Lawmakers in Washington D.C. are fighting to obtain more financing for manufactured homes, a segment of the market that receives little national attention despite its role in providing affordable housing.
Congressman Stephen Fincher, R-Tenn., along with Reps. Bennie Thompson, D-Miss. and Gary Miller, R-Calif. introduced the bipartisan Preserving Access to Manufactured Housing Act to protect the availability of financing for affordable manufactured housing to protect the more than 22 million Americans living in manufactured homes.
The bill would amend the Dodd-Frank Wall Street Reform and the Consumer Protection Act to change the criteria by which home loans are classified as "high-cost" while keeping in place strong consumer protections.
"Low-income families across the country, particularly in rural areas, depend on access to financing for affordable manufactured homes," said Nathan Smith, chairman of the Manufactured Housing Institute.
Smith added, "Not only are manufactured homes the largest form of unsubsidized affordable housing in the nation, but the manufactured housing industry is also a job creator and an important economic driver in many communities. We thank Representatives Fincher, Thompson and Miller for fighting to protect manufactured homeowners and our industry."
The Consumer Financial Protection Bureau decided earlier this year that all purchase loans will be covered by the Home Ownership and Equity Protection Act. This includes mortgages on manufactured homes considered personal property.
Under the guidelines from the CFPB, a large percentage of small-balance loans used for the purchase of manufactured housing would be unfairly classified as predatory and high-cost, effective January 2014. It is unlikely these loans would be offered to homebuyers due to the increased lender liabilities associated with making and obtaining an HOEPA high-cost mortgage. This would deny access to necessary credit for new and existing manufactured homes.
By eliminating that source of financing, low- and moderate-income homebuyers would be unfairly penalized. These homebuyers do not qualify for traditional mortgage financing necessary for single-family home ownership, do not have access to limited government-insured and GSE secondary market programs or live in rural areas where affordable housing is scarce.
By enforcing this rule, millions of families could see the equity they’ve worked so hard to build up in their manufactured homes be erased because of lenders’ unwillingness to provide the financing needed for resale.
"In this case, we believe the CFPB got it wrong," said Smith. "Homeowners who purchased safe, energy efficient homes that they can afford rather than taking out a loan they could not pay back should not be punished."
The cost as a percentage of originating and servicing a $250,000 loan and a $25,000 loan is very different, causing the smaller-sized manufactured home loan to potentially exceed the new thresholds and be categorized as high-cost. The proposed act would amend the thresholds by which designated small balance manufactured homes are deemed as high-cost under HOEPA while maintaining the consumer protections from predatory lending practices in Dodd-Frank.
The bipartisan legislation would also make apparent that manufactured home retailers and sales people are not considered loan originators, unless they receive compensation from a lender, mortgage broker or loan originator.
Companion legislation is expected to be introduced in the U.S. Senate in the coming weeks.