Borrowers who can only afford manufactured homes may be negatively impacted if the Consumer Financial Protection Bureau does not use its discretion to re-define regulations dealing with high-cost mortgages, said Sen. Sherrod Brown, D-Ohio.
Sen. Brown sent a letter to CFPB Director Richard Cordray, noting the Dodd-Frank Act expanded the Home Ownership and Equity Protection Act in a manner that could harm the manufactured homes industry. As a result of those changes, a high-cost mortgage is now defined as a first mortgage with interest rates of 6.5% (or a rate of 8.5% or greater) for mortgages on properties valued under $50,000.
The problem is "mortgages for manufactured housing are especially low in value," and the interest rates and fees generally become a "larger percentage of manufactured home mortgage costs," Sen. Brown asserted in his letter.
Because high-cost mortgages come with more compliance requirements and penalties, the senator believes lenders are less likely to offer these loans, which could make manufactured homes less attainable for low-income homeowners under the newly defined rules.
"While these disincentives will help alleviate bubbles in the general housing market, they could also prove devastating to low-income families looking to purchase manufactured housing," Sen. Brown asserted in his letter.
Brown asked Cordray to use the CFPB authority to make adjustments to the high-cost mortgage rule to ensure the manufactured housing industry is not harmed by the changes.
"[T]he CFPB has the authority to make adjustments to the applicable percentage rate triggers if the Bureau determines that the adjustment is 'consistent with the consumer protections against abusive lending' and 'warranted by the need for credit.'"
This is not the first time the manufactured homes industry has pushed back at regulators and policymakers in Washington D.C.
Kevin Clayton, the CEO of Clayton Homes, told lawmakers last year that his industry continues to be negatively impacted by a general lack of access to the secondary mortgage market.
"The ability for lenders to securitize manufactured home loans in the secondary market, particularly those secured by personal property, has been very limited," Clayton said while testifying in front of the U.S. House Financial Services committee last year.