carol Galante indicated that the agency may allow borrowers who take housing counseling before signing for a FHA-backed mortgage to pay a smaller insurance premium in the future.

According to the agency, it is one of “many options” FHA is considering to promote housing counseling services as a way to inform lower-income and first-time home buyers about their obligations and how to better manage their debt.

For more information, contact MHI Senior Vice President of Government Affairs Jason Boehlert at jboehlert@mfghome.org or (703) 558-0660.

MHI Joins Groups in Push to Renew Energy Efficiency Credit

On December 18th, MHI joined with more than 30 other housing, energy efficiency and building groups to urge leaders of the House Ways and Means and Senate Finance Committees to extend critical energy efficiency tax incentives that are currently set to expire December 31, 2013. Click here to view the letter.

Included in this request is an extension of the New Energy Efficient Home Credit (I.R.C. 45L), which provides builders of Energy Star-qualified manufactured homes a $1,000 dollar tax credit (per home) and builders of energy efficient modular homes a credit of $2,000. The credit, which will need to be renewed for 2014, has been subject to a number of short-term renewals over the past several years.

Members of the House Sustainable Energy and Environment Coalition have also written to House Ways and Means Committee leadership on calling for an extension of a slate of clean-energy tax credits, including 45L. The move was timed to coincide with the release of a nearly identical letter sent by a coalition of Democratic and independent senators to Senate Finance Committee leadership.

• To view the Senate letter, click here
• To view the House letter, click here

It had been released in earlier news reports that GOP members of the Senate Finance Committee had been working to reach an agreement with Senate Finance Committee Chairman Max Baucus (D-MT) that would allow the expiring provisions to be renewed early in 2014. However, extension of the wind-production tax credit has drawn opposition from Republicans.

Further complicating the matter, Sen. Baucus—who was scheduled to retire the end of 2014—will be nominated to serve as U.S. Ambassador to China. He will vacate his position immediately after his nomination is confirmed by the Senate, which is expected to take place soon after Congress returns from the December recess.

For more information, contact MHI Senior Vice President of Government Affairs Jason Boehlert at jboehlert@mfghome.org or (703) 558-0660.

HUD Publishes Final Rule Updating the Manufactured Housing Program

On December 9th, HUD published a final rule, effective June 9, 2014, updating the Manufactured Home Construction and Safety Standards. HUD issued a proposed rule in July 2010.

The final rule incorporates the “second group” of recommendations made by the Manufactured Housing Consensus Committee (MHCC) in 2005. The final rule also includes a number of updated and new reference standards that were not in the proposed rule.

The following items identified by the MHI Technical Activities Committee as having a significant cost impact are included in the final rule:

• New requirements for anti-scald valves (§3280.607);

• New requirements for egress windows (§3280.404). The sash cannot be removed to meet the egress window size requirements;

• New requirements for Class 1 Air Ducts and furnace supply plenums, and cross-over duct insulation {§3280.715(a)(1) and §3280.715(a)(7)};

• Elimination of current regulations that allow the electrical panel box to be installed in a closet.

Siting efforts by other federal agencies (Department of Energy and Environmental Protection Agency), HUD did not include the following items that were in the proposed rule:

• Changes to Subpart F regarding requirements for heat loss, heat gain, and cooling load calculations (§3280.508); the heat loss and comfort cooling certificates (§3280.510 and 511);

• Proposals for air duct testing {§3280.715(a)(2)(4)};

• Formaldehyde emissions requirements.

Also of interest is a provision in HUD’s Analysis of Public Comments. One commenter recommended that HUD consider including a requirement that all manufactured homes be equipped with fire sprinklers. In rejecting the proposal, HUD says that “there is a considerable cost impact to install a sprinkler system in a manufactured home…. A comparison of code requirements between manufactured homes and one and two family homes shows many fire safety provisions for manufactured homes that are not included in model codes for one and two family homes.” HUD’s statement on this issue may be helpful in those states and local jurisdictions that are considering fire sprinkler requirements.

A detailed analysis of the impact of the rule will be forthcoming. Click here for a copy of the final rule.

The White House Office of Management and Budget Publishes its Semi-Annual Regulatory Agenda

Following are the federal regulatory actions planned for 2014, which will likely impact manufactured housing.

Department of Housing and Urban Development (HUD)

Manufactured Housing Program: Label Fees

A proposed rule planned for April 2014 to increase the HUD label fee for manufactured homes from $39 to up to $100 per label to ensure that HUD can continue to fulfill its statutory responsibilities under the Manufactured Housing Construction and Safety Standards Act.

Manufactured Housing Program: Model Manufactured Home Installation Standards: Ground Anchor Installations

A final rule planned for February 2014 would adopt recommendations of the Manufactured Housing Consensus Committee (MHCC) to revise existing requirements for ground anchor installations and establish standardized test methods to determine ground anchor performance and resistance.

Manufactured Housing Program: On Site Completion of Construction

A final rule planned for April 2014 would establish a procedure whereby construction of new manufactured housing can be completed at the installation site rather than in the factory. Under current HUD regulations, manufacturers must obtain HUD approval for onsite completion of each of its designs. This rule would simplify the process by establishing uniform procedures by which manufacturers could complete construction of their homes at the installation site without obtaining advance approval from HUD.

Federal Housing Administration (FHA): Floodplain Management

A proposed rule planned for February 2014 to amend the FHA Single Family Mortgage Insurance program regulations to require that new construction including manufactured homes insured under the Federal Housing Administration and located in a floodplain be elevated or flood-proofed to a base flood elevation of best available data of the Federal Emergency Management Agency (FEMA) plus one foot.

Department of Energy (DOE)

Energy Efficiency Standards for Manufactured Homes

A proposed rule planned for September 2014 to establish energy efficiency standards for manufactured housing and a system to ensure compliance with, and enforcement of, the standards.

Environmental Protection Agency

Formaldehyde Emissions Standards for Wood Products

A final rule planned for September 2014 to implement emissions standards established by TSCA Title VI for composite wood products sold, supplied, offered for sale, or manufactured in the United States. Pursuant to TSCA section 3(7), the definition of “manufacture” includes import. As required by Title VI, these regulations apply to hardwood, plywood, medium-density fiberboard, and particleboard.

Under Ground Storage Tanks

A final rule planned for May 2014 revising existing requirements and establishing new requirements for secondary containment and operator training.

Consumer Financial Protection Bureau (CFPB)

See the December 6th Week in Review for the Semi-Regulatory Agenda.