As reported last week, the Federal Housing Finance Agency’s (FHFA) proposed rule on the “duty to serve” underserved markets, including manufactured housing, which will be officially released next week, will not consider any type of personal property lending on manufactured housing.
During the tumultuous 2008-2009 credit crisis, the GSEs have not provided any support for manufactured housing lending. While the GSEs purchase a very small amount of conforming real property manufactured housing loans, they offer no funding for personal property loans. In fact, less than one percent of their business is manufactured housing, even though since 1989 manufactured housing accounted for 21 percent of all new homes sold in this country, and in 2009 manufactured housing accounted for 43 percent of all new homes sold under $150,000 and 23 percent of all new homes sold under $200,000.
Unfortunately, there is a long history of Fannie Mae and Freddie Mac ignoring the manufactured home market. GSE policies continue to be based on bad loan purchase decisions several years ago. Given the monopoly the GSEs had on the market, these policies severely undermined the possibility of any real liquidity for manufactured home loans which ultimately hurts the consumer and those most in need of affordable housing. This is the primary reason why Congress sought to enforce a “duty to serve” the manufactured housing industry.
In addition, MHI was also extremely disappointed to learn that the FHFA Proposed Rule precludes GSEs from entering the commercial lending market for manufactured home communities unless they had been engaged in that business prior to government conservatorship – as per a recent announcement from Freddie Mac indicating they are suspending their efforts to enter this market.
MHI strongly believes that the GSEs should continue, and even increase, the purchase of commercial loans which fund manufactured housing communities. In 2008, Fannie Mae’s multifamily loan volume through its Delegated Underwriting and Servicing (DUS) program was approximately $33 billion, however only $1 billion of that total volume was in manufactured home communities. Historically, manufactured housing community loans have performed extremely well, and land-lease communities in general offer one of the most affordable forms of homeownership for moderate-, low-, and very low-income households. GSE activity in this area is vital to maintaining the health of this sector.
However, we understand that the proposed rule is now precluding Freddie Mac, who was actively engaged in preparing to enter the market by the 3rd quarter of the year, from continuing these efforts, even though Fannie Mae has demonstrated for years they have been able to operate profitably in this space.
With the expectation that this proposal will not be reversed significantly in any way, this situation raises a critical question about the industry’s position regarding the future of the GSEs which will be debated by Congress next year. This issue will be a critical topic of discussion at the upcoming MHI Summer Meeting and Legislative Conference to be held in Washington, DC on July 13-15, 2010.
MHI members with questions can contact Thayer Long at email@example.com.