Julian Castro & Doug Ryan

In recent news two fairly exciting things have happened for the manufactured housing industry.  Manufactured housing has begun to escape its dated reputation for being poor in quality, dangerous, and vulnerable to predatory lending practices.  Through the hard work of manufacturers in the development of new production methods, materials, and technology the industry has taken great strides to compare with and now exceed the quality and visual appeal of their site-built counterpart.  At the same time retailers, affordable housing advocates, and consumers have worked to educate politicians, lenders, and other potential home owners of the new realities in manufactured housing.

Recently the U.S. Secretary of Housing and Urban Development, Julian Castro, gave a speech praising the manufactured housing industry not just for offering a more affordable alternative to site-built homes, but for creating safe and energy efficient homes as well. Clearly manufacturers have made enormous strides in the quality of their product if they have gone from being shunned by the general public to being the center of praise and great admiration by a man whose job is to help Americans have access to quality and affordable housing.

In conjunction with Julian Castro, Doug Ryan, a man who has been at the forefront of lending reform with the Federal Housing Finance Agency is trying to make changes that would affect roughly 35% or manufactured housing consumers.  Currently manufactured home buyers who are putting homes on land they own are able to take advantage of conventional mortgage specifications because they are able to borrow money for the homes as real estate while most people who are borrowing to purchase a home that will be in a community or other form of leased land must classify the loan as chattel or personal property.  Doug is proposing to make lending changes that would allow for better lending treatment for leased land buyers by creating incentives for Fannie Mae and Freddie Mac to become involved in leased land lending.

Without getting into too much detail about the extreme financial differences between chattel loans and real estate loans, it is appropriate to state that those difference can be a deciding factor as to whether a person decides to buy or not.  When we see Doug Ryan making strides to increase borrowing opportunities for a group of people that make up 35% of our consumers, it gives all of us a reason to be excited.

Click here to read the whole article

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Doug Ryan, CFED & CFPB

With the Preserving Access to Manufactured Housing Act moving through the legislative bodies lending is a hot button issue in our industry.  Recently MHLivingNews has brought Doug Ryan under fire, building a case that the CFED (Corporation for Enterprise Development) is currently engaged in a conflict of interest with the CFPB (Consumer Protection Financial Bureau).  Both the CFPB and the CFED claim to be consumer advocates.  The CFPB aims to protect consumers from predatory lending while the CFED aims to make sure lending does not become regulated out of existence.  The case for the conflict of interest with Ryan is built on questionable funding. CFED receives a portion of their funding from the CFPB and Ryan refuses to disclose how large of a portion that funding is.

In the article by MHLN the CFPB is quoted as stating that the largest MH lenders are predatory and that the producers are greedy.  It would make sense that suspicion would arise when an organization accepts essential funding from another organization that is in direct philosophical opposition.  Though the article’s purpose was to discuss Doug Ryan and MHLN’s frustration with his actions, what I found most striking was the immense difference between funding for new homes and funding for used homes.  My business deals in new MH and the lending we use is a traditional mortgage, the same as a person would seek when buying an existing or site-built home. Conventional loans are a common occurrence with our new homes.  Hearing that regulation has become so tight that lenders who once helped consumers purchase used homes in the $20K and lower range have backed out of the market because originating smaller loans has become unprofitable is unfortunate.  The CFED makes the argument that sub-prime lending for used homes is not a danger to America’s financial infrastructure the way sub-prime lending led to the most recent housing collapse.   Even though this sub-prime lending does not pose a danger to society, on an individual basis, the structure of a sub-prime loan can still create a lot of stress and potential risk toward the borrower.

The arguments on both sides of the issue are compelling and each hold merit.   Predatory lending and putting profits ahead of ethical behavior is harmful to the society an institution serves.  Likewise, if an institution is unable to generate profits it cannot operate efficiently and will then fail to be capable of serving society.  Forcing people to conduct themselves ethically is a sticky tar pit, but as James Madison wrote in the Federalist Papers #51, “If men were angels, no government would be necessary”.

Mortgage Discrimination

Our in house finance consultant, DeAnna Trask, was passing an article around the office about mortgage denial for women on maternity leave. Click here for the article. I found the article very interesting and I didn’t think it had been an issue in the past but, this year there have been 16 incidents with at least three institutions. Some cases the lenders either denied the loan all together or stopped working on it. On October 9^th, HUD settled with Wells Fargo for $5 million, which is the largest settlement of its kind.

“Wells Fargo settled with HUD to resolve allegations that it discriminated against pregnant women, women on maternity leave, or women who recently gave birth by making loans unavailable based on sex and familial status; or by forcing women applicants to sacrifice their maternity leave and return to work prior to closing on their loans; and by making discriminatory statements to and against women who were pregnant or who had recently given birth.”  Click here to read the whole article.

One of the biggest problems regarding this type of discrimination is the lack of education.    The changes to Dodd Frank, the SAFE act and other federal law changes have greatly impacted and regulated our industry.  Tyna-Minet Anderson, vice president at Mortgage Educators and Compliance, said that underwriters and mortgage insures do not take the same training which many lead to a knowledge gap and fair lending.  HUD reported 30 cases of discrimination in 2010, 40 in 2011, 50 in 2012, and 40 in 2013.

I asked DeAnna to give us some insight on what we can do as dealerships to protect our deals and customers.  Here is what she had to say:

As a dealer, if you have a customer that is pregnant, you need to be aware of how this has worked in the real world.  If you’re doing an end loan, you could run into special underwriting guidelines that only pertain to women on maternity leave.   If the woman goes out on maternity leave before the deal is closed, an underwriter could do the following:

1. Refuse to count her income because she is on leave, effectively declining the loan.
2. Refuse to acknowledge that being on family medical leave does not mean that you’re unemployed.
3. Decline the loan altogether and make them resubmit when she goes back to work.
4. Or, put the loan on hold until she is back to work and has 30 days of paystubs.

All of these actions have been standard practice in the past.  However, all of these actions violate the Fair Housing Act of 1968.

MHI Weighs in on CFPB Housing Finance Proposed Rules

MHI or the Manufactured Housing Industry has worked to represent the concerns of our industry over the past few months in response to a number of proposed housing finance rule makings.  These proposals were release by the Consumer Financial Protection Bureau or CFPB.

A previous article mentioned that, “MHI is concerned that a number of new regulations currently being developed by the CFPB could further limit access to and the availability of credit in the already finance-constrained manufactured housing market. In addition to efforts to amend the Dodd-Frank law through legislative measures in the House and Senate (H.R. 3489 & S. 3484), MHI is actively advocating the industry’s concerns before key staff at the CFPB.”

The next section highlights some of the most significant rules that MHI has the most concern with.  MHI wants you to know that, “MHI staff is working to ensure final rules adequately reflect the price sensitivities and unique challenges inherent to the manufactured housing market.”

(The following is from the MHI news wire.  The information is quite important so please read further)…

Appraisal Requirements for Higher-Risk Mortgages

Implements Dodd-Frank provisions that an appraisal (including a physical inspection of the interior of a home) be conducted on homes with mortgages considered “higher-risk.” Under the law, qualified mortgages (QMs) would be exempt from the “higher-risk mortgage” definition and thereby exempt from appraisal requirements. In general, if the loan is not a QM and has an APR that is 1.5 percentage points over prime, it is considered “higher-risk.” Based on input from MHI, the rules proposed by the CFPB and others would exempt any loan “solely secured by a residential structure,” such as manufactured homes, from the higher-risk mortgage definition. Based on the unique difficulties of appraising manufactured homes, MHI is working to expand this definition to include any manufactured home loan secured by real property.

• Click here to view the proposed rule.
• Click here to view MHI’s comments.
• Click here to view a summary of the appraisal proposed rule.

Equal Credit Opportunity Act Amendments— Requires creditors to provide consumers free copies of all written appraisals and valuations developed in connection with an application for a mortgage. The proposal would require creditors to notify applicants in writing of the right to receive a copy of each written appraisal or valuation at no additional cost. With respect to new manufactured homes, most lenders develop a maximum loan amount based on the manufactured home’s invoice price. In the proposed rule, the CFPB indicates that “valuations such as manufacturer’s invoices for mobile homes” would not be considered a “written appraisal or valuation” and would not have to be provided to consumers by lenders. In addition, publicly available valuation lists (such as published sales prices or mortgage amounts, tax assessments and retail price ranges) are not items considered that must be provided to consumers.

• Click here to view the proposed rule.
• Click here to view MHI’s comments.

HOEPA High-Cost Mortgage Revisions — Dodd-Frank expands the types of mortgages subject to the protections of the Home Ownership and Equity Protection Act (HOEPA); revises and expands the triggers for coverage under HOEPA; and imposes additional restrictions on HOEPA “high-cost mortgage” loans, including a pre-loan counseling requirement. Because the fixed costs (such as servicing and origination) and the lack of secondary market access, low balance manufactured home loans are particularly susceptible to classification as high-cost under the revised HOEPA guidelines. Due to liabilities associated with a high-cost/HOEPA mortgage, lenders will not originate these loans—potentially further stifling the availability of credit in the manufactured housing market. MHI has urged the CFPB to significantly broaden the APR and origination points thresholds that define HOEPA high-cost loans and ensure that fewer low-balance manufactured home loans are captured by triggers that currently do not fully account for the price pressures in the manufactured housing market.

• Click here to view the proposed rule.
• Click here to view MHI’s comments.

Loan Originator Compensation Rules —Implements changes made by Dodd-Frank to Regulation Z’s current loan originator compensation provisions, including a new additional restriction on the imposition of any upfront discount points, origination points, or fees to consumers under certain circumstances. The rule implements a very narrow exemption for manufactured housing retailers to “exclude employees of a manufactured home retailer who assists a consumer in obtaining or applying to obtain consumer credit, provided such employees do not take a consumer credit application, offer or negotiate terms of a consumer credit transaction, or advise a consumer on credit terms (including rates, fees, and other costs).” Unfortunately, the provision provides no meaningful relief to the industry.

MHI has maintained the position that the exemption for manufactured home retailers should be based upon the compensation received in the home sale. If the compensation received is no greater than what the retailer would have received in an all-cash transaction, then the individual retailer/seller should not be considered a loan originator. Unless clarifications are made, MHI is concerned that lenders may be forced to consider sales commissions earned by a manufactured home retailer as compensation and gain for purposes of calculating a loan’s APR or points and fees. This may cause the loan to fail the test for a “qualified mortgage” or a HOEPA/high-cost mortgage.

• Click here to view the proposed rule.
• Click here to view MHI’s comments.

RESPA & TILA Mortgage Servicing Guidelines – The rules implement Dodd-Frank provisions regarding mortgage loan servicing. Specifically, this proposal implements Dodd-Frank sections addressing initial rate adjustment notices for adjustable-rate mortgages (ARMs), periodic statements for residential mortgage loans, and prompt crediting of mortgage payments and response to requests for payoff amounts. The proposed rule would provide an exemption to small servicers—defined as those that service 1,000 or fewer mortgage loans and service only mortgage loans that they originated or own—for the periodic statement requirements.

• Click here to view the RESPA proposed rules.
• Click here to view the TILA proposed rules.
• Click here to view MHI’s comments.
• Click here to view a summary of the new servicing requirements.

For more information, contact MHI Vice President of Government Affairs Jason Boehlert at  jboehlert@mfghome.org.

Agencies Set Mortgage-Servicing Rules for Military Members

On June 21st, 2012 the Consumer Financial Protection Bureau (CFPB), Federal Reserve, Federal Deposit Insurance Corp., National Credit Union Administration and The Office of the Comptroller of the Currency issued that mortgage servicers to provide servicemembers with guidance about information that they need to sell their homes.  This guidance also extends to modifying their loans when they must relocate.  For additional information click here for the press release.

The goal here is to provide the servicemembers who are receiving permanent change in station orders are obtaining “Clear, accurate, and timely information about available options such as loan modification or short sale,” declared the CFPB director, Richard Cordray.

According to the CFPB, approximately one-third of active duty servicemembers get these orders each year and the Department of Defense figures about 180,000 members of the military are homeowners.

The guidance also addresses two specific practices: asking servicemembers to waive their rights under the servicemembers Civil Relief Act as a condition for assistance or skip mortgage payments to become eligible for assistance.