MH Finance Language Advancing Rapidly

MHARRAs a follow-up to MHARR’s July 16, 2013 Washington Update concerning GSE reform legislation pending in the Senate and announced in the House of Representatives – and the treatment (or non-treatment) of manufactured home consumer financing in each such bill — it now appears that the House counterpart, the Protecting American Taxpayers and Homeowners Act (PATH) is poised to move forward on an expedited basis. At present, though, there is no indication that manufactured housing consumer financing is included as a mandatory element of the bill.

At the first Financial Services Committee (FSC) hearing specifically addressing the provisions of the PATH Act, on July 18, 2013, the FSC Chairman stated in his opening remarks that it is his “intention to mark up the PATH Act before the House adjourns for the August district work period.” And, in fact, following the hearing, the Committee announced that the PATH mark-up would begin on Tuesday, July 23, 2013 and continue for the remainder of that week. All this means that a final bill for committee action would be ready before the start of the congressional summer recess in early August 2013.

The legislative fast track for this bill — with tremendous potential impact on the industry and consumers — underscores and validates MHARR’s observation in the July 16, 2013 Update, that “proposals solidify into legislation, followed by committee action on such legislation, which then becomes difficult to change.” This, in turn, is further confirmation that: (1) it was a miscalculation for the joint industry MHARR-MHI working group to defer action on finance issues — and particularly secondary market support for manufactured home personal property (i.e., chattel) loans – pending the advancement of Dodd-Frank corrective legislation (H.R. 1779) (which is, in fact, included in the PATH Act); and (2) that the industry must act now to ensure that the Act contains mandatory language for the inclusion and non-discriminatory securitization support of manufactured home loans, including chattel loans.

Although some industry reports have stated that the PATH Act “should” provide for the inclusion of manufactured home loans “secured by personal property” within the new privately-based securitization structure envisaged by the 308-page draft bill, the industry, based on past experience – and particularly its recent experience with the “Duty to Serve” (DTS) – should not leave anything to chance. Specifically, DTS instructed Federal Housing Finance Agency (FHFA) regulators to “consider” chattel loans in connection with DTS. FHFA, however, exploited the non-mandatory nature of that language to totally exclude chattel loans from DTS, notwithstanding Congress’ intent to the contrary.

Consequently, the industry cannot gamble on “should be-s” and “maybes” on such a vital issue. Instead, the industry should take steps now to ensure – through clear, unmistakable, mandatory language – that manufactured home consumer financing is and will be an integral and equal part of the market support structure established by Congress to take the place of the existing GSE system. Without such mandatory language included in any final GSE reform bill, the industry and consumers, at worst, could be excluded from the new securitization structure, or, at best, could be leaving that critical issue to chance – a risk that neither can afford to take.

While it is not certain, at present, when the PATH bill will come to the House floor (or when pending GSE and FHA reform bills will go before the Senate), that legislation, given the clear intent and current known schedule of the FSC committee leadership, will advance very quickly. Consequently, time is of the essence in ensuring that strong, appropriate and mandatory manufactured housing consumer finance language is included in the bill. Short of an amendment during next week’s mark-up, however — which seems unrealistic given the very short time remaining — work needs to begin quickly on advancing language that could be incorporated into the bill by an amendment on the House floor.

Accordingly, MHARR and MHI are already planning to convene a meeting of the Associations’ joint working group to address and advance this matter.

We shall continue to keep you apprised as new developments unfold.

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