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DJ Quixote’s Adventures In La Manufactured Housing

November 10th, 2014 No comments

This is my third attempt at writing this article. I had to trash my two previous efforts.

After a bit of time, a bit of reflection, and a bit of perspective I’m giving it another shot. This third attempt was born from my previous efforts to understand why I was having such a difficult time penning a response to the CFPB white paper as more discarded paper accumulated around my desk.

spanish-windmill-credit-dj-pendleton-mhpronews-com-executive-director-texas-manufactured-housing-association-

The only reason I can determine is that like the self-proclaimed knight, Don Quixote, turned crazy by an obsession of returning to a world of chivalry, I have at this point been driven…nuts.

The experiences I have had over these last few years reading federal laws, proposed regulations, final regulations, interpretations of regulations, readiness guides, flowcharts, and watching hearings, have finally infected my brain in a way that has put me on a course, for this article at least, into a world of perception distortion and fantasy.

Similar to Don Quixote’s obsession that he was a knight out on a noble quest, my incessant reading of CFPB publications has cast me down a path that is no less fantastical. Rather than fight against this effect, I’m choosing to steer into the mental skid.

There are many industry responses on the recently published CFPB white paper on manufactured housing. Those lamenting the inadequate attention the Bureau gave to realties in our market and glancing over things like cost of funds, interest rate risk, borrower risk, lack of secondary market, and portfolio based lending are all well founded. For more on this I’d suggest Dick Ernst article Deconstructing the High Cost Mortgage Loan. In my two earlier drafts I did this too. And for follow up articles after I come back from my journey today atop my skinny stead, Rocinante, I might publish them as well.

But not today.

Today I’m asking that you travel with me and my trusty sidekick, Sancho, off into a distorted reality of a world of my creation. So indulge me for a little while, even if some of the suggestions are as preposterous as fighting windmills I believe to be giants. For this is my Don Quixote journey compelled by my most recent reading of the CFPB white paper on manufactured housing.

BACKGROUND

Before jumping into my La Mancha, a quick bit of context could be helpful for those not as familiar with recent CFPB happenings.

On September 30, the CFPB published a white paper on manufactured housing. If one were inclined to give the CFPB the benefit of the doubt, you could conclude they tried their best to present an objective analysis of our industry without injecting any intentional or unintentional biases. Of course, there are those that will assert they did not achieve this, and others still that claim this was never their intention. My goal will be to stay more positive than the cholericly tempered literary counterpart in my feeble attempt at analogy, but forgive my moments of weakness when certain angers are irrepressible (Note: I’m trying to up my level of analogy by turning to classic literature, but worry not as I’m sure Star Wars and Lord of the Rings themed articles will dominate my future efforts).

The white paper identifies the following seven “key findings:”

  1. Manufactured housing is disproportionately located in non-metropolitan areas.
  2. Compared with residents of site-built homes, manufactured-housing residents are somewhat more likely to be older and tend to have lower incomes or net worth.
  3. Manufactured homes typically cost less than site-built homes.
  4. About three-fifths of manufactured-housing residents who own their home also own the land it is sited on.
  5. An estimated 65 percent of borrowers who own their land and who took out a loan to buy a manufactured home between 2001 and 2010 financed the purchase with a chattel loan.
  6. Manufactured-home owners typically pay higher interest rates for their loans than site-built borrowers.
  7. The current state of manufactured housing production, retail, and financing reflects in part a rapid growth during the 1990s and subsequent sharp contraction.

If you would like to see the press release from the CFPB you can find it here:

If you want to read the 54 page white paper you can find it here:

http://www.mhpronews.com/home/industry-news/industry-in-focus/8460-cfpb-report-alleges-manufactured-housing-lending-is-expensive-sparks-controversial-comments-from-cfed-mhi-and-other-mh-industry-professionals (Editor's note: See download at the link above.)

I’m not going to address in detail or systematically attack the CFPB assertions. Quite the opposite.

I’m going to assume the basis for the examination of our industry and the subsequent white paper was intended to drive future policy based decisions and discussions. Where I might differ with the regulators is where I think the facts they have compiled should direct us, and the questions it brings to light that should be the focus of their future efforts.

However, I have a feeling my policy proposals will only come to be in fantasy and not in reality. But come on Sancho; I’m sure this will only hurt a little.

Here is my list:

  1. Why is manufactured housing disproportionately located in non-metropolitan areas? Shouldn't the policy be of inclusion and consumer choice rather than exclusion and limits?
  2. Wouldn’t it be nice if the housing playing field were level, markets not artificially influenced by selective polices, and either the removal of subsidies or, alternatively, bring the subsidization to manufactured housing to compete, rather than stacking the deck against us?
  3. Why was there no attention given to existing state laws, regulations, consumer complaint levels and consumer notices? And why does the white paper read as though there is a critical and immediate need for more regulations and notices?

WHY ARE CITIES STILL ALLOWED TO HATE US?

The white paper does list factors as to why manufactured housing is more of a rural housing option and not in more populated metropolitan areas. They mention zoning prohibitions as a contributing factor. Those of us in the industry know this is the factor limiting manufactured housings’ presence in urban settings. The question this should spawn is whether or not it is good policy to allow cities this type of prohibition. With new, modern, efficient, heavily regulated manufactured homes, what is the public policy that benefits a city from prohibiting manufactured homes and what are the benefits to removing these restrictions?

My case for the latter is simple – in city zoning restrictions modern manufactured housing should be treated exactly the same as all site-built residential construction. Equality. This would create a world where any type of discriminatory treatment directed exclusively towards manufactured housing placement is void.

Now some regulators and city officials might scoff in stern disagreement, but why?

Whatever the city restrictions are for site-built housing placement have those apply equally to manufactured housing. The preemptive federal construction code and state installation requirements modeled from the national standard satisfy any safety and soundness concerns.

Allow these standards that insure the homes are not substandard to serve the purposes they are intended. And if a city decides to impose some sort of home aesthetic mandates, energy efficiency standards, or any other requirements (so long as they don’t interfere with the federal construction or installation codes), simply require the standard to apply to all housing equally. This would allow manufactured housing to compete on the same playing field and increase consumer choice.

Another reason this is good policy is to consider the benefits the economy and labor force receive through a manufactured setting.

We are talking about factories with skilled, well paid, middle class, labor jobs. They draw paychecks, pay taxes and receive benefits. Not to mention worker protections and oversight from internal safety and quality control, to regulatory oversight and redress like worker’s compensation protection and OSHA. They are also U.S. jobs that are not outsourced.

In manufacturing you have greater efficiency in construction, less waste, organized and predictable supplier networks benefiting those producers down the line. How is it that this reality isn’t championed like other manufacturing industries?

How much more do you think your car would cost if instead of being produced in a factory all the parts were shipped to your driveway where contract workers showed up and built it on site. How long do you think it would take to build it? What about your television? How about your cell phone? If the market is allowed to work without manipulation efficiencies in production lower costs allowing some consumers the opportunity to pay less for an equivalent product. The white paper addresses the fact that on a square foot basis manufactured homes cost less than half as much as the estimated $94 per square foot site-built home.

Some consumers would like to have this choice when it comes to housing. And for others it would open up the chance for them to be homeowners who otherwise would not because they were priced out of the site-built market.

And yet, I’m not even advocating for a wild swing in the pendulum away from site-built to manufactured housing. I’m simply saying remove the non-level playing field, and allow us to compete equally.

Could the CFPB impact this? Sure.

With its broad authority and charges for greater equality, fair housing, transparency and consumer choice there are measures the Bureau could take to level the field.

One quick suggestion, when dealing with a new manufactured home in a metropolitan area that conforms to the federally mandated code and equivalent site-built restrictions for a given area, in order for a local government to pass a housing restriction on only manufactured housing and not any other residential housing, they must demonstrate an overwhelmingly compelling reason as to why they believe such a restriction is superior policy. In their required justification they would have to defend why their selective exclusion would not have an adverse or disparate impact on housing choice and any protected classes such as families who would like to live in something larger than a one-bedroom apartment or elderly retirees on fixed income who need a lower cost home choice. Failing to meet a much higher burden in ordinance creation would result in the ordinances being deemed void as either against public policy or a violation of fair housing ideals.

I know, such things are crazy talk from a guy wondering around in the sun in an old suite of armor. Completely irrational, right?

Well, I got the outfit on, and I’m on the damn horse so I might as well go for it, so here it goes.

The CFPB is big on consumer notice and consumer choice, so why not add a consumer notice for any site-built home being financed that says, WAIT. Before you sign, did you know you might be able to buy an equivalent house for less than half the cost per square foot of this one?” The same notice mandate could be applied to Fair Housing regulations requiring disclosures prior to a home purchase or a residential rental that a manufactured housing option would be hundreds of dollars less per month in all-in housing costs.

Reading between the lines of the white paper it sounds like more notices and warning mandates are coming down the pike for the manufactured housing industry, so I’ll ask another crazy question. Why don’t we ever get notices showing our clear advantages for consumers?

WHERE ARE YOU SUPPOSED TO LIVE IF YOU MAKE $26,000 YEAR?

The demand of affordable housing is undeniable. As incomes stagnate and living costs increase the demand for affordable housing will continue to grow. The manufactured housing story in this equation is one of “haves-and-have-nots.” But in our story the multi-billion dollar issue is subsidization. And we are in the “have-not” camp.

Any way you slice any of the myriad of “affordable housing” incentives or programs, at their core is government subsidization. I know there are the Libertarian minded readers out there disgusted at the idea of government subsidy. And similar to the city ordinance restriction argument I previously made, all things being equal and all subsidy removed, I know manufactured homes would compete for a much higher market share of housing.

However, while I’m admittedly crazy in this current effort, I’m not crazy enough to ever think all subsidization in all forms could practically be removed. I might think I’m a knight on a horse, but I’m not so nuts to think I’m the back-end of a horse (though some may beg to differ).

Instead, this Don Quixote is on a different quest of insane ideas. If you are going to subsidize programs to foster home affordability, why don’t you provide subsidy and incentive to clearly the most affordable housing option of manufactured homes?

Manufactured housing is, at times, somewhat eligible for some types of current programs. But in practice the government policies and attentions applying affordable housing subsidy in large scale to manufactured housing are more of a unicorn than an everyday work horse.

The subsidy is pervasive starting at the federal level, but also at state and city levels. Site-built and multi-family developers are granted incentives, tax breaks, and many other subsidies if they are building affordable homes or units. Most of the time the requirement to get the subsidy is that only a small portion of the total development provide affordable options. This is most common in apartment construction, but site-built and condo development also share in these subsidy treasures.

I know I’m the crazy one on the horse here, but let me see if the sane world has clearly figured this out.

The government will provide incentives, tax breaks and subsidy to build affordable housing that only serves a small percentage of the total development, then additional government subsidy is layered on to the buyer or renter in down payment assistance, reduced principal programs, subsidized lower interest rates, forgivable loans or rental housing vouchers to get people into “affordable housing.” I’m sure this makes perfect sense to everyone else, but in my clearly delirious mind it begs the question, “Why not just focus on housing that costs the least?”

Granted, there is a lot of dangerous substandard housing. The Colonia problem in Texas to name just one. But for safe, efficient, and easily replicable affordable housing, how is it that manufactured housing is either ignored or purposefully overlooked?

The white paper provides the facts on the superior affordability of manufactured housing in Table 5 when they compared manufactured housing in both metro and non-metro areas to both site-built and renters. Manufactured housing was less expensive ranging by more than half the monthly costs (metro site built $1,505 to metro manufactured housing $686) to about $100 less per month (non-metro rental $654 to non-metro manufactured housing $551). This means we win in all categories in all locations on affordability.

Table 5 Source, CFPB Report.

If manufactured housing is the least expensive compared to any other safe, regulated, quality living accommodation, then imagine the benefit of subsidization directed at manufactured housing. Wouldn’t such a crazy idea better serve the goal of providing affordable housing to more people?

Coming out of the recent housing crash, the idea of people choosing a home they could afford and living within their means seemed to penetrate the psyche of most of America. However, there seems to be some terrible stigma in maintaining this simple idea, even in the context of affordable housing, if the result is a conversation about homes that cost less than $100,000, less than $70,000, less than $50,000 and especially homes below $30,000.

Why?

If the home is regulated to ensure consumer safety, efficiently produced, and in nearly all cases larger than any other option at a similar price point, why then is the idea so ludicrous that this might be the best choice some buyers or renters could make?

I can’t get an answer out of my horse or Sancho on this, so I guess I’ll have to accept the idea that the saner approach for a person who can only afford a $45,000 house is to live in a $165,000 house with $120,000 worth of combined developer and individual subsidy attached to it.

It sure seems to make sense that subsidy dollars could go further and help more people if applied to the type of housing clearly superior in affordability. But then again, I’ve lost my marbles.

By the way, just under $40 billion was budgeted to be spent by HUD for all of its subsidized affordable housing programs in 2012, and this does not include any of the loan guarantee dollars and authority to incentivize securitization of mortgage loans that drastically underutilize manufactured housing.

I’m not saying manufactured housing programs should receive all or even the bulk of the subsidies. I’m merely suggesting that when doling out billions of dollars some focus and some programs specific to manufactured housing should be adopted. Such programs would better achieve the goals of providing safe, affordable housing while preserving the dignity and self-worth of recipients who receive the benefits.

NOTICE, TRANSPARENCY AND CONSUMER PROTECTION

The white paper has been read by more than just this crazy rider as a volley of shots across the bow and foreshadowing of possible new regulations for manufactured housing.

Here are just a few excerpts:

“At the same time, these same groups include consumers that may be considered more financially vulnerable and, thus, may particularly stand to benefit from strong consumer protection. “

“Thus, manufactured-home owners who can choose either chattel or mortgage financing (generally, those who own the land to which the manufactured home is being permanently affixed) may face a tradeoff between lower costs at origination and a quicker closing with less collateral, on the one hand, and lower total costs over the life of the loan along with greater consumer protections on the other.”

“The extent to which consumers are aware of theses tradeoffs and how consumers weigh them remains an open question. It is not clear to what degree upfront costs and convenience, lack of availability for mortgage financing, or lack of relevant information about financing options drive consumers to chattel financing.”

“Chattel loans may close more quickly than or have lower upfront costs than loans secured by real property, but chattel loans tend to have higher interest rates and provide borrowers with lesser consumer protections than mortgages secured by real property.”

“The relative scarcity of data on manufactured housing compared with data available on site-built housing and mortgage finance in general remains a challenge for research related to manufactured housing. This gap in data availability may begin to narrow, however, in the coming years.”

“The classification of some manufactured-housing retailer activities as loan originator activities provides consumer protection for homebuyers in what may be a high-pressure sales environment.”

However, nowhere in the white paper, in particular when addressing consumer protection and apparent perceived abuse by the industry, does the paper mention state law or state regulation. Manufactured housing is arguably the most regulated form of housing stemming from both the federal level and state level.

At least in Texas there are numerous consumer disclosures and cooling off requirements prior to buying to address the often mentioned “high pressure sales.” Texas also has a three day right of rescission for all consumer funds. In fact, in Texas the consumer is so protected that an equivalent contract agreement that exists in the site-built world were a buyer may end up losing earnest money is not allowed in Texas for a manufactured home purchased from a licensed retailer.

The CFPB fails to acknowledge that state regulators and auditors are enforcing consumer protection laws and regulations. These state level “cops on the beat” audit consumer files to ensure disclosures are provided, and the goals of consumer choice and transparency are achieved.

In Texas, there is also a specific chattel manufactured housing lending regulator, the Office of Consumer Credit Commission. With existing state laws and regulations this additional regulator is there to protect consumers who obtain chattel manufactured home loans. Texas state law requires any chattel loan contract contain the name and contact information of the OCCC notifying all Texas chattel manufactured home borrowers who the consumer protection regulator is and how to get in touch with them to file a complaint.

The white paper implies there are great injustices and consumer harm befalling those extremely vulnerable who are forced, as a last result, to purchase manufactured housing. The CFPB’s perception of consumer harm prompts them to allude to future CFPB regulation. But before we run to put out some blazing inferno, maybe we should ask if there is even a fire burning.

Let’s look at Texas’ manufactured home chattel financing. In 2013 HMDA data shows there were 7,094 manufactured homes sold with financing in Texas. The titling data at TDHCA actually has the number of chattel financed manufactured homes sold in 2013 at 9,759. As many institutions are currently exempt from HMDA reporting, and by the CFPB’s own admission the HMDA data is lacking when it comes to manufactured homes, we are going to use the Texas titling data. However, in order to align with the fiscal year used in the reporting of the OCCC, the apples-to-apples time frame we need is August 2012 through September 2013.

In Texas we had 9,509 manufactured homes sold with chattel financing between August 2012 and September 2013. In this same time frame the total number of consumer complaints processed at the Texas OCCC for manufactured housing lenders of chattel loans was 15. This means the percent of complaints compared to chattel manufactured home loans is .157 percent. I hope I’m not being too crazy to think that any industry would love to have less than 1/5th of a percent as their ratio of consumer complaints to sales.

I know the skeptics and supporters of increasing regulation might take issue with my facts. In order to cover all my bases I also looked at the CFPB’s own consumer complaint database. According to the CFPB their complaint database for mortgages dates back to December 1, 2011. The complaint data does not distinguish manufactured home from site-built, nor does their mortgage category separate chattel from real property mortgage loans. But you can filter to just mortgage complaints in Texas where the consumer disputed the company’s (lender or servicer) response.

When you filter the data to those categories there are 1,419 consumer disputed, mortgage complaints in Texas. Again, we can’t narrow down the complaints to chattel manufactured housing, but the companies’ names are listed. Based on the names of the common lenders who make or service manufactured chattel loans, the total count I have for companies who possibly have chattel mortgage complaints lodged against them with the CFPB is 64. Obviously, all 64 of the complaints are not manufactured chattel loans, but there is no way for me to tell with the data presented. It is easy to assume, especially with manufactured housing accounting for only 7.6 percent of the Texas housing stock that if one were able to dissect the 64 only a small percentage might be manufactured housing chattel based complaints.

But let’s err on the side of very conservative assumptions. Let’s take all 64 as if all of them were the result of consumers complaining about chattel mortgages on manufactured housing in Texas. Since December 1, 2011 when the CFPB database begin populating complaints on mortgages through July 31, 2014 there were 23,292 manufactured homes sold with chattel loans in Texas. Again, knowing the real number is lower, most likely much lower, than 64, but using that for a conservative estimate the ratio of complaints to sales with chattel loans is .274 percent.

In the face of this data, I’m forced to take off my helmet to scratch my head in confusion. Where is the extreme injustice? Where are consumers being harmed at such startling degrees that require significant federal regulatory reaction?

Let’s assume it is impossible to eliminate in any market all consumer complaints. If everyone can agree zero consumer complaints is not possible, then there must be some threshold goal. Ideally this goal is very low. In my delirious state I might suggest that less than half of one percent is very low. Everyone should further be able to agree that any additional regulation comes with additional costs that must be absorbed, almost assuredly in the form of pass through costs to all consumers. There is also the reality of diminishing returns triggered when each additional costs only produces fractional changes. The question then is, how much consideration and cost benefit analysis is being done when additional regulatory burdens are contemplated? If the reporting by consumers of all alleged harm is incredibly low, but the cost of additional regulations with the goal of reducing consumer harm further are felt by 100 percent of the consumers, is the additional regulation really in the best interest of the consumers?

I’ll put this another way. I’ll put it in the form of a consumer disclosure and consumer choice.

Consumer Notice: This industry historically experiences less than half of one percent in consumer complaints. Knowing this would you choose to pay an additional $175 to lower that amount by an additional .002 percent?

OBVIOUSLY RAMBLINGS OF A CRAZY OLD COOT

Clearly many of the points in this article are being made with hyperbolic language, rhetorical questions, sarcastic tone, and wild assertions. This was done with the purpose of trying to shock the system so that for some maybe these extremes make them see things or think of things differently.

For those that took the time to indulge my efforts in this article and leave with the same impression you started that I’m off tilting at windmills, well, then I’m sorry to have wasted your time. However, my hope is for most there were at least some things and some ideas that provoked more questions or ideas.

And finally, for the others who found themselves agreeing with me, nodding your head while you read, and pumping your fist thinking, “man, he is right,” (ok, that last one I know was a stretch), well I have news for you too…I hope you have lots of metal polish around to shine up your suite of armor because you are clearly just as crazy as me. ##

dj_pendleton__credit__mhpronewsDJ Pendleton

Executive Director

Texas Manufactured Housing Association

Manufactured Housing Institute Responds to Doug Ryan-CFED commentary on CFPB report on Manufactured Housing Finance

October 6th, 2014 No comments

Tony,
As the national association serving as the voice of the manufactured housing industry, Tim (Williams) asked that MHI respond to your inquiry. Our official response is provided below.

Doug Ryan and CFED have been consistent supporters of manufactured housing and continue to recognize manufactured housing as an important source of affordable housing for low- and moderate income families, particularly in rural and underserved communities.

Unfortunately, they fail to recognize the valuable role retailers and sales representatives have historically played in helping consumers identify financing alternatives. Ryan's message insinuates the industry is somehow preventing consumers from selecting less expensive real estate-secured mortgage loans. He says, "many borrowers of chattel products could have qualified for traditional, less expensive mortgages but did not get the chance simply because they were not offered or made aware of the options.”

mhi-logoAs the regulations are currently written—this is what MHI is attempting to fix in HR 1779/S 1828—the retailer cannot help the customer find a mortgage lender or inform the consumer of alternatives. The consumer needs the retailer’s help to become informed of the financing alternatives.

Today, a consumer might contact a dozen conventional mortgage lenders without locating a lender willing to assist them with a low balance mortgage. Prior to the CFPB Loan Originator compensation rule (CFPB defines sales commission from the sale of a home as meeting the compensation definition under the Loan Originator rule), a retailer representative could discuss financing alternatives with consumers including conventional mortgage lenders who offer low balance conventional mortgage loans.

Since the Loan Originator rules became effective, it has become nearly impossible for a retailer to assist consumers without inadvertently becoming considered a Loan Originator and becoming a covered person under Bureau regulations. CFED wants consumers to be informed of financing alternatives, but the people who have the best opportunity to inform them are effectively barred from having those conversations.

Ryan adds, “Indeed, one clear way to address this issue would be for industry to support titling reform that would give families the option to title their homes as real estate and the opportunity to access real estate loans."The manufactured housing industrysupports legislation in all states to provide the alternative of titling manufactured homes as real estate where the home is sited upon land owned by the consumer and when financing is needed, the consumer pledges a first lien position in the land.

jason-boehlert-manufactured-housing-institute-(c)mhpronews-com-75x75-.gifJason Boehlert
Manufactured Housing Institute (MHI)
Senior Vice President of Government Affairs
1655 North Fort Meyer Drive
Suite 104
Arlington, VA 22209

Related Links:

1) – MHI's Response to CFPB's Report (Editor's Note, the MHI link includes the full CFPB report as a free download)

2) – MHARR's Response to RV legislation and CFPB's Report on Manufactured Housing

3) – CFED's Doug Ryan sounds off on Consumer Financial Protection Bureau (CFPB) Report on Manufactured Housing and MH Financing

4) – CFPB Report on Manufactured Housing Signals Areas of Future Concern

    (Editor's Note: The views expressed by Jason Boehlert are his own and/or those of the MHI, and should not be construed to be the views of MHProNews or our sponsors.Other viewpoints on this or other industry topics are encouraged.

    MHProNews plans anIndustry in Focus Reportusing extensive comments from a range of industry professionals on this topic. Watch for it mid-week at the news/reports module link above.)

    CFPB Report on Manufactured Housing Signals Areas of Future Concern

    October 6th, 2014 No comments

    On Tuesday, the Consumer Financial Protection Bureau (“CFPB”) released a white paper summarizing their research on the manufactured housing industry. The Bureau relied upon information compiled by various surveys, data available pursuant to the Home Mortgage Disclosure Act (“HMDA”), and voluntary submissions of information by institutions in the manufactured housing industry. Although the CFPB acknowledges that they are still seeking additional information on the industry, the report, among other things, provides a detailed description of the manufactured housing market, the demographics of consumers who reside in manufactured homes, and the impact of the current regulatory climate on the industry.

    The CFPB also developed seven “key findings” from this research, many of which likely will come as no surprise to those actively involved in the manufactured housing industry. For example, the Bureau explains that manufactured homes are more likely to be located in non-metropolitan areas than site-built homes, and that manufactured homes typically cost less than site-built homes. These types of findings lead the Bureau to conclude that the industry is “an important source of affordable housing, in particular for rural and low-income consumers.” On the other hand, however, they believe that “these same groups include consumers that may be considered more financially vulnerable and, thus, may particularly stand to benefit from strong consumer protections.”

    With respect to the specific protections that may be necessary, the CFPB declines to make any conclusions and, in fact, leaves certain questions open for further research. For example, the white paper describes how consumers in the manufactured housing industry can either utilize real-property financing or chattel financing, and explains some of the short-term and long-term trade-offs that exist between the two options. However, it appears that the Bureau is concerned with, and wants more information on, “[t]he extent to which consumers are aware of these trade-offs and how consumers weigh them.” This information indicates that the CFPB will pay particular attention to whether or not borrowers are adequately informed about the trade-offs associated with pursuing chattel financing instead of real-property financing.

    The report does acknowledge that some of the title XIV Dodd-Frank Act amendments, including those made to the Home Ownership and Equity Protection Act (“HOEPA”) and the Truth in Lending Act (“TILA”), expand protections for consumers in the manufactured housing market. They also briefly describe the actual and theoretical impacts of these laws and the underlying regulations. For example, they admit the possibility that additional disclosure requirements and other burdens could increase the cost of extending credit to consumers seeking financing for a manufactured home. Prior to the rules being finalized, the CFPB received comments expressing concern that the proposed HOEPA high-cost thresholds would disproportionately impact small-balance loans that are often used to purchase manufactured housing. Many in the industry believe that these standards, which have been in effect since January 2014, are in fact reducing the availability of credit in the manufactured housing market because these loans are now classified as high-cost.

    Similarly, the new Loan Originator Compensation (“LO Comp”) rules in TILA may also be increasing the consumer’s cost of obtaining credit for a manufactured home. Unlike realtors, manufactured housing retailers are not exempt from the LO Comp rules. In order to avoid being considered a loan originator, and to avoid having to go through an expensive licensing process, manufactured housing retailers are often not referring potential borrowers to specific creditors that they know are willing to extend financing for a manufactured home. This has resulted in consumers being left unaware of which creditors are willing to extend credit and the requirements each creditor has for approving a loan. Consumers, therefore, are submitting more applications and, because of the lack of important information, are more frequently being needlessly denied.

    Despite acknowledging that the manufactured housing industry still has concerns about the impact of the CFPB’s new rules, the Bureau declines to accept that the rules have adversely impacted the market. Instead, they “will continue to monitor the effect of [their] rules on the manufactured housing industry and on consumers who purchase or seek to purchase manufactured homes.” In the meantime, the Preserving Access to Manufactured Housing Act, which would address at least some of these concerns, remains in Congress.

    If nothing else, this white paper should serve as a warning that the CFPB has taken an interest in the manufactured housing industry. The Bureau is continuing to monitor the impacts of the new mortgage rules on the manufactured housing market, which could signal that the Bureau may be open to making adjustments to the rules that would reduce burdens on creditors and lower the cost of credit for consumers. However, they have also tipped their hand to at least one area of ongoing concern. Creditors originating chattel mortgages should pay particular attention to the amount, and types, of information that is being provided to borrowers and should ensure that they are fully informed of their financing options and the costs and benefits associated with each.

    ##

    Republished with permission. This article first appeared in Financial Services Litigation & Regulatory Compliance Alert, a publication of Bradley Arant Boult Cummings LLP.

    About the Authors:

    Jonathan_R_Kolodziej-jd-bradley-arant-boult-cummings-llp-posted-industry-in-focus-mhpronews-com-75x75-Jonathan R. Kolodziej, JD, is an associate in the Birmingham office where he is a member of the firm’s Financial Services Litigation and Compliance Team. His regulatory compliance practice involves assisting some of the nation’s largest financial institutions and mortgage companies as they implement, and demonstrate compliance with, various obligations imposed on them by the Consumer Financial Protection Bureau (CFPB) and state banking regulators.

    bill-matchneer-jd-formerly-hud-cfpb-now=bradley-arant-boult-cummings-llp-posted-industry-in-focus-mhpronews-com-75x75-

    William “Bill” W. Matchneer, JD, recently joined the Washington DC office as senior counsel. He retired from the CFPB in February, where he had been one of the team leads for the regulations implementing the Dodd-Frank mortgage requirements. He previously spent ten years at HUD as manager of the Office of Regulatory Affairs and Manufactured Housing and Senior Counsel for Regulatory Enforcement.

     

    Related Links:

    1) – MHI's Response to CFPB's Report  (Editor's Note, the MHI link includes the full CFPB report as a free download)

    2) – MHARR's Response to RV legislation and CFPB's Report on Manufactured Housing

    3) – CFED's Doug Ryan sounds off on Consumer Financial Protection Bureau (CFPB) Report on Manufactured Housing and MH Financing

    4) – Manufactured Housing Institute Responds to Doug Ryan-CFED commentary on CFPB report on Manufactured Housing Finance

    (Editor's Note:  The views expressed by Messrs. Kolodziej and Matchneer are their own and/or those of the organization they work for, and should not be construed to be the views of MHProNews or our sponsors. Other viewpoints on this or other industry topics are encouraged.

    MHProNews plans an Industry in Focus Report using extensive comments from a range of industry professionals on this topic. Watch for it mid-week at the news/reports module link above.)

    CFED’s Doug Ryan Sounds off on Consumer Financial Protection Bureau (CFPB) Report on Manufactured Housing and MH Financing

    October 4th, 2014 No comments

    cfed-logo-posted-industry-voices-guest-blog-mhpronews-com-.gifThe CFPB report supports what CFED and other nonprofit organizations have said in recent years:  Manufactured Home loan borrowers are vulnerable to expensive products and are often not well-served by the current financing market due to the lack of competition, lack of liquidity and the costs of the loans.

    I have no doubt, as the Bureau reported, that many borrowers of chattel products could have qualified for traditional, less expensive mortgages but did not get the chance simply because they were not offered or made aware of the options. Indeed, one clear way to address this issue would be for industry to support titling reform that would give families the option to title their homes as real estate and the opportunity to access real estate loans.

    The report supports, quite explicitly, the need for the Bureau’s current rules to remain in place and enforced. As the Bureau wrote, “the manufactured housing borrowers being charged interest rates or upfront fees above the HOEPA thresholds are the very populations that HOEPA is designed to protect."

    I also believe that this report, and related efforts by industry and CFED and its nonprofit partners, offers an opportunity to develop new loan products, expand the pool of lenders and, ultimately, lower the costs of borrowing.

    CFED absolutely believes manufactured housing must be part of the affordable housing solution in communities across the US. Far too many advocates and policy makers are unaware of the quality and aesthetic appeal of manufactured homes. There is no doubt industry has made great strides to modernize the energy efficiency, the design and the value of the homes. Quite simply, the CFPB’s report underscores the need for the financing to be modernized, as well. ##

    doug-ryan-cfed-posted-manufactured-home-living-news-industry-voices-guest-blog-mhpronews-

    Doug Ryan
    CFED
    dryan@cfed.org

     

     

    Related Links:

    1) – MHI's Response to CFPB's Report (Note, the MHI link includes the full CFPB report as a free download)

    2) – MHARR's Response to RV legislation and CFPB's Report on Manufactured Housing

    3) – CFPB Report on Manufactured Housing Signals Areas of Future Concern

    4) – Manufactured Housing Institute Responds to Doug Ryan-CFED commentary on CFPB report on Manufactured Housing Finance

    (Image credit: Corporation for Enterprise Development (CFED logo.)

    (Editor's Note: As with any opinion column, the views expressed by Mr. Ryan are his own and/or those of the organization he works for, and should not be construed to be the views of MHProNews or our sponsors. Other viewpoints on this or other industry topics are encouraged.

    MHProNews plans an Industry in Focus Report using extensive comments from a range of industry professionals on this topic. Watch for it mid-week at the news/reports module link above!)

    Kudos for Ron D’Ambra’s thoughtful article on the HUD Code and Manufactured Housing Affordability

    September 5th, 2014 No comments

    As a former manager of the HUD Manufactured Housing Program, I was gratified to read Ron D'Ambra’s recent piece titled “Are HUD Practices Making Manufactured Homes Less Affordable?”   While there are always some costs associated with any form of government regulation, Ron clearly appreciates the long term benefits that HUD has brought to an industry that was previously known for building low quality firetraps. 

    Though a small clan within the industry reflexively condemns just about everything HUD has done over the years, I’d recommend Ron’s review of HUD’s history and various functions to anyone who wants to understand the enormous strides in quality and safety the industry has made since HUD first set up its program shop back in 1976.

    Rather than repeat Ron’s points, let me add one of my own.

    When the Act was passed in 1974, its title referred to the products as “Mobile Homes” and the language of the Act often referred to the products as “vehicles”. It has always seemed to me that Congress was thinking of the industry’s products as more like automobiles than houses for regulatory purposes.Thus the “Notification and correction of defects by manufacturer” requirements in 42 U.S.C. 5414 which are implemented in Subpart I of HUD’s regulations.

    Compliance with these requirements represents most of the real HUD compliance burden, which requires remedies much like automobile recalls for the life of the home.

    Given that the quality and safety of manufactured homes now equals or exceeds that of site built homes in most respects, perhaps the time has come to ask Congress to reconsider replacing the current requirements of 42 U.S.C. 5414 with some sort of warranty.For all I know, this idea has already been discussed, but I left HUD in 2010 and may have missed it.

    Anyway, on behalf of the hundreds of people who have staffed the HUD program, served as HUD IPIAs and DAPIAs, as HUD contractors and Consensus Committee Members, thanks very much Ron for your thoughtful piece.##

    bill-matchneer-formerly-with-hud-and-cfpb-posted-industry-voices-mhpronews-com-aBill Matchneer, JD, recently retired from 23 years of federal government service. Most recently he supervised the Dodd-Frank appraisal rules at CFPB, but is better known to our readers for his ten years as manager of the manufactured housing construction and safety standards program at HUD. Bill can be reached at (703) 973-4366 and at bill.matchneer@comcast.net

    (Editor's Notes: A recent interview with Bill Matchneer is found linked here.

    As a matter of MHProNews policy, we routinely encourage a variety of viewpoints, which may or may not reflect those of the publisher or our sponsors. You can submit a Letter to the Editor or OpEd to: latonyk@gmail.com or tony@mhmsm.com).

    Financing in the CFPB Era and the Path to Full Manufactured Home Communities

    June 24th, 2014 No comments

    Tony,

    Great articles and comments made by others. 

    I agree with 99% of what is said. The issues I see our industry has are: 

    1. People are so scared of the Dodd-Frank and Safe Act. Our industry needs to deal with this as the new reality and figuring out how to do business with these new regulations. 
    2. Lenders and community owners getting together on a win-win community home financing program that requires community owners to repurchase the homes that default and requires the lenders to originate loans at lower rates. 
    3. Community owners making their communities more appealing to today’s buyer:
      1. Updating their community amenities (Signage, clubhouse paint and carpet, pool furniture, road repairs, etc.)
      2. Enforcing communities rules to ensure that all homes are maintained and clean and neat
      3. Finding ways to improve the community lifestyle by organizing community events that enrich the residents lives.
      4. Moving in new homes and having 2 or more fully decorated models that will help prospects visualize how nice a manufactured home can be.
    4. Community owners should NOT jump into the rental home model so fast. Many markets can support true home sales business model by offering financing options that make sense to their customers. This does take more work but the full community with home OWNERS rather then renters is worth the extra work. 
    5. Community owners offering outside retailers attractive move in programs. 

    We have implemented this in all our communities and are selling anywhere from 30-100 homes per community per year. 

    Thanks for sharing this article. ##

    scott-roberts-roberts-resorts-posted-industry-voices-guest-blog-mhpronews-com-Scott Roberts
    Chief Executive Officer
    Roberts Resorts
    8350 E. Raintree DR. Ste 220
    Scottsdale, AZ 85260
    480.425.8696

    scott-roberts-roberts-resorts-posted-industry-voices-guest-blog-mhpronews-com-(Editor's Note: The articles Scott's letter to the editor refers to are ones by Ross Kinzler and Jay Hamilton.

    For those who may not have met Scott or know the progressive work being done in his communities, Scott was the recipient of the Manufactured Housing Institute's “Community of the Year” at the 2014 Congress and Expo.

    The head shot above is actually part of a larger photo, that shows him holding his Community of the Year award.)

    Manufactured Home Factory Tour with my Congressman

    June 5th, 2014 No comments

    Back in February when I visited with Congressman Bill Flores in Washington, I asked him if he had ever toured a manufactured housing plant.A couple of months ago, one of his staffers contacted me wanting information about the manufacturing facilities in Waco.I had replied with information about Fleetwood Waco and about Clayton Homes two facilities in Waco.I gave him information on the Clayton and Fleetwood facilities, explaining that while as TMHA Chairman I represented the entire state, my retail location had carried Fleetwood product for some years, but that I was sure either company would be more than willing to provide a tour.

    Last Wednesday, I received an email from his scheduler, Jessica Harrison for contacting me about Representative Flores coming to visit Fleetwood Homes manufacturing facility in Waco.

    Texas Manufactured Housing Association (TMHA) Director D.J. Pendleton, myself, and Gay Westbrook of the MHI, made the trip as well as Don McCann, the manager of the Clayton Homes Waco manufacturing facilities.We were joined there by Ray Parma and Zach Sanders, the GM and Sales Manager respectively of Fleetwood Waco. 

    I can report to everyone that the visit and tour went outstandingly well.

    Rep. Flores was very engaging of plant manager Ray Parma; the congressman asked questions during the plant tour about everything from frame camber, to shear wall design and how it impacted tie-downs.  I could just see Ray’s eyes gleaming with getting to share his many years of experience at the plant. It was a pleasure to all of us in attendance that the congressman genuinely cared about what went into our products and the people who made them.Zach had the opportunity to visit with his District Director during the tour and field questions from him as well.

    fleetwood-plant-tour 6-2-2014-for-congressional-representative-flores-550x512-.png

    While we can all brag about our differing product lines at shows and conventions, Ray and Don gave a great one-two punch by providing Rep. Flores with fact that between their facilities in Waco alone, there were over 750 constituent employees in his district and at least that many more in vendors that provide material for those facilities.

    Rep. Flores met with all of us after the plant tour and discussed not only Dodd-Frank legislation and the CFPB, but also things that affect manufacturing facilities such as OSHA inspections and health care for employees.  It was good to see friendly competitors coming together to express concerns to the congressman. 

    All in all, it was a great visit.

    My sincerest thanks to all who took time out of their schedules to be a part of the event and thanks to past MHI Chairman and current Cavco CEO and Chairman, Joe Stegmayer, for allowing the use of the Waco facility for the tour. ##

    karl-radde-texas-manufactured-housing-association-chairman-mhi-retailer-division-vice-chairman-posted-industry-voices-manufactured-housing-pro-news-mhpronews-comKarl Radde, GM
    Southern Comfort Homes
    Chair of TMHA and Vice-Chair of MHI National Retailer’s Council
    karl@schomestx.com

    Finance Expert Dick Ernst of FinmarkUSA: introduction at Tunica Manufactured Housing Show 2014

    May 20th, 2014 No comments

    Editor's note. This public introduction was videoed during the business building seminars held during the 2014 Tunica Manufactured Housing Show.

    Note that the Speakers knew they were being filmed.

    Dick-Ernst-Financial-Marketing-Associates-tony-kovach-mhpronews-com1

    An exclusive interview with Dick Ernst is planned to be featured in our upcoming June issue. Dick moderated the finance panel at aDick-Ernst-Financial-Marketing-Associates-tony-kovach-mhpronews-com3 packed room of industry professionals at the 2014 Tunica Show. Dick Ernst also moderated MH home lending and commercial panels, in an overflow crowd during the 2014 Louisville Show.

    Dick is a key figure in meetings with industry and public officials, including the CFPB, FHFA and more.

    Dick-Ernst-Financial-Marketing-Associates-tony-kovach-mhpronews-com2

    You'll get exclusive insights into the widely acknowledged top man in the manufactured home finance business, into industrymhpronews-interviews-with- finance issues, how to generate more profits and much more. Watch for it – and the. Watch it – in June!

    More video Interviews available today are found at this link below.

    http://www.MHProNews.com/home/industry-news/industry-in-focus/7540-global-eyes-on-manufacturedmodular-home-movers-shakers-and-news-makers

    Our thanks to Dick Ernst at FinMarkUSA.com for his profit-making and protecting leadership for businesses, associations and others, and my thanks too for his kind words shared in the video above. ##

    (Image and video credits, ManufacturedHomes.com in association with MHProNews.com)

    You Might Be a Redneck!

    December 12th, 2013 No comments

    You might be a redneck if: It never occurred to you to
    be offended by the phrase, 'One nation, under God..'

    You might be a redneck if: You've never protested about seeing
    the 10 Commandments posted in public places.

    You might be a redneck if: You still say ' Christmas'
    instead of 'Winter Festival.'

    You might be a redneck if: You bow your head when
    someone prays.

    You might be a redneck if: You stand and place your
    hand over your heart when they play the National Anthem

    You might be a redneck if: You treat our armed forces
    veterans with great respect, and always have.

    You might be a redneck if: You've never burned an
    American flag, nor intend to.

    You might be a redneck if: You know what you believe
    and you aren't afraid to say so, no matter who is listening.

    You might be a redneck if: You respect your elders and
    raised your kids to do the same.

    You might be a redneck if: You'd give your last dollar to
    a friend.

    You might be a redneck if you are tired of government overreach, such as ObamaCare, Dodd-Frank, the SAFE Act, CFPB and an alphabet soup of federal agencies that want to throttle our businesses or run our personal lives.

    You might be a redneck if you've read this far, and you've nodded in agreement more than half the time. When I read some of the above from an article that had no author's name, and I added the last ones which impact manufactured housing home owners, professionals and the rest of our country too.

    God Bless America! ##
    Submitted by Larry Hahn

    NCC Meeting News Update

    January 27th, 2013 No comments

    National Communities Council Members:

    With the growing need for affordable housing combined with the rapidly evolving regulatory environment, lack of homebuyer financing, and other challenges, our industry has tremendous opportunities at the same time it faces significant hurdles. Both MHI and the NCC have experienced a period of major transition, and with our Washington leadership team now firmly in place, I believe the most important step ahead is to develop a vision and action plan for the NCC that provides the foundation to carry us through the next few years of supporting the industry and servicing our membership. In lieu of the NCC business meeting that has been held traditionally in conjunction with the MHI Legislative Conference and Winter Meeting, at the upcoming meeting the NCC Executive Committee will instead hold a closed planning workshop focused on solidifying the NCC’s vision for the future. Our goal will be to define a vision that ensures the NCC supports MHI’s broader legislative advocacy and marketing outreach efforts, provides the range of services most valuable to the variety of constituents we represent, makes interim NCC meetings more productive for all of our members, and expands our membership to add to our resources and strength as the only MHI division representing community owners.

    While the traditional NCC meeting will not be held during the upcoming MHI Legislative Conference and Winter Meeting from February 24-26, I strongly encourage all NCC members to attend this important gathering and support MHI’s advocacy efforts. Our industry has an excellent opportunity for expansion as the housing market recovers, but we need unity and alignment to ensure the regulatory and legislative environment supports our goals. The upcoming Legislative Conference in Washington is the best place to contribute by making our collective industry voice heard on Capitol Hill and helping your legislators recognize our industry’s vital role in providing affordable housing.

    As just one example of how your voice can make a difference, the recently released CFPB rules will have a significant impact on community owners and operators, and while the industry did not achieve all of its goals for the new rules, MHI and member efforts clearly had an impact.  For example, within the Qualified Mortgage rules, the CFPB did expand the spectrum of loan amounts and has proposed a qualified mortgage exemption within the new category of “smaller creditors.”  Just today, we are learning that it appears all new manufactured homes may be exempt from the new appraisal requirements for higher-risk mortgages.  While information continues to develop, it is critical that we work together in the legislative process to present industry unity and bring positive results.

    The regulatory environment will continue to shift rapidly as additional Dodd-Frank and CFPB rules are promulgated and reform efforts are undertaken. These changes and their impact on your business will be central to the upcoming Legislative Conference, and your participation in MHI’s advocacy efforts is vital to ensuring the best result. I look forward to seeing you in Washington and to working with the NCC’s Executive Committee to lay out a vision that leverages our opportunities, responds to our challenges, and supports your success well into the future.

    Sincerely,
    David

    David B. Lentz
    Chairman
    National Communities Council

    (Editor's Note: this memo was originally sent to NCC members by Vice President Jenny Hodge on Tuesday January 15, 2013. It is reprinted here with permission.)