Washington, D.C., January 30, 2017 – At a Duty to Serve (DTS) “listening session” conducted by the Federal Housing Finance Agency (FHFA) in Chicago, Illinois on January 25, 2017, the Manufactured Housing Association for Regulatory Reform (MHARR) advised FHFA officials and representatives of the FHFA-regulated Government Sponsored Enterprises (GSEs), that the December 29, 2016 FHFA final DTS rule – which does not mandate manufactured housing chattel loan securitization and secondary market support by the GSEs – is unacceptable as currently constituted. MHARR, in both verbal comments and a detailed written statement distributed at the meeting (see, copy attached) stressed that any DTS rule which fails to provide meaningful and timely securitization and secondary market support for chattel loans – which comprise upwards of 80% of the manufactured housing consumer finance market, according to U.S. Census Bureau data – cannot conceivably satisfy the mandate imposed by Congress via the DTS provision of the Housing and Economic Recovery Act of 2008 (HERA).
While the FHFA final rule and related “evaluation guidance” proposal issued on January 13, 2017, have been lauded by some as bringing consumers and the industry ‘closer” to the realization of a manufactured housing chattel loan securitization and secondary market support program that would end decades of discrimination against the largest segment of the manufactured housing finance market – a segment that has grown by 25% just since 2007 -- the reality is that the final rule contains no affirmative requirement for GSE support of manufactured home chattel loans and no meaningful penalty or sanction for their continuing failure to serve that part (or any other part) of the manufactured housing finance market. The final rule and evaluation guidance, rather, would require only that the GSEs “consider” such support – a formulation that, particularly given the GSEs history, would allow them to either bypass and reject such support or engage in endless and ultimately meaningless research and “outreach,” with nothing more than a perfunctory “explanation.”
The FHFA final rule and evaluation guidance, therefore, instead of establishing a “duty” for the GSEs corresponding with the affirmative and mandatory “duty” established by Congress through the statutory DTS directive, instead creates a laundry list of essentially optional activities that the GSEs can either choose to pursue or totally ignore (other than providing a superficial “explanation”). And the GSEs have left little doubt that they have no interest in providing any such support. Freddie Mac, in comments filed in response to both FHFA’s 2010 and 2015 proposed DTS implementation rules, opposed any support for manufactured housing chattel loans. Fannie Mae similarly opposed chattel support in its 2010 DTS comments and, according to media reports published after the Chicago meeting, has stated that it has “no plans to do a pilot program with [manufactured home] chattel loans at this time.”
The FHFA rule, moreover, as confirmed at the meeting, would leave in place major FHFA regulatory hurdles – including, most particularly, its rule requiring approval of “new products” – that could prevent or significantly delay any actual GSE support activity for manufactured housing chattel loans, even if the Enterprises ever did decide to offer support for such loans on any basis.
The rule, then, as emphasized by former MHARR Chairman Edward J. Hussey and former MHARR President and current Senior Advisor Danny D. Ghorbani at the meeting (MHARR President and CEO Mark Weiss will speak at a February 8, 2017 FHFA forum in Washington, D.C.) does not and cannot satisfy the “duty” to serve as prescribed by Congress.
The rule would thus continue to exclude the vast majority of potential manufactured housing purchasers from the market – and from the American Dream of homeownership altogether, as manufactured housing is the nation’s most affordable form of non-subsidized housing -- because they cannot afford to pay higher-cost manufactured home chattel loan interest rates that are needlessly inflated by the discriminatory lack of GSE securitization and secondary-market support for such loans and by the lack of full and robust free-market competition, which is artificially suppressed by those same policies. At the same time, consumers who can qualify for such loans, are needlessly herded into higher-cost loans offered by the handful of lenders that dominate a market distorted by such official discrimination.
Having already wasted nearly a decade since the enactment of DTS, FHFA would now – at a minimum – waste years more on study and research that could have been underway already if FHFA and the GSEs were serious about DTS, while consumers could be forced to wait decades more for a remedy to an already decades-long failure to serve them. To correct this, MHARR, in its position paper and verbally at the meeting, proposed a workable GSE chattel loan program that would simultaneously allow for the near-term support of a substantial and market-significant number of manufactured home chattel loans, while providing for ongoing evaluation of the performance of such loans and any needed adjustments on a rolling and continual basis. Absent such a significant near-term chattel program, however, MHARR made it clear that it would take this matter back to Congress for an appropriate remedy.
In Washington, D.C., former MHARR President Danny Ghorbani, stated that the GSEs, “despite forty-years of on-again, off-again flirtation with the industry and its consumers, are socially active and engaged, but fiscally removed and divorced from each." The GSEs, he stated, “talk the right talk and go through the right motions, attending and sponsoring industry events and even hiring industry members as consultants to advise them, but have never formulated and implemented a positive and workable program to securitize the chattel loans that would allow low, lower and moderate-income consumers to become homeowners ... an underserved market that Congress decreed nine years ago, the GSEs must now serve."