On December 13, 2016, the Federal Housing Finance Agency (FHFA) issued a final rule to implement the “Duty to Serve” (DTS) requirements. The statute requires Fannie Mae and Freddie Mac (the GSEs) to provide leadership to facilitate a secondary market for mortgages on housing for very low-, low-, and moderate income families in three underserved markets. The underserved markets include: manufactured housing, affordable housing preservation and rural housing.
By way of background, the FHFA issued a proposed rule on December 15, 2015. The proposed rule provided that Duty to Serve credit would be given to Fannie Mae and Freddie Mac for financing manufactured homes titled as real property, but not manufactured homes titled as chattel. The agency’s rationale was that real estate loans perform better and have lower default rates than chattel loans. In anticipation of a firestorm of criticism, the agency invited public comment on whether the final rule should authorize Duty to Serve credit for the purchase of chattel loans.
The industry jumped on this opportunity and submitted over 3,100 comment letters to the FHFA. Shortly after the issuance of the proposed rule, industry representatives and the GSEs began meeting on an ongoing basis. Some of the meetings were with organized groups, like the MHI Duty to Serve Task Force, while others were one-on-one with industry stakeholders, including: lenders, community owners and consumer advocates. From all indications, these meetings were productive and the GSEs gained a better understanding and appreciation for the chattel manufactured housing market.
The final rule provides Fannie Mae and Freddie Mac with Duty to Serve credit for purchasing chattel manufactured housing loans, but does not mandate them to do so. Whether the final rule is positive or negative for the industry depends on which national industry trade group you listen to. MHI’s take on the final rule is that it is a step in the right direction. MHARR believes that because the FHFA did not mandate the GSEs to make chattel loans that it is highly unlikely that any chattel loans will be made.
The truth of the matter is that the industry is closer to getting a viable secondary market program for chattel manufactured home loans than it has been in nearly two decades. While the industry would have preferred the FHFA to mandate the GSEs to make chattel loans, this was not going to happen. However, over the past year the GSEs have demonstrated a genuine interest in understanding chattel manufactured housing financing as it exists today, not as it performed in the late 90’s. If the industry continues to meet with the GSE’s, shares industry operating and loss data, and provides suggestions for properly structuring a chattel loan program, including a flexible approach to loss mitigation, the GSEs will ultimately initiate a secondary market program for chattel manufactured housing loans. This will not happen overnight and the program will start small, possibly as a “pilot”. Over time, the program will expand based on the good loan performance of chattel manufactured home loans. ##
James R. Ayotte, CAE
Florida Manufactured Housing Association
1284 Timberlane Road
Tallahassee, FL 32312