Top National News
The National Association of Home Builders/Wells Fargo index of builder sentiment climbed to 29 for June, its seventh gain in the last nine months and its highest level since May 2007. The reading suggests that builders are seeing early signs of a rebound following years of sluggish activity. Still, any reading below 50 indicates negative sentiment; and the index has not risen above that mark since the housing boom's peak in April 2006.
Fed Wrestles With How Best to Bridge U.S. Credit Divide
The U.S. economic recovery is hampered by the economic divide separating Americans by their access to credit, rather than income or wealth. Millions of Americans with good credit who were less impacted by falling house prices, lost jobs, and other factors are taking advantage of the low interest rates engineered by the U.S. Federal Reserve. However, those accessing credit at cheaper rates may not necessarily be the segment of the population most in need of credit access, and it raises questions as to how much impact the Fed can have in reducing unemployment. As jobs growth remains disappointing and Europe continues to struggle, the Fed is weighing new steps to reduce unemployment given that low interest rates have not encouraged the increase in household spending, business investment, and hiring that policymakers have expected. Part of the problem lies with banks that are still unwilling to extend credit. The Fed is expected to maintain low interest rates through 2014, and could buy additional bonds or shift its portfolio toward longer-term bonds or mortgage debt to bring down longer term interest rates. Economic theory and research suggests that wealthier households are likely to save or invest their interest rate savings because they already have enough to consume what they want. There are some signs that the credit access gap is narrowing, with banks and financing firms issuing $169 billion in car loans to households with credit scores below 700 in 2011, up 26 percent from 2010, says Equifax.
The National Association of Realtors predicts that the echo boomer generation, comprising 62 million individuals between 17 and 31 years of age, will drive the housing market over the next 20 years. However, it remains to be seen whether this demographic can save the residential property market, as its members have been hit hard by unemployment and carry high levels of student loan debt. NAR chief economist Lawrence Yun believes the economy and unemployment rate should improve with a few years, noting that as long as people have jobs, they can repay student loans. Until then, experts say echo boomers will rent -- although recent surveys indicate that homeownership remains a goal for most Americans.
Rick Mostyn of The Bozzuto Group recently testified before a U.S. House Financial Services Subcommittee on behalf of the National Apartment Association (NAA) and the National Multi Housing Council (NMHC), emphasizing the importance of the Federal Housing Administration's (FHA's) multifamily housing program to the health of the rental market down the road. He said, "FHA has been a cornerstone for construction and permanent financing and refinancing for apartments for over 50 years and needs to remain a viable market participant to meet future housing needs." Mostyn pointed out that changes to capital requirements for new apartment construction, modified borrower credit requirements, and a backlog of loans could hamper market liquidity and access to capital. "NMHC/NAA strongly support FHA's efforts to introduce sound credit and underwriting policies, but there are areas in which improvements can be achieved," he concluded.
The ARIES Building America team, part of the U.S. Department of Energy, is preparing to kick off a project in July that will explore the use of foam sheathing in exterior walls as a way to make factory-built homes more energy efficient. The wall design will combine frame and fiberglass batt construction with an insulative, high R-value rigid sheathing board. The objective of the federally funded project is a streamlined production solution that is more affordable than existing techniques and that will help satisfy current and future building codes. To help research the approach, the ARIES team will enlist a single homebuilding facility to incorporate the design into current production and address key engineering issues. Plant evaluation will take place in mid- to late August. Most of the materials will be provided by industry suppliers, and the builder partner will provide plant space as well as staff support and expertise.
Despite being named Community of the Year for the Midwest at this year's National Congress and Expo for Manufactured and Modular Housing, the Timber Creek Living age-restricted development in Springfield, Ill., continues to maintain a low profile. The one-story homes -- ranging in price from $99,000 to $160,000 -- feature three bedrooms, two bathrooms, wood cabinets, efficient lighting, and a choice of exterior colors, among other design touches. "These homes are very well built," according to Springfield developer Doug Daniels. "In fact, the people who work in the cabinet shop are Amish." The common areas boast three ponds, gazebos, an exercise room, a community garden, and more. Although the awards are satisfying, Daniels says he most appreciates that Timber Creek residents are happy there.
Green Courte Partners, a real estate investment firm with a portfolio of 50 manufactured home communities in 10 states, is the new owner of Plantation Landings. The four-star, age-restricted development, sold by CRF Communities, is spread across 394 acres in Haines City, Fla., and is 100 percent leased. American Land Lease, acquired by Chicago-based Green Courte in 2009, will manage the property under its 55+ lifestyle brand, Solstice Communities.
Cavco Industries, a manufactured home builder, posted improved financial results for its fiscal fourth quarter ended March 31. Revenue at the Phoenix-based firm surged to $99.5 million for those three months, up 156 percent from the comparable period of 2011, and net income grew to an estimated $2.9 million from $1.7 million year over year. For the fiscal year as a whole, Cavco's revenue catapulted 158 percent from a year earlier to $443 million, and its net income mushroomed to $29.7 million from $4.1 million.
Origen Financial Inc., which manages residual interests in securitized manufactured home loan portfolios, moved out of the red and into the black for the 2012 first quarter. The Michigan-based real estate investment trust posted net income of $3.6 million, reversing a year-earlier loss of $2.8 million. Origen's board of directors also declared a cash dividend of $0.38 per unit of common stock, payable on June 22, 2012, to shareholders on the record as of June 15, 2012.
Though the term "modular" is still struggling to free itself from years of unfair, negative connotations, industry insiders believe that contractors and home buyers will warm up to the industry as the housing market revives. This expectation is based on the constraints on skilled job-site labor and rising materials costs, and some modular suppliers hope to use the shift in interest to bolster their profile on the national scene. To reach this point, modular manufacturers need more customers, as production fell by 5 percent in 2011 and the popularity of these homes has remained fairly regional. However, modular suppliers are working to emphasize the quality and flexibility of their manufacturing process and house designs. Excel Homes, for example, rolled out its American Lifestyles line with 14 different floor plans, adaptable to practically any U.S. market. US Modular, meanwhile, forged a partnership in 2011 with Champion Home Builders, and they are working together on multifamily projects in the western U.S. For its part, Cavco Industries stepped up its presence in the modular segment by purchasing Palm Harbor Homes as well as Nationwide Homes, which is focusing on the urban infill market. Various producers also are gaining more investment from their financial backers and are introducing new modules or expanding to larger plants.
A unit of Universal Forest Products (UFP) has acquired MSR Forest Products, which provides roof trusses and lumber to the manufactured housing industry. MSR is based in Haleyville, Ala., where UFP also has facilities. The transaction, which closed on May 19, additionally includes MSR's Waycross, Ga., factory. As a result of the deal, UFP will be in a position to improve its capacity utilization and cut costs. President Matthew J. Missad said the acquisition also "allows Universal to underscore our commitment to maintain our leadership position in the industry in which we got our start, manufactured housing."
CFPB Activities Update
CFPB Signs MOU on Supervisory Coordination
On June 4th, the Consumer Financial Protection Bureau (CFPB), jointly with the Federal Reserve Board (FRB), FDIC, National Credit Union Administration (NCU) and Office of the Comptroller of the Currency (OCC), announced a Memorandum of Understanding (MOU) on Supervisory Coordination.
The MOU requires the CFPB, before issuing a final exam report or taking supervisory action based on exam results, to “take into consideration concerns” raised by a depository institution’s prudential regulator in its comments on the CFPB’s draft exam report.
The supervised entities covered by the MOU are:
• depository institutions with more than $10 billion in total assets (large banks);
• affiliates of large banks that are depository institutions with $10 billion or less in total assets; and,
• other affiliates of large banks.
The MOU states that the agencies are considering entering into a separate agreement to address the CFPB’s authority to include its examiners on a sampling basis in a prudential regulator’s exam of a depository institution with less than $10 billion in total assets. The MOU does speak to the CFPB’s authority to examine nonbank subsidiaries of such entities. In addition, the MOU indicates that the CFPB and FRB plan to enter into a separate agreement to coordinate their supervisory activities related to holding companies and their subsidiaries.
Click here to view the MOU.
CFPB Finalizes Administrative Proceedings and Enforcement Rules
On June 6th, the CFPB finalized three rules that were issued in interim final form in July 2011:
• Rules Relating to Investigations: set forth the CFPB’s policies and procedures for conducting investigations. Click here to view.
• Rules of Practice for Adjudication Proceedings: set forth procedures for administrative enforcement actions initiated by the CFPB. Click here to view.
• State Official Notification Rule: sets forth procedures to be used by state officials to provide notice to the CFPB of any proceedings they initiate to enforce the Dodd-Frank Act or CFPB regulations. Click here to view.
The CFPB also issued a new interim final rule to implement the Equal Access to Justice Act that sets forth procedures for parties to adjudication proceedings before the CFPB to use to seek recovery of attorney fees and expenses. Click here to view.
CFPB Reopens Comment Period for Ability to Repay Rule
On March 31st the Consumer Financial Protection Bureau (CFPB) announced it was reopening the comment period through July 9, 2012 for proposed rules issued Spring 2011 defining the terms of a “qualified mortgage” as required under the Dodd-Frank Act. The qualified mortgage rule will establish underwriting standards that lenders (including for those providing loans for manufactured homes secured by personal property) must adhere to in documenting a consumer’s ability to repay a residential mortgage.
The proposed rule was initially unveiled in May 2011 with a comment period that closed in July 2011. The CFPB has indicated that it expects to release the final rule after the November elections.
Consumer and industry groups have been at odds over a legal provision within the act to shield lenders from litigation risk. Industry groups, including MHI, have pushed for a qualified mortgage rule that provides a “safe harbor,” meaning borrowers seeking suit against lenders must provide concrete evidence that their lender did not adhere to underwriting standards outlined in Dodd-Frank. Consumer groups have advocated for a “rebuttable presumption” which is a lower threshold by which a loan can be contested in court.
In its press release announcing the reopening of the comment period, the CFPB had received data from the Federal Housing Finance Administration (FHFA) tracking the performance of loans purchased by Fannie Mae and Freddie Mac. Among other elements, the data includes payment-to-income and debt-to-income ratios (DTI) at origination; initial loan-to-value ratios; and borrower credit scores.
The CFPB is using the data to perform statistical analyses and examining various measures of delinquency and their relationship to other variables such as a consumer’s total DTI ratio to assist in defining a qualified mortgage.
The notice seeks comments on specific issues and encourages that submissions be limited to the following issues:
• Data – CFPB intends to use FHFA and other private sector data sources in its analyses, with much of that focused around DTI. They seek comments on the data they intend to use and also seek comments on other data sources they should use.
• Litigation cost estimates – CFPB seeks data on litigation cost estimates and quantification of liability risks. Among other things, CFPB asks for input on the potential nature of and number of lawsuits, costs of those lawsuits, costs of put-back risk, and cost of potential extension of foreclosure timelines.
Last Spring, MHI submitted official comments on the qualified mortgage rule advocating the CFPB adopt a “safe harbor” standard and provide lenders a greater opportunity to recoup origination costs on small balance loans. Click here to view MHI’s comments.
MHI Responds to Request by House Committee on Oversight and Government Reform
On June 5th, MHI responded to a May 2012 letter from the Chairman of the House Oversight and Government Reform Committee, Darrell Issa, requesting additional information on existing and proposed regulations that continue to negatively impact job growth in the manufactured housing industry. The Committee has been undertaking an extensive examination of federal regulations that could potentially hinder job growth in the U.S. and MHI’s letter follows an initial request by Chairman Issa last year.
MHI’s comments focused on three major areas of regulatory reform: regulations authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203; Dodd-Frank); the Manufactured Housing Construction and Safety Standards Act (42 U.S.C 5401 et seq.) administered by the U.S. Department of Housing and Urban Development (HUD Code); and proposed regulations authorized by the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140).
Highlights of the MHI letter include the following:
• Minimize the burdensome Homeownership and Equity Protection Act (HOEPA) high-cost mortgage standards placed on manufactured housing.
• Reduce uncertainty in Qualified Mortgage guidelines.
• Eliminate conflicting federal mortgage origination standards.
• Establish realistic valuation methods for manufactured housing.
• Streamline HUD’s rulemaking process to ensure that the consensus process for the development, revision and interpretation of the standards and its enforcement regulations can function as envisioned by Congress.
• Promote innovation and affordability with timely construction codes and standards.
• Enhance preemption to streamline production and reduce regulatory impediments.
• Make manufactured housing a priority within HUD; appoint a Non-Career Administrator.
• Eliminate duplicative enforcement of manufactured housing energy efficiency standards.
Click here to view a copy of MHI’s letter to Chairman Issa.
MHI Comments on Department of Energy Request for Comments on Improving Regulation and Regulatory Review
On May 29, 2012, MHI provided comments to the Department of Energy’s (DOE’s) May 15, 2012 request for comments and information regarding regulations that should be modified, streamlined, expanded, or repealed as a part of its implementation of Executive Order 13563, “Improving Regulation and Regulatory Review,” issued by the President on January 18, 2011.
MHI’s comments focused exclusively on the draft proposed rule to establish new energy efficiency standards for manufactured housing which is currently pending at the Office of Management and Budget. In its comments, MHI made the following points:
• The draft proposed DOE Rule imposes overlapping and potentially contradictory regulation. Manufacturers will be subject to building and construction standards, enforcement and oversight by two federal agencies.
• The draft proposed DOE rule contains onerous and unrealistic testing requirements requiring every home to be tested in the factory. This will require the home to be preassembled at the factory, tested, and then disassembled for transportation to the home site.
• The proposed DOE draft rule will impact affordability. Because the vast majority of manufactured homebuyers are low and moderate income earners, even a small increase in home cost has a disproportionately large impact on manufactured homebuyers: on their ability to qualify for a home loan; on the proportion of income that goes toward mortgage payments; and, on their ability to purchase basic amenities.
• DOE’s own estimate of the total cost burden to the industry is $4.5 million over four years. While MHI believes the actual cost is likely to be far greater, a careful and thorough cost analysis is warranted and necessary to understand how manufactured homebuyers and the industry will be impacted by the proposed standards.
• The draft rule is in conflict with provisions of the Manufactured Housing Construction and Safety Standards (MHCSS) Act that require the Manufactured Housing Consensus Committee to review and recommend proposed changes to the Manufactured Housing Construction and Safety Standards.
• The mission of DOE and HUD are fundamentally different and conflicting. The Department of Energy’s mission is to ensure America’s security and prosperity by addressing its energy, environmental and nuclear challenges through transformative science and technology solutions. HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. MHI believes that new standards need to strike a balance: minimize energy use and costs for the next generation of manufactured homes while preserving affordability.
Click here to view MHI’s comments to DOE.
4,650 New HUD Code Homes Shipped in April 2012
In the month of April 2012, 4,650 new manufactured homes were shipped, up 17.6 percent from April 2011. Increases were across the board with shipments of both single-section and multisection homes up compared with the same month last year. As with the first three months of 2012, single section homes accounted for the largest portion of the increase, with shipments up 23.4 percent compared with the April 2011 figure.
Compared with the prior year, 2012 has recorded shipment increases every month so far. For the first four months of this year, shipments totaled 17,430 homes compared with 13,650 homes in 2011, a net increase of 27.7 percent.
The seasonally adjusted annual rate (SAAR) of shipments was 52,642 in April 2012, down 8.1 percent from the rate of 57,268 in March 2012. The SAAR corrects for normal seasonal variations in shipments and projects annual shipments based on the current monthly total.
A total of 7,124 floors were shipped in the month, an increase of 16.1 percent over April 2011. The number of plants reporting production in April was 123, one up from the number in March, and the number of corporations was 45, one down from the number in the prior month.
2,922 New Modular Homes Shipped in the First Quarter of 2012
The National Modular Housing Council’s actual shipments report indicates that 2,922 new modular homes were shipped in the first quarter of 2012, up 18.7 percent from the same quarter in 2011.
Relative to Q1 2011, state shipment results for the first quarter of 2012 showed increases for 16 states, reductions in three states and 12 states with no significant change (defined as less than or equal to ±5 shipments).