Issue link: https://read.dmtmag.com/i/251530
FEBRUARY 2014 12 THE JOURNAL No Excuses Left on Consumer Financing MHARR VIEWPOINT BY DANNY GHORBANI Having been unsuccessful in warding off the worst aspects of the Dodd-Frank law prior to the January 2014 effective date of Consumer Finance Protection Bureau implementing rules, the in- dustry cannot afford an even more serious and far-reaching lapse in 2014 as Congress develops legislation that will shape the consumer home fi- nancing market for decades to come. The challenge is straightforward. Bills to re- form the Government Sponsored Enterprises (GSEs) pending in both houses of Congress right now would arguably allow regulators not only to continue their long-standing discrimination against all types of manufactured home loans, but to completely exclude manufactured home chat- tel loans – representing 76 percent of all new HUD Code placements – from the new institu- tions, structures and programs they would estab- lish. Without clear, definitive and mandatory language to include all types of manufactured home loans – on an equal, non-discriminatory basis -- in any final law emerging from Congress, the industry could find the vast majority of its homebuyers effectively frozen out of the housing finance market of the future. And while MHARR has developed the neces- sary language to properly amend the pending bills, skepticism over the performance of manu- factured housing loans remains. Thus, Congress will need to be convinced that such loans are worthy of inclusion in the new home financing mechanisms that it establishes. Fortunately, though, the evidence needed to make that case is beginning to emerge. Despite having had absolutely nothing to do with the "housing bubble" and subsequent tax- payer bailouts of the GSEs and the Federal Hous- ing Administration (FHA) (constituting only a miniscule portion of the total loan volume held by those entities), manufactured home loans have long been a target of opportunity for regu- lators and others who would just as soon have nothing whatsoever to do with manufactured home consumer financing. Thus, for years now, homebuyers and industry members have heard from FHA, the GSEs, the Government National Mortgage Association (GNMA) and the Federal Housing Finance Agency (FHFA) (cheered-on by industry competitors, de- tractors and other benefici- aries) that there is nothing more they can do to help ex- pand the availability of everyday manufactured home consumer financing – and particularly chattel loans -- because it's all just "too risky." Brandishing decades-old "data" or no data at all, these organizations have maintained policies that discriminate against manufactured homebuyers and undermine competition in the manufactured housing finance market. The GSEs, for exam- ple, do not securitize any chattel loans at all and discriminate against manufactured home real es- tate mortgages and land-home loans (on under- writing, comparables, appraisals and rates) -- having once offered only the excessive (and vir- tually unused) "select" criteria to even come close to the treatment afforded other types of homes. Other examples include the GNMA "10-10" rule for FHA issuers and the FHFA proposed 2010 "duty to serve underserved markets" (i.e., man- ufactured housing and two other markets desig- nated by Congress that have historically been underserved by Fannie Mae and Freddie Mac) (DTS) rule that would have totally excluded chattel loans contrary to the clear directive of Congress – but has never been implemented. Indeed, one needs only look to the adminis- trative record of the DTS rulemaking to gain an appreciation for the deep-seated bias that will need to be overcome. In September 2009 com- ments on FHFA's Advance Notice of Proposed Rulemaking (ANPR), Freddie Mac stated, with no support whatsoever, that loans "not secured by land present substantially more risk compared to land-owned homes." No statistics, no figures, no analysis, no nothing. Fannie Mae – with its own sorry record -- went on to cite FHA Title I (chattel loan) default data from the 1990s (well before the industry's adoption of improved lending practices and the implemen- tation of the Manufactured Housing Improvement Act of 2000, with its national installation standards and enhanced nationwide consumer dispute resolu- tion system) for the proposition that the chattel market is "risky for investors." Apparently Fan- nie Mae deemed it better to smear an entire class of consumers than re-examine its own errors in sinking half a billion dollars into manufactured housing paper from a company that was about to – and did – go bankrupt. In part, these outdated perceptions and obso- lete data, to the extent that it exists – have been able to persist and have an ongoing negative im- pact on public policy because no new perform- ance data has been made public or divulged (as far as MHARR is aware) to relevant decision- makers by those who have such data. For ex- ample, GNMA officials indicated in a December 2011 meeting with MHARR that they would be willing to revisit the competition-killing 10-10 rule \ 15