Issue link: https://read.dmtmag.com/i/76207
MHARR VIEWPOINT FHFA, Fannie and Freddie Drop the Ball Again BY DANNY GHORBANI Chattel, or personal property financing, the first and most popular type of manufactured home consumer financing for decades, remains the lifeblood of the industry. Census Bureau data for 2011 shows that 76% of the manufac- tured homes placed for residential use were ti- tled as personal property, up from62%in 2008. The reason is simple. Chattel financing, se- cured solely by the home and not the land the under the home, provides lower and evenmod- erate-income homebuyers with access to the in- dustry'smost affordable products, products that are within the economic means of nearly every American without costly taxpayer-funded sub- sidies that contribute to record-level deficits. But, the Government Sponsored Enterprises (GSEs) – Fannie Mae and Freddie Mac – that provide the vast bulk of the secondary market capital and liquidity for private home loans and have a Charter and statute-based duty to sup- port affordable housing, have never truly sup- ported manufactured housing and have been even more hostile to manufactured home chat- tel loans. Years before the housing bubble burst and after certain ill-advised investment choices, the GSEs imposed punitive underwrit- ing criteria on manufactured home real estate mortgages and currently provide no securitiza- tion and/or purchase (S/P) support for chattel loans. Thus, manufactured home loans com- prise less than one percent of the GSEs total portfolios, while the industry and consumers suffer from the resulting lack of market liquidity and loan availability. Extensive interaction with Fannie and Fred- die officials over the course of nearly a decade have made one point perfectly clear -- the GSEs' contempt for manufactured housing is rooted in: (1) their lack of understanding of the unique characteristics of manufactured homes, AUGUST 2012 10 THE JOURNAL the industry, its consumers, manufactured home financing and,most importantly the evo- lution ofmanufactured homes frompseudo-ve- hicles to legitimate housing, with proper installation nationwide and consumer protec- tion as provided by the Manufactured Housing Improvement Act of 2000; and even more importantly (2) their unwillingness and refusal to learn, acknowledge, understand and act based on these unique characteristics despite persistent efforts to ed- ucate them. So, MHARR turned to Congress which, as part of the Housing and Economic Re- covery Act of 2008 (HERA), established the MHARR-developed "Duty to Serve Under- servedMarkets" (DTS), directing the GSEs to "develop loan products and flexible underwrit- ing guidelines to facilitate a secondary market for mortgages on manufactured homes for very low, low, andmoderate-income families," tak- ing into consideration bothmanufactured home real estate and personal property loans. In the same legislation, Congress created the Federal Housing Finance Agency (FHFA) to act as the GSEs' regulator and it fell to FHFA to develop the content of a DTS implementation rule. True to form, in the DTS rulemaking, the GSEs, in defiance of Congress, aggressively op- posed any S/P support for manufactured home chattel loans and FHFA -- by then the GSEs conservator -- simply parroted their long- standing biases, prejudices and excuses in issu- ing a proposed DTS rule that excluded chattel loans and, therefore, the vast bulk of all man- ufactured housing loans. WhileMHARR thor- oughly debunked these myths in its DTS comments,more than two years later, DTS re- mains in limbo at FHFA. And now, FHFA, an agency charged with changing the policies that led the GSEs to ruin and lead them back to fiscal sanity, is instead following those failed policies once again by seeking to exclude man- ufactured home chattel loans from credit in meeting the GSEs' af- fordable housing goals (AHG). Parroting the GSEs a second time, FHFA trots out the same tired ex- cuses for excluding the most affordable homes and most affordable home loans from the "af- fordable" housing goals for 2012-2014, stating: "the Enterprises have minimal experience with chattel financing, and the high level of defaults related to such financing creates significant credit and operational risks. The depreciation in the value of the manufactured home could result in greater loss to the Enterprise in the event of default on the loan." As pointed out though in MHARR's formal July 2012 AHG comments, none of these stale arguments have any factual basis. First, the GSEs do have purchase experience with manufactured home loans, including chattel loans. Both GSEs have participated in the manufactured home mortgage market (in- deed, the GSEs purchased 15% of all manufac- tured home loans as recently as 2004) and "bulk purchased" manufactured home chattel loans prior to the FHFA conservatorship. But even if the GSEs did not have that experience, it would still not be a valid excuse because. Con- gress, in enacting DTS, assumed the GSEs