Issue link: https://read.dmtmag.com/i/140471
MHARR VIEWPOINT Obama Administration Home Ownership Policies Favorable to Manufactured Housing BY DANNY GHORBANI As the Obama Administration moves into the heart of its second term and finally begins to put its imprint on national housing and housing finance policy, a new window of opportunity could possibly be emerging for the manufactured housing industry and American consumers of affordable housing – and the industry, along with its consumers, should move cooperatively to take maximum advantage of that opportunity. Through much of the President's first term, Obama Administration "housing policy" was dominated by stop-gap and emergency measures designed to halt and reverse the bleeding in the housing and home finance markets resulting from the 2008 recession and the insolvency of the Government Sponsored Enterprises (GSEs). With the wider housing market slowly recovering, however, and the GSEs similarly showing signs – at least for now -- of returning to near-term profitability (for example, Fannie Mae reported $58.7 billion profit during the first quarter of 2013), the stage is set for the evolution of a broader, more forward-looking Obama Administration housing finance policy that could – and should -- represent a sharp departure from the practices that landed the GSEs under a conservatorship administered by their federal regulator, the Federal Housing Finance Agency (FHFA). It's pretty much universally conceded that the GSEs went off the tracks because they severely deviated from their original statutory mission of providing home financing opportunities for middle-income Americans and firsttime borrowers who needed and merited help, and might otherwise be excluded from home ownership. Recent congressional hearings, featuring testimony from across the economic and political spectrum, have demonstrated that the GSEs went broke through massive participation JULY 2013 12 THE JOURNAL in the extremely risky sub-prime finance market for site-built homes and other "exotic" real estate mortgage products – instead of helping ordinary, credit-worthy homebuyers access affordable housing such as HUD Code homes. Put differently, the GSEs - contrary to their founding mission and purpose -spent years incentivizing financial institutions to loan money to individuals for high-cost homes they could not afford to keep, leading to a tidal wave of defaults that still haunt the housing market and ultimately the GSEs' own insolvency. At the same time, in the words of a leading affordable housing advocate, the GSEs "have been in shutdown mode when it comes to working-class borrowers..." The Obama Administration has made it clear, though, that the days of the GSEs subsidizing ever-larger home loans for wealthier Americans -- or those in over their heads -are over. Instead, the evolving second-term housing policy of the Administration is focused on returning the GSEs (or their successor entities) -- and FHFA as their regulator -- to their original and economically vital mission of helping decent, hard-working, credit-worthy Americans who pay their bills, and especially first-time borrowers, own a home that they can truly afford. Perhaps the strongest evidence yet that the Administration is intent on real change at both FHFA and the GSEs is the recent nomination of congressman Mel Watt (D-NC) to serve as director of FHFA (subject to Senate confirmation). In nominating Congressman Watt, President Obama emphasized the core principle underlying this change – i.e., that government housing finance policies need to focus on "helping… Americans who work really hard [and] play by the rules day in and day out to provide for their families." And in Congressman Watt, President Obama has put forward a nominee with a long record of promoting home lending to lower-income and working-class borrowers. Better yet, Congressman Watt, hailing from North Carolina -- an important manufactured housing production and shipment state – knows the manufactured housing industry and, as a supporter of the enactment of the 2000 reform law, has the potential to become a "game-changer" at FHFA. And – notwithstanding rumblings from some within the industry – both the industry and its consumers could use a change in direction at FHFA and, by extension, the GSEs, particularly when it comes to the securitization of manufactured home chattel loans, which still comprise the bulk of the HUD Code market and provide access to the industry's most affordable homes. As industry members are aware, Congress attempted to jump-start and expand the manufactured housing finance market (and particularly its chattel component) – currently dominated by just a handful of large lenders -through enactment of the landmark "Duty to Serve" (DTS) provision of the Housing and Economic Recovery Act of 2008 (HERA), which directed the GSEs to facilitate a secondary market with "new products" and "flexible"