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RV DEFINTION and CFPB MANUFACTURED HOUSING FINANCE STUDY -- REPORT & ANALYSIS

MHARR

1. RV Industry Again Seeks Legislative Exemption –

HUD Issues “PARK Model” Enforcement Memorandum

Attached, for your review and information, are copies of a new bill (H.R. 5658 – the “Recreational Vehicle Certainty Act of 2014”) filed on behalf of the recreational vehicle (RV) industry, once again seeking an expanded RV exemption from the definition of “manufactured home” contained in the Manufactured Housing Construction and Safety Standards Act of 1974 (as amended), and a related October 1, 2014 HUD memorandum reiterating the applicability of the HUD Code standards to Park Models exceeding 400 square feet.

By way of background, earlier this year, the Recreational Vehicle Industry Association (RVIA) sought legislation – as part of the HUD appropriations process -- to amend the HUD definition of “manufactured home” and expand the existing statutory exemption for “self-propelled” RVs to include both towable RVs (without size limitation) and “park model” structures. That statutory effort, however, failed to gain traction in Congress, leading the Senate Appropriations Committee to urge the RV industry and HUD -- in its report on the 2015 Transportation, Housing and Urban Development and Related Agencies bill -- to address the RV exemption issue through HUD’s “open, transparent and inclusive” regulatory process.

Notwithstanding this clear signal from Congress, RVIA, on September 18, 2014, had a new stand-alone bill filed in the House of Representatives to effectively exempt all types of RVs and park models from the definition of “manufactured home” (and thus HUD regulation), using the same language and approach as its earlier appropriations process initiative.

While this stand-alone bill – at least procedurally -- represents something of an improvement over RVIA’s appropriations-based effort, which could have become law without any type of substantive consideration or hearing, the substance of the new stand-alone bill is the same as its earlier proposal and thus raises the same substantive issues for interested parties.

HUD, meanwhile -- subsequent to the filing of the RVIA stand-alone bill -- has published a guidance memorandum to “reiterate” its “longstanding interpretation” of its own statute and regulations regarding the exemption of certain RVs and the status of certain “park models.” In part, the HUD memorandum states:

“Several manufacturers have produced units marketed as “Park Model RVs” believing these units fall under HUD’s Recreational Vehicle (RV) exemption…. Such manufacturers have purportedly relied on [RVIA’s] 2012 Standards Bulletin (SNB-23/12) to measure square footage for the exemption under a voluntary standard (ANSI 119.5) used by RVIA in connection with its own labelling program. After examining RVIA’s Standards Bulletin, HUD finds that this bulletin misinterprets HUD’s authoritative Interpretive Bulletin A-1-88 and provides inaccurate instruction on the proper measurement for the RV exemption….”

(Emphasis added).

The Memorandum further states that HUD intends to ask the Manufactured Housing Consensus Committee (MHCC) at its next meeting (i.e., December 1-2, 2014) “whether the MHCC wishes to recommend … modification of HUD’s current RV exemption.”

MHARR’s position on this entire RV exemption matter has been and continues to be consistent with the strong message conveyed by the Senate in its 2015 Appropriations Bill report – i.e., that its proper resolution lies in the HUD regulatory process. Thus, the Department’s stated intention to bring this issue to the MHCC is a step in the right direction.

In this regard, and recognizing the stated concerns of the RV industry, MHARR is developing a position and approach designed to change the dynamics of this matter by permanently and properly addressing the demarcation between manufactured homes and RVs through the HUD regulatory process in a way that would eliminate any need -- or basis for -- congressional intervention via modification of the governing law.

This RV exemption issue and its resolution will be on the agenda of MHARR’s upcoming Board of Directors meeting for review and consideration.

2. CFPB Issues Report On Manufactured Housing Finance

The Consumer Financial Protection Bureau (CFPB), the federal agency charged with implementing and enforcing the Dodd-Frank consumer protection law and the SAFE Act, has issued an expected “White Paper” on manufactured home financing (see, copy attached).

Based on an analysis of public data from the U.S. Census Bureau and other sources, as well as “proprietary data voluntarily provided to CFPB” by undisclosed sources, the White Paper reaches seven “key findings,” all of which are well known and well-documented, but are potentially revealing in relation to CFPB’s future course of action concerning manufactured home financing:

Manufactured Housing is disproportionately located in non-metropolitan areas;

· Compared with residents of site-built homes, manufactured housing residents are somewhat more likely to be older and tend to have lower incomes and net worth;

· Manufactured homes typically cost less than site-built homes;

· About three-fifths of manufactured housing residents who own their own home also own the land it is sited on;

· An estimated 65 percent of borrowers who own their own land and who took out a loan to buy a manufactured home between 2001 and 2010 financed the purchase with a chattel loan;

· Manufactured home owners typically pay higher interest rates … than site-built borrowers; and

· The current state of manufactured housing production, retail and financing reflect in part a rapid growth during the 1990s and subsequent sharp contraction.

From these “key findings” and the data analyzed, the White Paper draws two particularly significant conclusions.

First, while recognizing that its Dodd-Frank regulations “may affect … the manufactured housing segment of the market in ways that differ from the rules’ effect on other market segments,” CFPB maintains that “because the rules have been effective for only a few months, and because there are lags in the availability of data, it would be premature to reach conclusions on the market-wide effects of the rules.” Consequently, it would appear that there is no imminent likelihood of revision of those rules by CFPB on its own initiative.

Second, while recognizing that manufactured homes are an important source of affordable housing for “some” consumers, including non-metropolitan, “older” and “lower-income” households, CFPB states that “these groups include consumers that may be considered more financially vulnerable and thus may particularly stand to benefit from strong consumer protections.” This conclusion could well impact not only CFPB review and analysis of its existing regulations, but the nature, shape and scope of its role in the manufactured housing finance market going forward.

In addition to these conclusions, the White paper also contains revealing information regarding the consolidation of financing, production and other functions within the industry -- and the domination of the manufactured housing market by a few large businesses. With regard to financing, the White Paper states:

“…[T]he majority of … loans with APR’s that exceed the HOEPA [Home Ownership and Equity Protection Act] APR threshold for manufactured homes were originated by two creditors…. These two creditors … account for roughly 91 percent of all home-purchase loans for manufactured homes in 2012 that have rates that exceed the HOEPA APR threshold … [and] 38 percent of home-purchase loans for manufactured homes in [the Home Mortgage Disclosure Act database] overall.”

The White Paper further notes, “Ginnie Mae now operates a home-only (FHA Title I) chattel loan guarantee program. Only one issuer was active in that space as of early 2014….”

Similarly, with respect to production, the White Paper points out:

“The largest three manufacturers held almost 70 percent market share of new manufactured housing production at the end of 2013. Clayton Homes, a subsidiary of Berkshire Hathaway, has been the largest manufacturer by market share for over a decade, with [a] home production share of 45 percent as of the end of 2013.”

While such domination in all of these areas has been obvious on an anecdotal level for some time, the specific market share information contained in the White Paper is particularly relevant to a wide range of pending and upcoming issues affecting the industry.

Taken as a whole, therefore, (and based on a preliminary review) the CFPB White Paper, insofar as it signals no imminent steps based on the impact of its existing regulations on the manufactured housing market, appears to be designed to establish a policy base-line and public reference point for future CFPB action.

RIVA_Congressman_Duffy_Bill_HR______RV_Final.pdf

cfpb_report_manufactured-housing.pdf

RVMemo.pdf

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