Industry Voices

By Ken Rishel

Anyone familiar with the Captive Finance Newsletter knows I have very little faith in any government backed chattel finance program coming to fruition or, if it does, being the answer to the manufactured housing industry’s prayers. If it happens, it will only double the current sales volume and that is not enough. However, it is worth some effort to try to make it happen because doubling industry sales is an important thing, even if it isn’t the whole answer. While I still believe that owner assisted financing is the real answer, I am asking you to join me in a last ditch effort to help MHI in their efforts to make this thing work.

For those of you who don’t know, MHI made a plea last week at their Summer Meeting in Washington DC for industry members to email the government and their Congressmen and Senators asking FHFA to not ignore their duty to serve. Greg O’ Berry of Hometown America went even farther and suggested both at the MHI meeting and in this ezine that community owners and operators ask their residents to also email everyone explaining that the value of their investments in their homes would be adversely affected if government backed chattel financing did not come to fruition.

Because I am skeptical about this program ever emerging and because I am so focused on more complete solutions, I have not lifted a finger to help. I have however, come to realize that is the wrong attitude. Nothing is ever won by people finding fault, or not trying to make something work, and I now do not want to feel as if I did nothing when something could make a difference. This manufactured housing industry is something special, and all of us owe it more than we can ever repay. We just need to realize it, and pay up in some measure. I know that, because that is what has kept me running 16 hours a day while being called a fear merchant for the last several years, when I could have been on a beach in Hawaii watching my wife learn the Hula. I know it, but I didn’t act on it when it came to this issue. I am ashamed of my lack of action. To those of you who have already gotten involved, I apologize for my lack of action.

Perhaps it was Greg’s impassioned plea, but it struck me that all of us in this industry, no matter how cynical, could at least stand up and be counted on this issue. As a result, I am emailing everyone that makes sense tonight ( FHFA, Congressmen, and Senators) after I finish this article to you. My question is, “What are you going to do”? Will you make the same effort after reading this? Will you reach out to others and persuade them to do the same? If you are a community owner, operator, or manager, will you follow Greg’s lead and ask your residents to do the same? Will you stand up and be counted?

Ken Rishel of Precision Capital Funding is a leading expert in chattel financing of manufactured homes and in starting and running owner assisted finance operations. His organization was named MHI’s Service Supplier of the Year for 2010, and he authors and publishes the Chattel Finance Newsletter which goes out to over 9,000 people on a monthly basis.

The decision by the FHFA to exclude loans on manufactured homes on leased land from their proposed rules to implement the duty to serve underserved markets as outlined in HERA will be financially devastating to existing manufactured homeowners. If the GSE’s do not offer loan programs for MH homeowners, the financing available to potential home buyers will be severely limited, costly or non existent.

We recommend that community owners encourage their residents to write their congressional representatives and let them know that the GSE’s exclusion of MH loans in land lease communities will be devastating to the value of their homes, significantly limiting their ability to sell their home for a fair value, thereby causing severe financial loss if the resident needs to move. The resident should suggest that the FHFA should treat a manufactured homeowner the same as a stick built homeowner and not abandon the support of millions of MH homeowners living in MH communities.

MHI will be developing a sample letter in the next few days for distribution to community residents. The deadline for comments is July 22nd, so we must mobilize swiftly if we are to get resident comments to the FHFA by July 22nd.

Greg O’Berry
President and COO
HometownAmerica

In the MHMSM.com download area please find the reprint copy of the “MHARR VIEWPOINT” article titled “RESTORING THE STATURE AND STATUS OF THE MHCC” published in the July, 2010 issue of the Journal magazine.

A great deal of misinformation has been circulating around the industry regarding the status of the Manufactured Housing Consensus Committee (MHCC) and recent steps taken by HUD regulators and attorneys that threaten to turn the MHCC into an impotent and irrelevant forum akin to the now-defunct National Manufactured Housing Advisory Council (Advisory Council).

The must-read MHARR Viewpoint article details these ongoing efforts to downgrade the role, authority, functionality and independence of the MHCC, placing them in the context of the background and history of the MHCC as one of the centerpiece reforms of the 2000 law. By tying together the history and development of the MHCC as an independent replacement for the HUD-dominated, rubber-stamp Advisory Council, the column shows just how far recent changes have degraded the MHCC and the extremely negative impacts that these changes will have going forward, unless they are halted and reversed.

Manufactured Housing Association for Regulatory Reform
1331 Pennsylvania Ave N.W., Suite 508
Washington, D.C. 20004
Phone: 202/783-4087
Fax: 202/783-4075
Email: mharrdg@aol.com

Contact FHFA and Congress Immediately to Request Modification of the Enterprise Duty to Serve Underserved Markets Proposed Rule (Action Needed by July 22, 2010)

On June 7, FHFA released a proposed rule (Enterprise Duty to Serve Underserved Markets; 75 FR 32099) that excludes personal property lending in the GSE duty to serve the manufactured housing market. Click here to view the proposed rule. Specifically, the proposed rule would “consider only manufactured homes titled as real property for purposes of the duty to serve the manufactured housing market…FHFA is proposing that only loans titled as real property be considered towards the Enterprise’s duty to serve.” Click here for more detailed information on this issue.

In the proposed rule, FHFA identifies three key reasons for declining to include personal property lending as part of the GSE duty to serve manufactured housing, including:

A lack of existing business activity in purchasing personal property loans and, in order to develop a business in purchasing or guaranteeing personal property loans would require GSEs to develop operational capacities and risk management processes not currently in place

Extensive consumer protection requirements would have to be developed by the GSEs in order to ensure that personal property lending was done responsibly

Personal property lending is inconsistent with GSE conservatorship and would require too much effort to ensure safe and sound operations in this area

MHI opposes this proposed rule and urges FHFA and Congress to expand GSE activity in this area. Given the prevalence of personal property lending, FHFA’s proposed rule essentially ignores the needs of both the manufactured housing industry and consumer.

FHFA and the GSEs have an obligation to serve manufactured housing and the 18 million Americans currently residing in manufactured homes

GSEs cannot fulfill their “duty to serve” manufactured housing by ignoring 21 percent of the total housing market and manufactured homebuyers who are in desperate need of this source of affordable housing

More than 60 percent of manufactured home owners have relied on a personal property loan in order to finance their home purchase; it is exceptionally difficult to faithfully serve any market if more than half of it is excluded from consideration

The charters of both Fannie Mae and Freddie Mac have always allowed for the purchase of personal property loans and the GSE’s have purchased Asset Backed Securities (ABS) collateralized by manufactured home loans and has purchased loans directly from lenders for their portfolios. Congress and HERA recognized this reality by specifying FHFA consider loans secured by both real and personal property in assuring the GSEs dutifully serve the needs of the manufactured housing market

Estimates indicate that personal property loans account for at least 60 percent of manufactured housing lending. Enhanced liquidity for new homes will help expand and stabilize the existing home market

Industry lenders operate responsible and profitable programs for personal property lending and follow all appropriate laws such as Truth in Lending (TILA), and the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), as well as all appropriate state laws, however they have been shut out from a secondary market due to GSE policies; industry lenders can provide GSEs and the American taxpayer adequate protection from any loss

Action Needed

MHI members are asked to submit comments to FHFA (Click here for sample comment letter or click here if you have Microsoft Word. Comments must be submitted by July 22, 2010. Click here for talking points and background information.

Submit comments via email to regcomments@fhfa.gov (include “RIN 2590-AA27″ in the subject line of the email) and via mail (see address on sample comment letter). Please forward copies to MHI.

MHI members are also asked to contact their Representatives and Senators, via fax or email, and request (Click here for the sample letter or click here if you have Microsoft Word) that they do the following:

Contact FHFA directly to request the agency modify its proposed rule to require GSE’s consider personal property lending in their duty to serve manufactured housing
Contact leaders of the House Financial Services and Senate Banking Committees and specifically request FHFA amend its proposed rule; Senators and Representatives serving on these committees are especially urged to make this request.

A complete list of Congressional e-mail addresses and fax numbers is available at www.manufacturedhousing.org/government_affairs/find_congress.asp.

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

Submitted by MHI Vice President of Government Affairs Jason Boehlert

To start with some good news, indications are that the twelve year decline in manufactured housing production and sales may be leveling-off and, hopefully, coming to a halt. Just as importantly, an MHARR analysis, including input from manufacturers and retailers, shows that as the first signs of a possible recovery begin to appear, positive indicators are strongest at the most affordable end of the price spectrum. Thus, confronted with unprecedented difficulty in obtaining and/or qualifying for purchase money financing, Americans are increasingly turning to the industry’s most affordable homes in order to meet their housing needs — providing just the latest vindication of MHARR’s founding vision and ongoing mission of maintaining the delicate balance between affordability and the proper protection of manufactured housing residents.

The basic underpinning of this philosophy and mission, is that of all segments of the housing industry, only manufactured housing has been recognized by Congress as providing inherently affordable home-ownership for all Americans, without the need for government subsidies. As the original manufactured housing bill was debated in Congress in 1974, a key sponsor warned against regulation that prices consumers out of the manufactured housing market by needlessly raising the purchase price of the home — “if these provisions become law, Congress will have the obligation to evaluate frequently their cost effect on mobile homes. If the cost effect is too great, it could price low income consumers out of the market….” This concern for purchase affordability was later written into law by the Manufactured Housing Improvement Act of 2000, which specifically requires HUD and the Manufactured Housing Consensus Committee (MHCC) to consider the cost impact of both new and revised standards and regulations on the cost of manufactured housing to consumers.

The latest trend toward affordability shown by MHARR’s analysis, thus underscores the importance of keeping the purchase price of HUD Code manufactured homes as stable as possible and ensuring that prices are not driven up by needless or unnecessarily costly standards and/or regulations. For the industry and consumers, this means insisting that proposed changes to existing standards and/or regulations include sufficient cost and justification information to properly and accurately evaluate purchase price impact. It also means rejecting guesswork and wishful thinking, and insisting that purchase price impact be fully considered by the MHCC, by HUD and by any other government agency considering action that could impact manufactured housing. Only by observing these guideposts can manufactured housing remain both safe & affordable for all Americans and continue to provide maximum freedom of choice for consumers to select the amenities they want, consistent with their means and ability to pay for a home. Indeed, with legislation pending in Congress (i.e., the “Restoring American Financial Stability Act of 2010″) that would require homebuyers to prove their ability to pay for a home, this will be more important than ever.

Unfortunately, despite the disproportionately negative impact of purchase price increases on lower-income consumers, there is constant pressure from regulators and others to impose new and more costly standards and regulations on HUD Code manufactured homes. Much of this has been — and is being — advanced by circumventing the major reforms of the 2000 law, and most particularly, as shown at the April 2010 meeting of the MHCC in Tulsa, Oklahoma, by downgrading the role, authority, functionality and independence of the MHCC, which was created by Congress with the specific mission of acting as a check and balance on the power of program regulators and not just as a run-of-the-mill “advisory committee.”

For those who missed the Tulsa MHCC meeting, or did not have an opportunity to review MHARR’s comprehensive meeting report, below are just a few examples of actions taken or advanced (albeit, like the meeting itself, based on decisions made by the prior HUD program management) without a legitimate basis or necessary cost and justification information:

• Under a February 2010 “Interpretive Rule,” HUD has placed off-limits from MHCC review and comment, a myriad of agency interpretations and decisions affecting the standards and their enforcement. By reading “catchall” section 604(b)(6) out of the 2000 reform law, a provision designed by Congress to ensure that HUD would bring most standards and regulatory matters to the MHCC, the stage is now set for HUD to bypass the MHCC on major issues.
• HUD has indicated that changes in reference codes that would relax or lower existing HUD standards will be ignored, leaving only upward revisions of reference standards to be considered. This one-direction-only policy for escalating the HUD standards surfaced during a recent MHCC task force debate regarding updated wind standards.
• Sprinklers mandates. Existing federal standards already provide for the fire safety should be applied by HUD to preempt state or local sprinkler mandates. Instead, HUD is advancing a federal sprinkler standard under the guise that it is either “voluntary,” or triggered only “as needed” by a state or local sprinkler mandate. Experience shows, however, that there is no such thing as a “voluntary” standard and that this will end up as mandatory for all manufactured homes, unnecessarily raising the purchase price of those homes.
• Proposed regulations to revamp the enforcement system, which failed to gain the consensus support of the MHCC because they were not supported with justification or cost-efficiency data are, apparently, still being pursued by HUD.
• Ground anchor testing. HUD’s recent re-write of the anchor testing protocol developed by the MHCC is yet another example of wishful “life-cycle” thinking masquerading as cost analysis. The proposal, generated by a HUD contractor, states:… an accurate assessment of total costs cannot be determined at this time… However, the anticipated increase in cost is considered to be justified by the overall benefits achieved…” If total benefits cannot be determined, however, the relationship of benefits to costs cannot be determined.
• Energy standards are being developed by the Department of Energy (DOE) and other energy mandates are being advanced simultaneously by special interests before the MHCC. The typical claim for energy proposals, without any actual cost data having been shown thus far, is that heightened standards will produce long term savings for consumers. To a consumer who cannot qualify to buy a home because of a higher purchase price, however, “life-cycle” savings mean absolutely nothing.

These proposals and actions represent just the tip of the iceberg that could undermine the affordability of manufactured housing without any corresponding benefit to consumers, and bring an abrupt halt to what appears to be a fragile recovery being led by the industry’s most affordable homes. More than ever, therefore, it is essential that the purchase affordability of manufactured housing be protected and defended by fully implementing all reform aspects of the 2000 law. With a new program leadership now in place at HUD, MHARR will work with the Department to focus on the importance of balancing purchase affordability and consumer protection as set out by Congress in the 2000 reform law – as should all program stakeholders, particularly the rest of the industry and consumers.

In MHARR’s view, manufactured housing is – and must remain – affordable housing for all Americans.

MHARR is a Washington D.C.-based national trade association representing the views and interests ofproducers of federally-regulated manufactured housing.