MHI Week In Review — April 12, 2013

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MHI News

Calendar Alert: 2013 NCC Fall Leadership Forum Announced

The National Communities Council is excited to announce the addition of a new leadership and networking event to be known as the NCC Fall Leadership Forum. The event will be held on October 16-18 at the W Hotel in downtown Chicago, and this year’s theme for the annual event will be “Building a Vision for the Future.” The NCC is pleased to report that Sam Zell, Chairman of Equity Group Investments, will be a featured speaker at this year’s inaugural event.

While NCC staff and leadership are working through a variety of details, the plan is to host a networking event on the evening of Wednesday, October 16th, have a full day of programming plus a major networking event on Thursday, October 17th, and end the program by lunchtime on Friday, October 18th. There will be significant networking opportunities throughout the event in the spirit of bringing industry leaders together, sharing knowledge and building relationships.

David Lentz, NCC Chairman and President and CEO of American Land Lease, Inc., commented, “With the housing market recovery well underway and our members getting more and more excited about the future, we felt the time was right to create a flagship event that will signal the next phase of success for the NCC and growth for our industry. Our goal is to make the NCC Fall Leadership Forum a total knockout and the ‘can’t miss’ industry event of the fall. The terrific team at MHI is poised to make this a winner.” The intent is to offer an unparalleled program including industry veterans and leaders as well as strategic perspective from outside the industry that would be of interest to our industry’s leaders, including not just community owners, but also manufacturers, lenders, consultants, and service providers.

The NCC will continue to communicate information about this event as it develops but be sure to mark your calendars for October 16-18 in Chicago. “Exciting things are happening for the NCC on many fronts,” noted NCC Vice President Jenny Hodge, “and we look forward to seeing you in Chicago.”

Financial Services Policy Update

FDIC Holding Free Teleconferences on Mortgage Rules

Through May and June the Federal Deposit Insurance Corporation (FDIC) will hold three free teleconferences on mortgage rules recently released by the Consumer Financial Protection Bureau (CFPB), and will cover:

• The first teleconference will focus on the CFPB’s final rules on the ability to repay, qualified mortgage standards, escrow requirements, and the loan originator compensation requirements involving the prohibition on mandatory arbitration clauses and single premium credit insurance. The call will be held on Thursday, May 2, 2013, from 2:00 p.m. to 3:30 p.m. EDT.

• The second teleconference will focus on the CFPB’s final rules on mortgage servicing. The call will be held on Wednesday, May 15, 2013, from 2:00 p.m. to 3:30 p.m. EDT.

• The third teleconference will focus on the CFPB’s final rules on loan originator compensation and changes to the Home Ownership and Equity Protection Act (HOEPA). The call will be held on Thursday, June 6, 2013, from 2:00 p.m. to 3:30 p.m. EDT.

For more information or to register, click here to visit the FDIC web site.

CFPB Unveils Qualified Mortgage Compliance Guide for Small Entities

On April 10th, the CFPB published its Small Entity Compliance Guide for the Ability-to-Repay and Qualified Mortgage Rule. According to the agency, the aim of the guide is to provide “a comprehensive rule summary in a plain language and FAQ format, which makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.” The guide is part of a series that will be published by the CFPB on each of the new mortgage rules. To view the guides, click here.

Housing Finance Groups Press CFPB for Extension on Mortgage Rule Implementation

In a letter to CFPB Director Richard Cordray, the American Bankers Association (ABA), Consumer Bankers Association (CBA), and Financial Services Roundtable and Housing Policy Council urged the agency to publish “much-needed” clarifications on its new mortgage-related rules and to extend the rules’ compliance deadlines.

The groups emphasized that they are repeating their request that the agency use its exemption authority to extend the mortgage rules’ compliance deadline from 12 months to 18 to 24 months. In the letter the groups state:

“Without more time to comply, we are concerned certain lenders may choose to mitigate the resulting operational risks by reducing, or even eliminating, their mortgage lending activities. This will be devastating to the industry and reduce mortgage loan options for consumers at a time when all agree there should be an increase in responsible mortgage lending.”

Click here to view the letter.

27 States Set to Adopt Uniform SAFE Act MLO Test

On April 1st, the Conference of State Bank Supervisors (CSBS) announced that more then 20 states were set to implement a new National SAFE MLO Test Component with uniform state content. In these states mortgage loan originators (MLOs) seeking licensure with their state regulatory agency will no longer be required to take a second state-specific test component.

According to CSBS, Delaware, Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, New Hampshire, North Carolina, North Dakota, Pennsylvania, Rhode Island, South Dakota, Utah, Virginia, Washington, and Wisconsin will no longer require a state-specific test component beginning April 1st.

Five additional states – Alaska, Kansas, Nebraska, Tennessee, and Vermont – will adopt the test on July 1, 2013. Two additional state agencies, the Texas Office of Consumer Credit Commission and the Texas Department of Savings and Mortgage Lending, will begin using the test on October 1, 2013. Remaining state agencies will continue to require state-specific test components, though additional states are eventually expected to adopt the new National SAFE MLO Test Component with uniform state content.

For more information, click here to visit the CSBS web site.

Ballard-Spahr to Conduct Free Webinar Examining Regulatory Challenges to Lender-Placed Insurance

Following recent interagency guidance on implementing revisions to the Flood Disaster Protection Act (FDPA) that increase penalties for FDPA violations, require new disclosures, and establish escrow accounts, the law firm of Ballard-Spahr will be hosting a free webinar on May 29th highlighting some of these revisions. Click here for more information.

The webinar will also highlight the new wave of litigation and regulatory action facing mortgage lenders and servicers arising from force-placed insurance, assess recent changes to the National Flood Insurance Program, and changes to agency regulation and guidance that will affect how mortgage servicers administer their hazard and flood insurance programs.

For more information, click here.

Financial Services Committee Top Democrat Open to Dodd-Frank Technical Changes

On April 10th in a speech before the U.S. Chamber of Commerce, House Financial Services Committee Ranking Member Maxine Waters (D-CA) indicated that she is willing to make changes to the Dodd-Frank Act, but only if they are “truly technical.”

Waters indicated she is not open “to wholesale revisions to the act, or receptive to packages of bills which, taken as a whole, essentially repeal its key provisions or dismantle it piece by piece.” However, “there may be some room for modification in some areas.”

For more information click here.

FHA Policies and Practices at Center of Financial Services Committee Hearing

On April 10th, the Financial Services Subcommittee on Housing and Insurance held a hearing examining the policies and practices of the Federal Housing Administration (FHA). The Financial Services Committee is holding an ongoing series of hearings on the need for FHA reform. Three prior hearings examined FHA insolvency, historical mission, and barriers created by FHA.

The agency has come under increasing scrutiny since last fall when an independent audit found that the FHA, which currently holds more than $1 trillion in loans in its portfolio, had expended the majority of its capital reserves due to bad mortgages. The FHA currently projects a shortfall in its Mutual Mortgage Insurance (MMI) Fund of $16.3 billion, which could necessitate a bailout from taxpayers. The MMI Fund is the government fund that insures FHA’s single-family housing portfolio.

President Obama’s FY 2014 budget request, which contains $943 million in funding to shore up FHA, was criticized by committee Republicans during the hearing, including the full Committee Chairman Jeb Hensarling (R-TX), who have called for FHA to shrink its “footprint” in the housing market to allow the private sector to take a larger role.

To view a webcast of the hearing, click here.

President Unveils FY 2014 Budget Plan

On April 10th, President Obama unveiled his $3.77 trillion FY 2014 budget request. Included in it is roughly $1.06 trillion in discretionary spending. The administration’s budget plan is expected to run into significant opposition from House Republicans, which recently adopted a $3.5 trillion budget with $966 billion in discretionary spending.

Included in the President’s request is $47.6 billion for Department of Housing and Urban Development (HUD) housing programs, an increase of $4.2 billion over FY 2013. The vast majority of the increase will be to sustain current program levels for rental and homeless assistance.

The budget contains $943 million to help shore up the Federal Housing Administration (FHA), which is pegged to run a deficit of $16.3 million in its single-family insurance fund (MMI Fund). Despite this deficit, FHA is expected to insure $178 billion in loans in FY 2014. See related article for information on manufactured housing programs.

The administration’s budget plan also assumes GSEs Fannie Mae and Freddie Mac will provide the federal government with roughly $51 billion in profit by 2023. To date, the GSEs have borrowed $187.5 billion from the federal Treasury and have paid $55.2 billion in dividends for net cost to tax payers of $132.3 billion. The White House budget anticipates Fannie Mae and Freddie Mac paying an additional $183.3 billion in dividends over the next ten years, for a net surplus of $51 billion.

The historic levels of return recently experienced by Fannie Mae and Freddie Mac have brought into question the viability and policy makers’ commitment to reform the GSEs. Earlier this month, Fannie Mae reported profits of $17.2 billion in 2012 and Freddie Mac report a profit of $11 billion, which were the largest profits ever recorded by the GSEs.

The budget calls for a change in the carried interest rate paid by general partners in equity firms or other alternative investments. The budget would seek to tax carried interest as regular income, and not at the lower capital gains rates. In addition, the budget would seek to raise $59 billion over ten years by imposing a “financial crisis responsibility fee.” It would be a tax of 17 basis points on institutions with at least $50 billion in assets to recoup the costs of the TARP program. Enactment of these changes would depend on passage of comprehensive tax reform legislation in both the House and Senate.

Both House and Senate Budget Committees are expected to hold hearings on the administration’s plan over the coming weeks.

HUD’s FY 2014 Budget Outlines Priorities for Manufactured Housing Program – Requests Label Fee Increase

President Obama’s Fiscal Year 2014 budget, presented to Congress earlier this week, proposes to fund $7.5 million for the HUD Manufactured Housing Standards program, including $1 million in direct appropriations and up to $6.5 million in offsetting label fee collections. To fund this expenditure, HUD plans to propose a label fee increase of up to $100 per floor and expects to have a new fee in place by mid 2014.

HUD needs $10 million in FY 2014 to administer the program, which until a few years ago, was funded almost a 100% through label fees. The $2.5 million difference between the cost to administer the program and the proposed budget will be funded through unspent funds from prior years.

HUD’s $10 million FY 2014 budget for the Manufactured Housing Program will be allocated as follows:

• $3.3 million (the same as FY 2013) to fund 37 State Administrative Agencies (SAAs),

• $4 million (down from $6 million in FY 2013) to fund the monitoring contract to primary inspection agencies and the states,

• $1.5 million to regulate and enforce model installation standards in 17 states that do not have such programs,

• $500,000 to regulate and enforce Dispute Resolution Programs in 23 states that do not have programs,

• $100,000 for a one year contract to NFPA to administer the Manufactured Housing Consensus Committee, and

• $60,000 for meeting planner services to fund regional SAA meetings.

The HUD FY 2014 proposed expenditures reflects the opportunity for the appointment of an Administrator for the Manufactured Housing Program and a staff of 54 to administer programs to carry out the activities of the Office of Risk Management and Regulatory Affairs.

In addition to the $10 million needed to administer the program, HUD requested eight full time employees to administer the Manufactured Home Inspection and Monitoring Program. HUD staff from the Office of Housing will carry out the additional workload activities of the manufactured housing program. The salaries and expenses for the manufactured housing program are paid out of the general HUD Salaries and Expenses account funded with congressional appropriations.

For more information regarding the budget click here.

GAO Reports to Congress on the Benefits of State Based Manufactured Home Replacement Programs

Last Month, the Government Accountability (GAO), in response to a Congressional request, issued a report on various state programs that utilize federal energy assistance funding and other state and federal resources to provide replacement homes for low income families living in pre 1976 manufactured homes. The GAO surveyed industry representatives and took an in-depth look at three state-based programs; Montana, Maine, and Washington. The GAO report concluded that energy savings from purchasing a new home did not fully offset the costs of replacing older manufactured homes over a typical loan term. According to the report, homebuyers were able to save almost $500 per year in energy costs on a new home costing an average of $56,000.

Not surprisingly, the GAO found that the energy savings did not fully offset the costs of replacing the older homes. However other benefits were achieved such as moving families into safer, more weather-tight manufactured homes built to a residential code which was considered just as important as increased energy savings. The report identified some challenges to utilizing the replacement programs such as the borrower’s inability to meet large down payment requirements and low credit scores.

This report will be used by Congress to decide whether and how to most effectively spend limited federal tax dollars to provide grants to states and local jurisdictions to assist low income families pay their utility bills.

Update on GAO Request by Congress to Review the HUD Manufactured Housing Program

With two recent reports on manufactured housing recently completed, the GAO has now turned its attention to a comprehensive review of the HUD Manufactured Housing Program requested by Representative Spencer Baucus (R-AL) in late 2011. Last month, MHI members hosted a team of policy analysts from GAOs Office of Financial Markets and Community Investments, who visited six manufacturing facilities, several retail locations, and a community as well as a private third party testing facility. Many thanks to Mary Gaiski and Mark Bowersox, Executive Directors of the Pennsylvania and Indiana Manufactured Housing Associations respectively, who helped host the tours and assisted members in answering questions and providing information.

MHI understands that GAO plans to visit and talk with other third party design and inspection agencies, manufacturers, lenders, and State Administrative Agencies as it continues its thorough examination of the manufactured housing program. It plans to complete its report by the end of the year.

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