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Waste! Fraud! Abuse! Its Impact on Business

April 18th, 2017 Comments off

(Pork Barrel credit: Citizens Against Government Waste)

As part two on our series on federal taxation, the Daily Business News spotlights today what private and federal research reveals to be hundreds of billions of dollars in waste, fraud and abuse. The Trump Administration has made tax reform a hallmark of their agenda, and President Donald J. Trump pledged to cut the waste and inefficiency of government.

Reforming spending and taxations, along with regulatory reform, are among the factors that caused so many manufactured home professionals to vote for the nation’s new president.

Citizens Against Government Waste (CAGW)

With the national debt at a hefty $19.3 trillion and estimated by the Congressional Budget Office (CBO) to grow another $534 billion in fiscal year (FY) 2016, which runs through Oct. 2017, Citizens Against Government Waste (CAGW) suggests 618 recommendations that would save taxpayers $644.1 billion in the first year and $2.6 trillion over five years. CAGW says it has helped save taxpayers $1.4 trillion since 1984 when it began.

As an example, Prime Cuts, CAGW’s house organ, proposes eliminating the Market Access Program (MAP), which aims to help agricultural producers promote U. S. products overseas, but is in fact a corporate welfare program that sends millions of dollars to profitable, large corporations and trade associations that can afford their own promotional efforts. This would save $1 billion over five years.

Prime Cuts goes after just about every department of government, attacking many programs that been considered sacrosanct for years. Eliminating the Rural Utilities Service, which originally provided electrification to rural areas and now expanded to provide broadband to those areas would save $9.6 billion in one year, $48.1 billion over five years; since FY 2002, members of Congress have added six earmarks for high energy cost grants totaling $113.5 million.

The sugar subsidy adds $1.5 billion to the budget annually, and additionally costs consumers of baked goods ”$3.5 billion more each year in artificially inflated prices for commodities that use sugar, including baked goods, beverages, candy, cereal, dairy products, snack foods, and hundreds of other products.” The program needs to be replaced with a market-oriented system.

Similarly, the U. S. dairy price supports add $1.1 billion annually to the budget, and eliminating the peanut subsidy would save taxpayers $275 million over five years.

The Hollings Manufacturing Extension Partnership (HMEP), named for U. S. Senator Ernest ‘Fritz’ Hollings was designed to increase the efficiency and profitability of American manufacturing firms, but amounts to corporate welfare for advisors and consultants. Potential savings if halted: $715 million in five years.

The Department of Defense has multiple contracts spread over numerous congressional districts, but representatives cry “national security” and the programs continue. One example is the M1 Abrams tank retrofit program. “In 2011, Army Chief of Staff General Ray Odierno told Congress that the Army had a sufficient number of tanks; the Pentagon proposed suspending production until 2017, saving $3 billion.” Earmarks to the budget have increased continually, adding jobs for constituents, including a $40 million project in FY 2016. Since FY 1994, there have been 39 earmarks for the M1 Abrams program, requested by at least 13 members of Congress, costing taxpayers $948.6 million.

The Southeastern Power Administration, which consists of 23 hydroelectric projects in Alabama, Florida, Georgia, southern Illinois, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia, and the Tennessee Valley Authority’s electric power assets could be sold and privatized, saving $2.3 billion over five years. Fears of huge rate increases to consumers are unfounded.

Reducing the fraud and waste in the Medicare system would save taxpayers $21.7 billion over five years. Congress has fortunately enacted the Recovery Audit Contractor program which has recovered $11.3 billion for the Medicare Trust Fund since it began doing audits in 2005. RAC has an average accuracy rate of 96 percent.

As the average life expectancy has increased. raising the Normal Retirement age for Social Security beneficiaries would save $119.9 billion over the next ten years. Raising the eligibility age for Medicare recipients by two months every year until it reaches the age of 67 would reduce Medicare costs by ten percent by 2035, saving taxpayers $124.8 billion over the next ten years.

(Image credit: Citizens Against Government Waste)

Eliminating Community Development Block Grants in the Department of Housing and Urban Development (HUD) would produce a $15 billion savings over ten years. Intended for infrastructure investments, housing rehabilitation, job creation, and public services in metropolitan cities and urban counties, the program has fallen short on both accountability and results.

For the entire CAGW report on savings in the Department of the Interior with its vast swaths of land that could be leased, the Department of Justice’s Community Oriented Policing Services which has failed to meet its goal of reducing crime and has become an overlay of hundreds of million of dollars in waste and fraud, and the Davis-Bacon Act which requires employees of federally-contracted projects to be paid a prevailing wage, click here.

Meanwhile, the Government Accountability Office (GAO) has similarly produced a report documenting 92 actions that could be taken by Congress or the executive branch to reduce waste and improve efficiency in 37 areas covering a wide range of governmental functions.

The Internal Revenue Service has referral programs to award individuals who help uncover tax noncompliance by others in its attempt to reduce the $385 billion taxes that go uncollected. This information referral process, which covers under reporting of income, false tax claims, failure to file a return and failure to withhold and pay taxes resulted in 87,000 referrals in 2015 and $209 million in tax assessments.

In Medicaid services, the GAO uncovered federally facilitated exchanges that allowed for duplicate coverage. One state reported duplicate coverage for 3,500 people from January to July 2014.

In 2014, the Departments of Defense (DOD), Energy (DOE), and Commerce (Commerce) collectively had signed agreements to establish 11 manufacturing innovation institutes involving partnerships with private nonfederal entities, but a review determined that agencies that could benefit the program, such as the Department of Labor, were not included in the projects.

For the full report, click here.  For our prior report on Tax Facts, Business and You, click here. ##

(Image credits are as shown above.)

matthew-silver-daily-business-news-mhpronews-comSubmitted by Matthew J. Silver to Daily Business News for MHProNews.

Government Accountability Office Evaluates Dodd-Frank Act Effects

January 5th, 2016 Comments off

government accountability office--wikipediaAccording to a report released by the Government Accountability Office (GAO), as nationalmortgagenews tells MHProNews, the Dodd-Frank Act is expected to have a $100 million impact on the bottom lines of community banks and credit unions in the form of higher expenses and forgone revenues. Regulators continue to verify actual costs.

The full impact of the Dodd-Frank Act remains uncertain because many of its rules have yet to be implemented and insufficient time has passed to evaluate others,” the GAO said.

Regulators told us that it is still too early to assess the full impact of Dodd-Frank Act rulemakings on community banks and credit unions, and while they have heard concerns about the increase in compliance burden, they have not been able to quantify compliance costs.”

Particular rules in Dodd-Frank created an increased compliance burden, especially in smaller lending institutions. Fears about loans that are not qualified mortgages have led to reduced loan activities lest the lender face litigation or the inability to sell those loans to secondary markets.

While the GAO acknowledged there were some initial contractions of credit availability, trade groups see this as the need for more regulatory relief from Congress. Today’s GAO report confirms that Dodd-Frank regulations have increased compliance burdens on credit unions,” Dan Berger, president and chief executive of the National Association of Federal Credit Unions, said.

Meanwhile, the National Credit Union Administration (NCUA), the only federal financial regulator to leave a comment, said it would like to see the differences between banks and credit unions in a more detailed analysis.

The appropriate indicators to use in assessing the effects of the Dodd-Frank Act may be different for very small institutions – where most of the credit unions are clustered – than they are for larger institutions,” said the NCUA’s Executive Director Mark Treichel, in a response letter. “Using a set of indicators better-calibrated to the business models may be more helpful in assessing the effects of the Dodd-Frank Act.”

The GAO, noting that the indicators they developed were reasonable, stated, “While we presented similar indicators for banks and credit unions, comparisons between the two types of institutions may not be appropriate and that certain indicators may be more relevant than others for each type of institution.”

The GAO is required to present an annual report on the effects of the Dodd-Frank Act on community banks and credit unions, the impact on financial market stability, and how federal regulators implemented the rules. ##

Memo asserts HUD Code Manufactured Housing Program “Seriously Off Track”

November 14th, 2014 Comments off

hud-logo=credit-posted-daily-business-news-mhpronews-com-In the aftermath of a largely favorable report on Manufactured Housing (MH) by the Government Accounting Office (GAO), and a more problematic one in its wake from the Consumer Financial Protection Bureau (CFPB) on MH lending, MHARR’s current president released a memo outlining 7 ares of concern regarding the HUD Code Manufactured Housing Program.

In the memo, MHARR President Danny Ghorbani, wrote in part, quoting:

Listed below are the seven items addressed in this communication with the program Administrator.  It should be noted that two of these (i.e., items 6 and 7) involve critical issues where the Administrator has committed to taking the proper course of action under the 2000 reform law, which MHARR fully supports, encourages – and thanks the Administrator:   

1. Unwarranted and discriminatory restrictions on the use of manufactured homes

2. Unnecessary and unnecessarily costly expanded in-plant regulation

3. Unnecessary and unnecessarily costly monthly IPIA Subpart I record inspections

4. Misuse of additional label fee revenues contrary to congressional intent

5. Unjustified retroactive Subpart I treatment for attached garages

6. Necessary regulatory reform for the separation of manufactured homes and RVs

7. Costly and discriminatory Department of Energy standards for HUD Code homes   

All of this expanded regulatory activity indicates that the HUD program remains – and continues to progress — seriously “off-track,” veering away from the main focus and objectives of the 2000 reform law and necessitating an intensified effort to roll-back such activities.”

The entire press release and related downloadable letter to Pam Danner, JD, HUD’s Manufactured Housing Program administrator are linked here. ##

(Image credits: HUD Logo, graphic)

MH Industry Pros Respond to CFPB Report

October 8th, 2014 Comments off

richard_cordray_c-span2__creditWhile the Consumer Financial Protection Bureau’s recent report on financing the purchase of manufactured homes (MH) notes buyers of MH are often poor, elderly, rural and vulnerable to high-cost “chattel” (“home only,” personal property) loans, the bureau wants to ensure consumers have access to “responsible credit.” Their report, comments and the resulting controversies are the subject of a new Industry in Focus report, linked here.

Consumer Affairs reporter Truman Lewis says mortgage lenders generally disregard MH lending because the demand is not great, which leaves the door open to five national MH personal property lenders.

However, smaller regional and local MH lenders exist, but CFPB regulations restrict sales people from referring consumers to them for fear of violating CFPB rules.
Dan Rinzema, president of MHVillage and DataComp says the government regulation is misguided and does not help the market for the resale of manufactured homes, which would help make MH a competitive housing choice. Doug Ryan, Director of Affordable Housing Initiatives at the Corporation for Enterprise Development (CFED), a non-profit that supports affordable MH, echoes CFPB’s claim that borrowers are vulnerable to expensive loan products.

Some Washington insiders say the report stems from the stiff grilling CFPB Director Richard Cordray received Jan. 28, 2014 at the hands of the House Financial Services Committee’s Subcommittee, and point to a video of that hearing.

The 55-page report alleges that 68 percent of all MH purchase loans in 2012 were chattel loans compared to three percent of site-built home loans, and included that two-thirds of MH loans were eligible for traditional mortgages but chose personal property loans instead. Chattel loans are quicker to obtain, says the report, but have lower origination costs. Industry finance expert Dick Ernst, a principal at FinMarkUSA, says while the report notes the absence of a secondary mortgage market for MH, the cost to originate personal property loans is the similar regardless of the amount of the loan.

Meanwhile, the Government Accountability Office (GAO) report, in response to a request from the chairman of the House Financial Services Committee for an analysis of HUD’s implementation of the MHIA of 2000, says HUD has fallen short of encouraging Ginnie Mae to securitize manufactured home loans, which in turn reduces the availability of affordable MH.

The law firm of Bradley Arant Boult Cummings LLC said in a statement the CFPB report indicates the agency is showing interest in the MH industry which may lead to adjustments that could reduce burdens on the lenders and lower costs of credit to borrowers. Robert Williamson, of Hart King Law, says the paper may be a public recognition of the importance of MH to the consumer housing market, and may in turn stimulate a more robust MH market.

The Manufactured Housing Association for Regulatory Reform (MHARR) notes the report may be establishing a jumping off point for future CFPB activity, while the Manufactured Housing Institute (MHI) remarks the CFPB acknowledges the negative impact the Dodd-Frank Act, implemented in Jan. 2014, is having on the manufactured housing market.

Tim Williams of 21st Mortgage Corporation says the statement that 60 percent of chattel customers own their land and are therefore eligible for a conventional mortgage is incorrect, noting it is irresponsible of the CFPB to make such false statement. He says 26 percent of 21st’s borrowers say they own their land, but he is pleased the CFPB admits their regulations restrict credit to manufactured home owners.

When consumers are considering buying a site-built or a manufactured home, the two pieces of crucial information are the down payment and the monthly payment. MH sales people are restricted in what they can offer in response to such a question, while some believe it’s not a violation if a Realtor ® gives such information.

A chart from Fannie Mae demonstrates that even when the interest rate is higher for an MH, monthly payments often make the purchase of a manufactured home the lower cost option. The restrictions on MH salespeople helping consumers find financing can turn people away from even being interested in a manufactured home, further damaging the industry’s chances of offering affordable options, as Jason Boehlert, Senior VP of Government Affairs at MHI notes.

Major MH lenders have told MHProNews they have added staff to deal with the increase of applications being “shot-gunned” to multiple lenders, since the CFPB regulations took effect in Jan. 2014. This is increasing costs, all because MH retailers do not want to be accused of steering customers, which could result in heavy fines.

In addition, the lack of a secondary market for MH loans also limits mortgage lenders from making MH loans, which higher costs of funds makes the loan cost more to the borrower. The CFPB regulations result in lenders not accepting loans for under $25,000 because the cost to originate and service that sized loan makes them unprofitable.

While CFPB Director Cordray says, “Manufactured housing is a critical source of affordable housing for some consumers,” the regulations of the agency work is in the opposite direction—preventing potentially millions of Americans from buying durable, affordable, energy efficient homes that could stimulate the housing market and the jobs that would accompany the stimulus. ##

For the complete commentary, please click here.

(Photo credit: C-SPAN 2)

CNBC says 5 to 6 Million Renting Should Own – Affordability = Credit Access, Rates & Price

August 27th, 2014 Comments off

credit-comstock-getty-cnbc-posted-daily-business-news-Tim Rood with the Collingwood Group was part of a CNBC discussion that pointed to factors that manufactured home professionals relate to: the many – and often competing – dynamics that cause someone to buy a home or stay in a rental. Elements such as price and interest rates, CNBC’s Diana Olick  tells MHProNews,  along with knowledge of options, down payments and access to credit all impact prospective home buyers.

Olick says, “There has long been a saying in the real estate market that potential homebuyers don’t buy according to the home price or the mortgage rate. Instead, “they buy the monthly payment.” The monthly payment is, of course, a combination of rate and price, but the weight of each can change dramatically.”

Olick described factors in the last boom and bust: “For example, home prices were able to soar uncontrollably during the last housing boom only because risky mortgage products at the time made monthly payments minuscule and down payments often nonexistent.”

MH professionals know that well intended, ‘corrective’ regulatory hurdles imposed by the Consumer Financial Protection Bureau (CFPB) and/or states have in many cases harmed sales that would have taken place otherwise.  

For example, when a community operator or private money investor is willing to lend at a rate that still yields an affordable payment, but fails to fit the peghole regulators established, would-be sales are lost. This in turn keeps factories from building homes that would otherwise have been ordered by MH retailers, developers and communities to fill demand.

If Rood is correct, 5 to 6 million potential home sales represent a huge economic stimulus that would create millions of jobs. As demand on rentals would ease, monthly rates could be mitigated and housing affordability for millions more would improve.

Manufactured housing professionals can point to facts found in the recent GAO study which cites the lower monthly payment MH enjoys, combine it with stories of affordable quality living, to tap into more sales, to sway more opinion leaders and public officials.

“It never ceases to amaze me how hung up mortgage borrowers can be on rate,” said Matthew Graham of Mortgage News Daily. “In fact, a lot of times we have to remind them that the .125 percent difference in rate only amounts to X dollars and they’re surprised.” ##

(Image credit: Comstock/Getty/CNBC)

(Editor’s Note: A chart by FannieMae, published in this article here, underscores the relationship of price, rate and affordability for manufactured housing.)

 

Manufactured Housing Label Fees to Rise Sept. 12

August 15th, 2014 Comments off

mhi  photo credit  mh under productionThe Manufactured Housing Institute (MHI) reports that the Department of Housing and Urban Development (HUD) will increase label fees on new manufactured homes (MH) to $100 per label effective Sept. 12, 2014 to help cover the costs of administering the program. Manufacturers that have already purchased the $39 labels will be assessed the additional $61 if the labels will be used on or after Sept. 12. A recent Government Accountability Office (GAO) report criticized HUD for not properly implementing the requirements of the Manufactured Home Improvement Act of 2000, and suggested the label fees be raised to cover program costs. MHI suggested the increase be based on production, as MHProNews has been informed, but while HUD maintains there is not a direct correlation between production and operating expenses, it will consider reducing the label fee if production unexpectedly rises. To view a copy of the final rule, click here. ##

(Photo credit: Manufactured Housing Institute–MH under production)

FHA Bail-Out? 50-50 Odds

February 19th, 2013 Comments off

Federal Housing Administration (FHA) Commissioner Carol Galante, telling the House Financial Services Committee her agency will not likely need Treasury assistance this year, says the FHA has raised its insurance premiums five times since 2009, is raising them again April 1, and is issuing new regulations to reduce losses. The Government Accountability Office (GAO) has the FHA in its sights of “high risk” government programs, and House Financial Services Committee chairman Jeb Hensarling, R-Texas, says FHA’s designation as a high risk is not surprising. “We know the FHA is broke and is quickly approaching bailout-broke.” There are 734,650 seriously delinquent loans in its portfolio, and independent auditors estimate FHA will have to absorb $60 billion in claims by the end of FY 2014, most of which are on loans originated in those underwater days of FY 2007 through FY 2009. However, refinancings fourth quarter year-over-year doubled, totaling $32.7 billion in Q4 compared to $15.4 billion in the same quarter of 2011. FHA is refinancing 50,000 current FHA borrowers a month; and the Congressional Budget Office (CBO) says after updating its estimates, FHA took in $4 billion more than originally estimated. As nationalmortgagenews tells MHProNews, mortgage consultant Brian Chappelle says, “FHA is endorsing the best loans in its history.”

(Image credit: CNNMoney)

HUD Seeking Input from MHCC

January 10th, 2013 Comments off

A letter dated Jan. 9, 2013, from Henry Czauski, HUD’s Acting Deputy Administrator in the Dept. of Manufactured Housing, to Robert Solomon, Project Mgr. of the Manufactured Housing Consensus Committee (MHCC), says the Government Accounting Office (GAO) finished a study of air quality and ventilation systems in manufactured housing. The GAO recommends HUD, working with the MHCC, develop a method to test the overall effectiveness of the ventilation system in terms of indoor air quality, as part of the HUD certification process. As MHProNews has learned, the letter is essentially asking for input from the MHCC on the GAO recommendations. For the complete text, click here.

(Image credit: Dept. of Housing and Urban Development)

GAO: Ventilation Possibly Deadly in MH

November 15th, 2012 Comments off

According to usgovinfo, a recent report from the Government Accountability Office (GAO) says the air quality in manufactured housing may be compromised by carbon monoxide entering the homes. GAO says the problem stems from fresh air intake and exhaust vents constructed too close together, which could allow CO2 and other contaminants to enter the home, given unique wind patterns. Separating the vents with more distance allows for more dilution of the contaminants even if they do come in. The agency says HUD’s ventilation systems for manufactured homes has not been updated since 2005, and does not reflect standards used by the home building industry. MHProNews has learned the GAO recommends HUD require tests to validate the performance of ventilation systems.

(Photo credit: gfhomesandland)

Dodd-Frank Entities Lack Transparency and Accountability

September 14th, 2012 Comments off

The House Financial Services Committee says after an extensive nine month audit by the Government Accountability Office (GAO) of the Financial Stability Oversight Committee (FSOC) and the Office of Financial Research (OFR), both creations of the Dodd-Frank Act, public information of their activities is limited. Financial Services Committee Chairman Spencer Bachus, and Oversight and Investigations Subcommittee Chairman Randy Neugebauer, who requested the report, said in a letter to Treasury Secretary Tim Geithner, who is chairman of FSOC, “The actions that FSOC and OFR have taken, and will take in the future, have the potential to directly and significantly affect the financial stability of the United States. It is therefore critically important that FSOC and OFR operate in a manner that promotes greater congressional and public understanding of their actions.” MHProNews has learned in a letter to Secretary Geithner, Reps. Bachus and Neugebauer ask for more detailed recommendations, accountability, and transparency of the proceedings of the FSOC, and how the agency will promote more coordination among its member agencies.

(Image credit: Facebook)