In a media release to the manufactured housing industry’s largest trade media, MHProNews, the Manufactured Housing Association for Regulatory Reform provided the following report. That will be followed by additional information, related analysis, and commentary.
MHARR PERSISTENCE PAYS OFF – FHFA ADMITS
REALITY: FANNIE AND FREDDIE NOT SERVING MH UNDER DTS
Washington, D.C., November 4, 2020 – As confirmed by the Manufactured Housing Association for Regulatory Reform (MHARR), a report recently submitted to Congress by the Federal Housing Finance Agency (FHFA) – the federal regulator for mortgage giants Fannie Mae and Freddie Mac – reveals, for the first time, how those entities have been certified by FHFA as allegedly being “in compliance” with the statutory Duty to Serve Underserved Markets (DTS) mandate regarding manufactured housing when, in fact, they are only serving a tiny fraction of the mainstream manufactured housing market. Specifically, the report reveals that this “in compliance” determination is the result of a deceptive fiction, whereby an entire category of manufactured home consumer lending – representing nearly 80 percent of the entire manufactured home consumer loan market – is totally excluded from FHFA’s compliance evaluation.
Under the DTS mandate, enacted by Congress as part of the Housing and Economic Recovery Act of 2008 (HERA), Fannie Mae and Freddie Mac were directed to provide securitization and secondary market support for three historically underserved segments of the housing industry, specifically including affordable, federally-regulated manufactured housing. The DTS provision, moreover, makes it abundantly clear that support for mainstream manufactured housing is to include consumer loans for manufactured homes titled as both real estate and personal property, often referred to as “chattel loans.”
Nearly 13 years after the enactment of DTS, however, neither Fannie Mae nor Freddie Mac have securitized a single manufactured housing personal property loan – and have no current plans to provide any DTS support for such loans for the foreseeable future – despite the fact that personal property loans comprise (and have historically comprised) nearly 80 percent of the manufactured housing market, according to U.S. Census Bureau data. This lack of DTS support, in turn, has helped perpetuate a less-than-fully-competitive manufactured housing consumer lending market, with consumers effectively forced to rely on higher-cost loans originated by a small handful of dominant lenders affiliated with the industry’s largest corporate conglomerates. Thus, as reported by Freddie Mac itself, “More than 90% of the personal property loans reported in the 2018” Home Mortgage Disclosure Act (HMDA) data were “higher-cost originations.”
The impact of this total lack of DTS support for the vast bulk of the mainstream manufactured housing market and the overwhelming majority of manufactured housing consumers is profoundly negative. First, it subjects better-qualified borrowers to unnecessarily high interest rates. Second, it totally excludes from the market qualified consumers who could afford market-competitive, DTS-supported interest rates, but not the higher interest rates currently being charged without DTS support for mainstream manufactured housing personal property loans. And third, it has artificially suppressed the production of mainstream, affordable manufactured homes, devastating the industry, with production levels over the past decade-plus well below historical norms and 2019 and 2020 production levels that have fallen even further.
Against this backdrop, and despite Congress’ clear intention and mandate to include mainstream manufactured housing personal property loans within the scope of DTS to ensure full-scale, market-significant support for the manufactured housing market as a remedy for decades of neglect, Fannie and Freddie – with FHFA’s de facto consent and approval – have totally ignored and avoided manufactured home chattel lending. And now, in its latest report to Congress, FHFA finally – after being “smoked out” by persistent MHARR pressure – acknowledges that its certification of Fannie and Freddie’s alleged DTS “compliance,” is based on a complete fiction, which excludes the entire chattel sector of the market. In relevant part, FHFA states in that report:
“For manufactured homes titled as personal property, or chattel loans, both Enterprises submitted infeasibility requests on their chattel pilot initiatives, requesting that FHFA exclude these objectives from consideration during the annual Duty to Serve performance evaluation for 2019. An Enterprise may submit an infeasibility request if underserved market conditions or other extenuating circumstances outside of its control substantially interfere with its accomplishment of an objective. FHFA approved these infeasibility requests on February 27, 2020.”
Consequently, FHFA’s DTS compliance certification is based solely on the real estate segment of the HUD Code manufactured housing market which, according to U.S. Census Bureau data, comprises only a small fraction of all manufactured home sales. This, in turn, has restricted DTS support to only 4-5 percent of new HUD Code home sales since the initial implementation of the DTS program in 2018. Conversely, some 94-95 percent of the new mainstream manufactured housing market, as maintained by MHARR, has gone completely unserved under DTS over the same period – FHFA’s phony and misleading certifications notwithstanding.
This deception and gamesmanship – by entities that nearly crashed the U.S. economy during the 2008 housing crisis – is a disgraceful manipulation of the moderate and lower-income Americans that Congress meant to serve through DTS. Ultimately, the remedy for this travesty would be for Congress and the Administration to hold FHFA, Fannie and Freddie accountable for the full and faithful implementation of DTS within the mainstream manufactured housing market. MHARR will now pursue such a process.
The Manufactured Housing Association for Regulatory Reform is a Washington, D.C.-based national trade association representing the views and interests of independent producers of federally-regulated manufactured housing.
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Additional Information, MHProNews Analysis and Commentary
MHProNews reported earlier this week on a keenly related topic. That report is linked below.
Tim Williams reportedly said to several people that he was happy about the failure of the manufactured housing pilot program for chattel loans with the Government Sponsored Enterprises (GSEs) of Fannie Mae and Freddie Mac. Williams, 21st, Clayton Homes, Berkshire Hathaway, MHI, and their attorneys were contacted to confirm, clarify, or deny that statement. After multiple contacts, they declined comment. Thus, the comment which was reportedly stated to several, stands unrefuted.
There are numerous other questions and concerns that come into focus from what MHARR says how their persistent efforts prompted FHFA to admit in their annual report to Congress.
Some of those DTS and finance related items are covered in the related reports above and below.
All of this belies MHI’s claims to be working on behalf of the entire industry.
How is it possible after 12 years that MHI’s has failed to advance the DTS mandate for personal property “home only” chattel lending from being passed into law without being implemented? That failure by MHI, clearly with the blessings of their corporate leadership, can’t reasonably be garden variety ineptitude. MHI keeps saying something year after year after year that may sound fine to some, but in fact has produced no measurable progress. For all of their photo opportunities or videos with key officials, elected or appointed, MHI and their corporate masters has not moved the needle on the DTS lending issue. That’s the view of some professionals in MHI, from MHARR, and others. See some of those reports and comments linked above, as well as the one below.
The bottom line? The status quo has benefited consolidators. Using the logic of William Proxmire, that should not be treated as mere coincidence.
When someone follows the money, history, and evidence, there are strong reasons to believe that MHI and their corporate masters are getting what they want. It is manufactured housing independents and consumers that are getting short changed.
MHARR pointing to FHFA’s admission may be one more step toward progress. But the stark reality is that MHARR is de facto battling not only foot-dragging by public officials and the GSEs. They are arguably also battling industry insiders, as exemplified by the leadership of MHI.
The pieces of the puzzle, obscured through years of purported razzle dazzle and confidence maneuvers can now be a call for Congress to hold the FHFA to account. To learn more, see the linked reports above and below the byline, offers, and notices.
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By L.A. “Tony” Kovach – for MHProNews.com.
Tony earned a journalism scholarship and earned numerous awards in history and in manufactured housing.
For example, he earned the prestigious Lottinville Award in history from the University of Oklahoma, where he studied history and business management. He’s a managing member and co-founder of LifeStyle Factory Homes, LLC, the parent company to MHProNews, and MHLivingNews.com.
This article reflects the LLC’s and/or the writer’s position, and may or may not reflect the views of sponsors or supporters.
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