Issue link: https://read.dmtmag.com/i/179253
MHARR VIEWPOINT "'Shall' Versus 'May' and Why the Difference Matters to the Industry and Consumers" BY DANNY GHORBANI In the nation's capital, where the success or failure of federally-regulated industries is impacted every day, there is a world of difference between two small words -- "may" and "shall." And understanding the difference between the two, and why that difference is important, will be crucial as the industry seeks to ensure not only its survival, but its revival and expansion in the years ahead. With annual production stuck for years now at plus-or-minus 55,000 homes, the main roadblock to industry growth – as is widely acknowledged -- is a lack of consumer financing driven by the unavailability of high-volume manufactured home loan securitization (particularly for personal property "chattel" loans) in the private sector, through the Government Sponsored Enterprises (GSEs), and the public sector, through the Federal Housing Administration (FHA). And while the availability of consumer financing is not the only challenge facing the industry and potential manufactured homebuyers, it has had a major impact over the past decade and could have even more devastating consequences in the future if not addressed properly in the nation's capital by the industry, consumers and their respective allies in Congress and the Administration. In the current Congress, the industry's efforts on consumer financing have had two principal focuses – corrections to the Dodd-Frank financial reform law and comprehensive GSE reform. And while both are an outgrowth of the 2008 recession and housing market meltdown, they are fundamentally different and can only be properly understood by industry members, consumers and decision-makers if they are seen and appreciated as being different. On the one hand, the necessity and importance of the industry effort to correct the DoddFrank law is clear. But the success of that effort OCTOBER 2013 12 THE JOURNAL to exclude manufactured housing from debilitating Dodd-Frank regulations, will only preserve the current level of loan availability and securitization -- and thus production. And certainly no one would claim that current production levels are satisfactory or acceptable for either the industry or manufactured homebuyers. Put differently, correction of the DoddFrank law (and regulations) will not, in itself, expand the availability of manufactured home loans and securitization (especially for chattel loans) beyond present day levels. On the other hand, there is the entire matter of "GSE reform," with bills introduced in both houses of Congress and the President having expressed support for the concept of such reform. While the political wrangling on these measures continues, when a final law emerges from this process, it will ultimately determine the size, shape and character of the entire housing finance market – along with its winners and losers -- for decades to come. And it is in the context of this process that the effort of the industry and its consumers to ensure the role of manufactured housing as an equal participant in the housing finance market must ultimately have its primary focus, and where those two words, "may" and "shall," become vitally important. So, what are the key differences between these two efforts and why does "may" versus "shall" matter to the industry and manufactured homebuyers? Very simply, as noted above, the Dodd-Frank correction effort would preserve the current availability of consumer loans for the near-term, while GSE reform will determine for the long-term whether manufactured home consumer loans (and particularly chattel loans) are either "in" or "out" of the institutions, structures and programs that will ultimately replace the GSEs. In other words, the GSE reform process will ultimately determine whether the availability of manufactured home loans (and, again, particularly chattel loans) can be expanded beyond present-day levels, or whether manufactured homes and manufactured homebuyers are shut out of high-volume loan securitization in the future. And, in order to ensure that manufactured home loans are included in the new institutions, structures and programs established by any final GSE reform law, mandatory "shall" language -- rather than "may," or any other language that leaves the matter to chance – will be required. This is why MHARR maintains that developing and advancing clear, definitive and mandatory (i.e., "shall") language for the inclusion of manufactured home loans in any final GSE reform bill is essential. Why the mandatory "shall?" Because the industry has learned the hard way that anything less than "clear, definitive and mandatory" language in any law pertaining to federally-regulated manufactured housing can and will be used by regulators and other decision-makers as an excuse to ignore Congress and treat both manufactured housing and its homebuyers as second class citizens. A prime example – and the most recent -- is the "Duty to Serve" (DTS). Language in the Housing and Economic Recovery Act of 2008 (HERA) provides that the GSEs' regulator, the Federal Housing Finance Agency (FHFA), may "consider loans secured by both real and