Consumers’ Views on Current Economy Rise
Data released Friday by the University of Michigan/Thomson Reuters show that consumer sentiment rose in September after tumbling to a nearly-three-year low in August. The preliminary sentiment reading for September increased to 57.8 from 55.7 in August. The August reading was the lowest level since November 2008. The survey’s gauge of views on current conditions rose to 74.5 in September from 68.7 in August. Meanwhile, the expectations gauge declined to 47 from 47.4. Also, one-year inflation expectations rose to 3.7 percent from 3.5 percent.
Industry Expects Another Short-Term Extension for Flood Insurance Program
The National Flood Insurance Program (NFIP), which is set to expire on Sept. 30, could be extended for a short-period as Congress seeks additional time to consider two reform bills. The U.S. House could vote as early as Sept. 21 on a short-term extension through Nov. 18, and a U.S. Senate vote would follow shortly after that. American Insurance Association (AIA) Senior Vice President for Public Affairs Blain Rethmeier says that the short-term extension is part of a resolution to continue to fund the government and to make available disaster relief funds for the states impacted by Hurricane Irene. Lawmakers indicate that they need additional time to advance and forge a compromise between the measures passed by the full House and the Senate Banking Committee, which would reauthorize the NFIP for five years and reduce subsidies in rates for coastal homeowners.
Congress Urged to Keep Higher U.S.-Backed Mortgage Limits
Congress should not let the size of government-insured mortgages shrink until the housing market is more stable, say experts. The ceiling on loans guaranteed by Fannie Mae, Freddie Mac, and the FHA is set to decline Oct. 1, falling from $729,750 to $625,500 in high-cost markets. The lower limits have already been priced in by many banks; data from the Mortgage Bankers Association shows that loan requests for between $625,500 and $729,750 slumped 34 percent last month, versus a 14 percent drop for all applications.
Federal Reserve Considers Whether to Twist Again
U.S. Federal Reserve Chair Ben Bernanke will use the tools at his disposal to combat high unemployment and lower inflation even if they are not expected to have a significant impact on the economy. Currently, the central bank is reshaping its $1.7 trillion portfolio of Treasuries to hold less short-term debt and more long-term debt to help reduce long-term interest rates. The yield on the 10-year Treasury already is below 2 percent, and bond markets and bankers eagerly anticipate the Fed’s actions. Rather than engage in quantitative easing through which the Fed bought $600 billion in bonds to fuel the economy, the central bank is hopeful that shifting into longer term bonds will further reduce long-term rates. However, previous attempts to shift the Fed’s portfolio in Operation Twist were considered a failure, according to several Fed members, including Bernanke, in 2004. Nobel laureate Franco Modigliani said that the impact of the move was moderate, reducing long-term rates by 0.1 percent or 0.2 percent. The central bank and U.S. Treasury continue to discuss their options, while the Fed is concerned about the United States going the way of Japan and the Treasury worried the nation is headed for trouble like that in Greece. Wall Street Journal Columnist David Wessel says that Operation Twist will not improve the economy on its own, but could bolster public and business confidence if used in in conjunction with other measures.
Replacing Minot Homes
The Federal Emergency Management Agency previously singled out existing manufactured home communities (MHCs) as the fastest route to restoring homeownership in Minot, N.D., in the wake of destructive flooding. An estimated 800 lots within the area’s eight MHCs could serve as new home sites for displaced residents, and manufactured home builders — which can construct units quickly and in large numbers — are prepared to take on the task, writes North Dakota Manufactured Housing Association President Lance Kennedy. The existing homes must be removed in order to repair and replace the infrastructure, however, and Kennedy is frustrated at the government’s slow action toward this goal. “Time is running out,” he warns in the Minot Daily News. “The potential for many homes to be replaced this year in established locations is fading away. . . . Having 800 lots sitting idle through this winter would be a shame. While the government is building lots for temporary housing, 800 lots for permanent housing sit idle. A plan needs to be in place in days not weeks and not months.”
Housing Company Wants to Quickly Add Workers
Factory-built homes manufacturer Hi-Tech Housing confirms that it has been awarded a second order for temporary housing units by the federal Department of Homeland Security. In response to the new order, the company will open a second plant in Middlebury, Ind., and will immediately start hiring 120 to 150 new employees. The Federal Emergency Management Agency, which is part of Homeland Security, will use the three-bedroom structures as temporary housing for the thousands of residents displaced by this year’s floods and tornadoes. An initial order in July, for 270 units, is providing shelter for residents in North Dakota’s Souris River flood zone. The latest order for 500 new units also will go to North Dakota as well as other areas impacted by severe weather events in recent months. The company is hiring production employees, quality control workers, and administrative staff.
Green Courte Partners Acquires Manufactured Housing Community in New York
Green Courte Partners LLC is the new owner of Parkside Village, an age-restricted manufactured housing community located in Cheektowaga, N.Y., where the Chicago company already operates the Sky Harbor family community. Parkside Village features 156 home sites, which have boasted a 100 percent occupancy rate since the community was developed in the early 1990’s. American Land Lease Inc., a Green Courte unit, has been recruited to manage the new acquisition under its 55+ lifestyle brand, Solstice Communities. It already does so for substantially all of Green Courte’s land-lease communities, which consist of more than 18,100 developed home sites across 49 properties in 10 states.
ELS Cranks Out Seven More Property Closings, Worth $160 Million
Equity Lifestyle Properties (ELS) has completed its purchase of an additional seven properties as part of a larger portfolio of assets that it agreed to acquire this past May. The seven properties, among 58 in total that ELS closed on during this year’s third quarter, were bought for $160 million and also included closing on certain manufactured homes and loans secured by manufactured homes at those properties. ELS is on track to close on the 18 remaining properties in the broader portfolio — which is valued at $1.43 billion — by early next month. In all, the acquisition will include 31,167 sites and 75 manufactured home communities — primarily in Florida and the U.S. Northeast.
Manufacturer of Modular Homes Leases Former Submarine Shop at Mare Island
Modular homebuilding operations are slated to set up shop on California’s Mare Island in the coming weeks, taking up space previously occupied by a submarine repair and machine business. As Massachusetts-based Blu Homes spreads out to meet West Coast and Canadian demand for energy-efficient modular residences, it is expected to create nearly 100 jobs at its newest installation initially and eventually as many as 190 positions. “We’re very excited to be in Vallejo and see this as an enormous step forward in addressing the rapidly growing demand for our homes in the West,” said Blu Homes President Bill Haney in a statement.
Drew Acquires Starquest for $22.6M
Drew Industries Inc., a New York-based maker of components for manufactured homes and recreational vehicles, has paid $22.6 million for Starquest Products LLC and its affiliate, Qualitec Manufacturing LLC. It anticipates an immediate increase in profits as a result of the acquisition of Starquest, which registers $22 million a year in sales from its windows for truck caps and its windows and doors for buses and horse trailers.
More Changes in HUD’s Office of Manufactured Housing
Former HUD Deputy Assistant Secretary for Regulatory Affairs, Teresa Payne is back at HUD. She left HUD earlier this year for the new Consumer Financial Protection Bureau (CFPB) to continue working on SAFE Act and RESPA issues. Payne will serve as a Special Assistant in the Office of Risk Management and Regulatory Affairs where she will work on a variety of issues, which may include manufactured housing. Beverly Miller currently serves as the new Deputy Assistant Secretary for Risk Management and Regulatory Affairs.
New CFPB Head Indicates Tough Enforcement Ahead
Still without an official director, the Consumer Financial Protection Bureau’s (CFPB) acting head, Raj Date, indicated that the Bureau would be taking a strong stance in identifying practices harmful to consumers.
When Elizabeth Warren resigned as the head of the agency earlier this summer, Date was thrust into the role of leading the agency until the Senate could confirm the nomination of Richard Cordray as the Bureau’s first official director. However, Senate Republicans have promised to block the nomination until changes are made to the CFPB’s operating structure. Meaning, Date could potentially be serving as the de facto head of the Bureau for the foreseeable future.
On September 15, Date, whose official title is Special Adviser to the Treasury Secretary, delivered his first public speech and stated that “banks and other firms will find that we are fair-minded. But we’re tough-minded too…when enforcement is the right tool to use, I assure you we will not hesitate to use it.”
He indicated areas the CFPB would focus its enforcement and regulatory efforts, including:
• bank overdraft fees
• those offering products outside of the traditional banking sector (payday and title lenders)
• streamlining mortgage disclosure forms
• developing basic standards for mortgage servicing
• private student lenders and for-profit educational institutions
Super Committee Meets, MHI Lobbies on Critical Industry Tax Issues
The Joint Committee on Deficit Reduction or “Super Committee” held its first public meeting. The 12-member bipartisan panel is responsible for determining how the government will trim $1.5 trillion from the deficit. The committee roster includes Senators John Kerry (D-MA), Max Baucus (D-MT), Jon Kyl (R-AZ) and Pat Toomey (R-PA), as well as Representatives Dave Camp (R-MI), Fred Upton (R-MI), Chris Van Hollen (D-MD), James Clyburn (D-SC) and Xavier Becerra (D-CA). Many view the panel’s recommendations as an opportunity to overhaul the tax code. If the panel does not produce a plan by the end of November – or if Congress does not adopt it by the end of the year – more than $100 billion a year would be cut automatically from the budget, starting in January 2013.
What follows are major manufactured and modular housing tax provisions that MHI staff is monitoring:
• ENERGY STAR Tax Credit – Presently, manufacturers who build ENERGY STAR homes are eligible to receive a $1,000 tax credit while modular home builders are eligible to receive a $2,000 tax credit by exceeding the International Energy Conservation Code (IECC) by 50 percent. This tax credit is set to expire in December of 2011.
• Taxation of “Carried Interest” – “Carried Interest” allows real estate investment trusts, private-equity firms and other partnerships to pay tax rates on their profits that are lower than rates paid by salaried and hourly workers. An increase in the tax rate will adversely affect our communities that are real estate partnerships and will have a profound affect on smaller developers/owners who are already feeling the ill effects of capital constraints in the marketplace.
• Mortgage Interest Deduction – Despite its popularity among homeowners, real estate agents, and builders, talk is building on Capitol Hill and in policy circles of scaling back or eliminating the mortgage-interest tax deduction. It was estimated by Congress’ Joint Committee on Taxation that between 2011 and 2013, the elimination of this deduction will allow about $360 billion in potential tax revenue.
As Congress looks for ways to close the deficit gap, MHI staff will be monitoring these critical issues.
Senate Committee Examines Need for Government Guarantee of Housing Finance System
On September 13, the Senate Banking Committee held a hearing entitled Housing Finance Reform: Should there be a Government Guarantee? Witnesses to the hearing focused their testimony on the level of government needed in the housing finance market.
Two witnesses indicated that given the country’s current economic situation, sufficient private capital did not exist to support a purely privatized market. Witnesses also stated that:
• There is insufficient demand for mortgage credit risk to support the housing market absent some form of government guarantee.
• Given the current “economic stress,” the absence of government guarantees would lead to an absence of mortgages.
• A purely private market would “likely” not provide a 30-year fixed rate pre-payable mortgage.
Witnesses also stressed that the “choice” facing policy makers is not “guarantee versus no guarantee.” It is whether the guarantee should be implicit or explicit.
Other witnesses stressed that a purely private market could fully service the needs of the housing markets and do so without further stress to the economy.