The House Financial Services Committee Passes Bipartisan Legislation to Protect the Availability of Financing for Manufactured Homes (Editor's Note: As mentioned in the earlier article with the passage of similar legislation pending in the US Senate, MHCO is working with the Oregon Congressional delegation to ensure passage of this critical legislation.)
Washington, DC - The U.S. House Financial Services Committee today passed the bipartisan Preserving Access to Manufactured Housing Act (H.R. 1779) to protect the ability of manufactured home customers to buy, sell and refinance affordable manufactured homes, the largest form of unsubsidized affordable housing in the nation. Specifically, the bill would amend the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to address the criteria by which home loans are classified "high-cost" while keeping in place strong consumer protections. Sponsored by Representatives Stephen Fincher (R-TN), Bennie Thompson (D-MS), and Gary Miller (R-CA), the bill is also supported and cosponsored by an additional 110 House Members on both sides of the aisle.
"The ability to access affordable manufactured homes is vital to millions of low- and moderate-income Americans, and our industry is also an important economic driver and job creator in many communities across the country," said Nathan Smith, Chairman of the Manufactured Housing Institute. "This legislation would ensure that manufactured housing remains a viable affordable housing option, particularly in rural, distressed and underserved areas. We urge the full House of Representative to move swiftly to consider this important legislation." The Consumer Financial Protection Bureau (CFPB), through a rulemaking process required under Dodd-Frank, deemed that all purchase loans-including mortgages on manufactured homes considered personal property-be covered by the Home Ownership and Equity Protection Act (HOEPA). Under these guidelines, many small-balance loans used for the purchase of affordable manufactured housing are now unfairly classified as predatory and high-cost. Unfortunately, the CFPB failed to recognize the uniqueness of manufactured home loans compared to the rest of the housing industry.
While the cost of originating and servicing a $250,000 loan and a $25,000 loan are the same in terms of real dollars, the cost as a percentage of each loan's size is significantly different. This difference causes the smaller-sized manufactured home loan to potentially exceed the new thresholds and be categorized as a HOEPA high-cost loan.
Due to the increased lender liabilities associated with making a HOEPA high-cost loan, it is unlikely that these loans will be offered to homebuyers, denying access to necessary credit for new and existing manufactured homes. In fact, industry lenders have already stopped originating loans of less than $20,000 as a result of the new rule. According to the American Housing Survey, roughly half of the nation's 8.5 million manufactured homes have a purchase price of less than $30,000.
Manufactured home loans perform just as well, if not better, than loans on site-built counterparts and are serviced in a responsible and consumer-friendly manner. This is evidenced by delinquency rates among manufactured housing lenders that are half of what is reported in the larger mortgage market.
Eliminating this important source of financing would unfairly penalize low and moderate-income homebuyers who do not qualify for traditional mortgage financing needed for single family home ownership; do not have access to limited government-insured and GSE secondary market programs; or live in rural areas where affordable rental housing is scarce or non-existent. Additionally, millions of families could see the equity they have diligently built up in their manufactured homes wiped out because lenders would be unwilling to provide the financing needed for resale.
"Homeowners who purchased safe, energy efficient homes that they can afford rather than taking out a loan they could not pay back should not be punished, and we are thankful so many lawmakers have backed this effort to protect the more than 22 million Americans living in manufactured homes," added Smith.
The bipartisan legislation would also clarify that manufactured home retailers and salespersons would not be considered loan originators unless they receive compensation from a lender, mortgage broker or loan originator. The new CFPB definition of a loan originator is based on traditional mortgage market roles that do not equate with the business model of the manufactured housing industry, including lending and retail sales practices.
A similar bipartisan bill has been introduced in the Senate, the Preserving Access to Manufactured Housing Act of 2013 (S. 1828), by Senators Joe Donnelly (D-IN) and Tom Coburn (R-OK).