MHI Week In Review — August 23, 2013

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MHI News

Direction of Housing Finance Reform Remains Unclear, MHI Takes Lead in Developing Outlets for Manufactured Home Loans

During the month-long August congressional recess, the Senate Banking Committee has begun the process of developing housing finance reform legislation, which has included meeting with a variety of industry representatives and stakeholders from housing organizations, including staff of the Manufactured Housing Institute (MHI). During this process, MHI has served as the preeminent advocate for the development of a secondary market for manufactured home loans, including those loans secured by personal property.

While legislation (S. 1217) introduced by Sens. Bob Corker (R-TN) and Mark Warner (D-VA) has garnered significant attention and praise from a number of housing organizations, it is unclear what path Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) will take in developing and moving a housing reform measure. Committee staff and policy experts believe that the bill will serve as a basis or starting point for a proposal being assembled by the committee leaders, but that such a draft will depart from the Corker-Warner bill in some areas.

Complicating Senate passage of legislation abolishing Fannie Mae and Freddie Mac are recent comments by Senate Majority Leader Harry Reid (D-NV). His remarks indicate he is opposed to plans that would abolish the GSEs believing it would become too difficult for many Americans to then purchase a home.

The outlook for passage of legislation in the House of Representatives is also unclear. Legislation referred to as the PATH Act, developed by House Financial Services Committee Chairman Jeb Hensarling (R-TX) containing revisions to the Dodd-Frank Act that are supported by MHI, would eliminate Fannie Mae and Freddie Mac and replace them with a new securitization utility that, unlike the Corker-Warner bill, would be completely devoid of any governmental backstop. A number of housing and financial services groups, including the National Association of Realtors and National Association of Home Builders, have launched a full-scale lobbying campaign against the PATH Act. Despite this opposition, Rep. Hensarling has committed to bringing the bill to a floor vote by October.

MHI is closely tracking this issue and will continue to communicate with leaders of the Senate Banking and House Financial Services Committees of the need for a vibrant secondary market for both real estate- and personal property-secured manufactured home loans.

American Banker has developed an informative “cheat sheet” that provides an overview of the housing finance reform debate. Click here to view the cheat sheet.

MHI Financial Services, CFPB and Dodd-Frank Act Updates

Court Dismisses CFPB Lawsuit

On August 1st, a federal judge dismissed a lawsuit challenging portions of the Dodd-Frank Act, including the creation of the CFPB, ruling that plaintiffs in the case did not have the standing to bring the suit.

The lawsuit, filed by a Texas community bank, the Competitive Enterprise Institute, and Attorneys Generals from 11 states, also asked a judge to overturn provisions of the law that established the Financial Stability Oversight Council (FSOC), as well the Federal Deposit Insurance Corporation’s (FDIC) new authority to liquidate failing financial firms.

The court ruled that State National Bank in Big Spring, Texas, “has not come close” to showing it is likely to suffer financial injury as a result of the law, a key requirement to bring a suit. The bank argued that the designation of certain firms by the FSOC as systemically important would put it at a competitive disadvantage. The bank further argued that it incurred significant compliance costs as a result of the creation of CFPB.

To view a copy of the opinion, click here.

CFPB Issues Revised Mortgage Examination Procedures Guide

The CFPB has published a second update to its examination procedures to account for new mortgage regulations going into effect in January 2014. The update covers the CFPB’s mortgage origination rules issued through May 29, 2013, and mortgage servicing rules issued through July 10, 2013. The revised procedures address a number of areas, including requirements that:

• Lenders evaluate a borrower’s ability to pay back the loan: The Interim TILA Examination Procedures add a section on the Ability to Repay Rule. The section repeats the Ability to Repay Rule’s requirement for creditors to determine that a consumer has the ability to repay a loan. Using the principal and interest over the long term, creditors need to verify a consumer’s financial information, evaluate that information, and conclude that the borrower can repay the loan.

• Ban or limit certain points, fees, and features: Within the section relating to the Ability to Repay Rule, the Interim TILA Examination Procedures add sections relating to limitations on points, fees, and loan features for a Qualified Mortgage.

• Servicers provide monthly statements and disclosures: The Interim TILA Examination Procedures add a section on periodic statements for closed-end mortgages. The new section summarizes and restates requirements regarding periodic statements from the Mortgage Servicing Rules. As described in the procedures, mortgage servicers must provide regular statements which include the amount and due date of the next payment; a breakdown of payments by principal, interest, fees, and escrow; and recent transaction activity.

• Servicers establish policies and procedures for access to servicing personnel and a review process: The Interim RESPA Examination Procedures add a section regarding continuity of contact. This section summarizes the relevant provisions from the Mortgage Servicing Rules.

To view the interim TILA examination manual, click here and to view the interim RESPA examination manual, click here.

CFPB Issues Response Guidance for Complaint System’s Company Portal

CFPB has developed new Response Guidance to companies utilizing the agency’s complaint system portal. The guidance supplements the CFPB’s Company Portal Manual which describes the operation of the online portal used by companies to view complaints submitted to the CFPB by consumers. The CFPB also maintains a consumer portal for consumers to use to check the status of their complaints and view companies’ responses. After communicating with a consumer regarding a complaint, a company is expected to complete a form on the company portal that describes the substance of its response and attaches relevant documents. The product-specific response guidance lists specific information to be included in a company’s response and documents to be attached to the response depending on the issue involved in the complaint.

To view the Response Guidance, click here. To view the Company Portal Manual, click here.

CFPB Releases Updated QM Compliance Guide for Small Entities

On August 14th, the CFPB released an update to its Small Entity Compliance Guide for the Ability-to-Repay and Qualified Mortgage Rule, incorporating the changes made in the June 2013 Concurrent Final Rule and July 2013 Final Rule. The updated guide includes a new section detailing the exemptions added by the June 2013 Concurrent Final Rule for certain creditors and loan programs, such as designated community development organizations, certain nonprofit organizations, and loans made pursuant to housing finance agency programs.

A new section is included covering the types of qualified mortgages that can be made by Small Creditors, in addition to General and Temporary QMs. The updated guide amends the section regarding the inclusion of loan originator compensation for the points and fees calculation, deleting compensation paid by a creditor to a retail loan officer employee. Additional guidance is provided for making the determination of eligibility under the Temporary QM definition. Pursuant to the July 2013 Final Rule, the updated guide reflects the additional eligibility criteria of valid recommendations from a GSE Automated Underwriting System or agency underwriting tool, GSE or agency guidelines from official manuals, written agreements between a GSE or agency and the creditor, and individual loan waivers from a GSE or agency.

To view the guide, click here.

FHA Issues Guidance on Borrower Credit Disputes

New guidance issued by the Federal Housing Administration (FHA) on August 15th will require lenders to consider a borrower’s ongoing credit disputes for overdue fines or other unpaid accounts before the agency will insure a mortgage.

According to the FHA guidance, outstanding credit disputes of at least $2,000 — excluding medical expenses — will be factored into whether the borrower has too much debt compared to income when determining the ability to pay back the mortgage, using either a calculation the agency provides or payment arrangements the borrower makes. Borrowers must submit a letter explaining each collection account open against them if they have least $1,000 outstanding.

The new requirements go into effect on October 15th. To view the rule, click here.

CFPB Unveils ECOA Examinations Manual

The CFPB recently issued its Equal Credit Opportunity Act (ECOA) baseline review procedures for use by its examiners. The procedures consist of six “baseline review modules” for examiners to use “during ECOA baseline reviews to identify and analyze risks of ECOA violations, to facilitate the identification of certain types of ECOA and Regulation B violations, and to inform fair lending prioritization decisions for future CFPB reviews.” The procedures indicate that ECOA baseline reviews are one of three types of fair lending reviews conducted by the CFPB.

To view the manual, click here.

HUD Awards Monitoring Contract and Avoids Certification Label Shutdown

On August 16th, HUD issued a $25 million, five year contract to the Institute for Building Technology and Science (IBTS) to monitor and enforce the HUD manufactured housing program. Under the contract, IBTS, who has served as HUD’s monitoring contractor since the inception of the program in 1976, will perform parallel and concurrent monitoring of the In-Plant Production Primary Inspection Agencies (IPIAs) and Design-Approval Primary Inspection Agencies (DAPIAs) as well as assessment inspections of the 37 State Administrative Agencies (SAAs). IBTS was awarded the contract under federal contracting guidelines that provide for fair and open competition. MHI understands that at least one other entity competed for the contract. The award was issued in time to divert a shutdown of the HUD label certification program.

Under the terms of the contract, IBTS has the following primary responsibilities:

1) Monitor In-Plant Production Primary Inspection Agencies including the development of IPIA audit procedures; perform annual in-plant audits; analyze in-plant audit reports; conduct post production follow-up audits including consumer sites; conduct IPIA performance reviews and IPIA headquarters visits; review and recommend any need changes to audit procedures or procedural enforcement regulations with opportunity for industry input; and manage label fee program.

2) Monitor Design Approval Primary Inspection Agencies (DAPIAs), including: development of DAPIA monitoring procedures; conducting DAPIA performance reviews; reviewing and assessing design packages.

3) Perform assessments of the 37 State Administrative Agencies (SAAs); including post production audits of retail sites and review of retailer service complaints; and in-plant review of manufacturer’s records.

To view a copy of the IBTS performance work statement click here.

Appellate Court Judge Says Local Zoning Law Prohibiting Older Homes is Not Preempted

In a troubling ruling by the 10th Circuit Court of Appeals, a Wyoming man was denied placement of his manufactured home on several counts, including the finding that the town’s zoning ordinance prohibiting the placement of such homes did not violate the preemption clause of the Manufactured Housing Construction and Safety Standards Act.

The homeowner, Roger Schanzenbach brought an action against LaBarge, Wyoming, and its town council in the United States District Court for the District of Wyoming. He had originally sought permission for the installation of two manufactured homes both of which were more than ten years old. He asserted a variety of constitutional claims as well as a claim that the town’s 10-Year Rule was preempted by the National Manufactured Housing Construction and Safety Standards Act of 1974 (the Manufactured Housing Act).

The Court awarded summary judgment to the defendants. Adopted in December 2006, the LaBarge local ordinance includes specification that any buildings brought into town “shall be no more than 10 years of age at the time of [building permit] application.” The Court ruled the LaBarge 10-Year Rule was not preempted by the Manufactured Housing Act writing that “the record contained no evidence that the rule related to anything other than ‘the aesthetic quality of the community and preservation of property values, which have nothing to do with safety or construction.’” The Court rejected Schanzenbach’s appeal that the town lacked authority to enact the 10-Year Rule by citing both the Wyoming constitution and statute that provide local municipal powers “shall be liberally construed for the purpose of giving the largest measure of self-government to cities and towns.”

The 10th circuit Appellate Judge ignored the amendments made by the Manufactured Housing Improvements Act (MHIA) in 2000 which expanded the preemption clause by linking, for the first time, “Federal Supremacy” with the “Findings and Purposes” section. Under the 2000 law, federal supremacy is to be “broadly and liberally construed” (by HUD and the courts) in order to maintain “federal superintendence” and state and local standards “shall be consistent with the purposes of this title.” The “purposes” title of MHIA says that (1) manufactured housing plays a vital role in meeting the housing needs of the Nation; and (2) manufactured homes provide a significant resource for affordable homeownership and rental housing accessible to all Americans.

The opinion, Schanzenbach v. Town of La Barge, 706 F.3d 1277 (10th Cir.,2/7/2013), can be accessed by clicking here.

2014 Congress & Expo Call for Presentations

MHI and the Manufactured Housing Educational Institute (MHEI) are soliciting proposals for educational workshops to be held during the 2014 National Congress & Expo for Manufactured and Modular Housing. Workshops will be held on Wednesday and Thursday, April 16th and 17th in Las Vegas, Nev. You are invited to share your expertise and experience by submitting a proposal for an educational program. Click here for a form to submit your proposal. Please review the form for information on policies related to speakers and submit your proposal by October 18, 2013.

Educational workshops should be relevant and timely for the industry. The length of each workshop at the Congress & Expo is one hour and 15 minutes. Proposals will be evaluated on four criteria: 1) Relevance and timeliness of the topic to today’s manufactured and modular housing industries; 2) How well-defined the topic is; 3) Practical application of the material for attendees; and 4) Presenter qualifications.

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