MHI Week In Review — July 20, 2012

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House Passes FY 2013 Appropriations for HUD — Manufactured Housing Program Reductions Enacted

On June 29th, the House passed the FY 2013 Transportation-HUD Appropriations bill, H.R. 5972, which includes funding of up to $4 million for the Manufactured Housing Program. These funding levels remain substantially unchanged from the House Appropriations Committee-passed version (reported in the June 22nd issue of MHI’s Week in Review – click here to review). The House passed version of the FY 2013 HUD Appropriations bill includes a $2.5 million reduction from FY 2012 and it reflects MHI’s efforts to convince Members of Congress of its concerns about the management of the HUD Manufactured Housing Program, and that the annual production of manufactured homes does not justify program budgets levels approved in previous years.

The Senate Appropriations Committee passed its version of the bill which calls for a $1.5 million reduction in the Manufactured Housing Program, but the bill has not yet been considered by the full Senate. With time running out in the 112th Congress, and with all the partisan wrangling over spending priorities, there will likely be no resolution to the final HUD budget for FY 2013, resulting in continued spending for HUD programs at FY 2012 budget levels.

In a related action, on July 18th, the House passed by a vote of 414 to 2, the Sequestration Transparency Act of 2012, H.R. 5872, which instructs the President to submit to Congress within 30 days of the bill’s enactment a detailed report on the sequestration, or across-the-board spending cuts, scheduled to take effect on January 2, 2013, as mandated by the Budget Control Act of 2011.

Sequestration is scheduled to occur on January 2, 2013 unless new legislation alters current law. The projected sequestration-related cuts in 2013 would amount to approximately $109 billion, including $55 billion in cuts to defense, $43 billion in cuts to non-defense discretionary, and $12 billion in cuts to mandatory spending. Therefore, defense programs would be cut by approximately 10 percent and non-defense discretionary programs, including HUD and rural housing programs, would be cut by approximately eight percent.

Although many expect Congress will not be able to reach agreement on legislation to stop or alter sequestration until after the November elections, there is a growing call by some Congressional Members to work on alternatives now. However, it is uncertain that action on sequestration will occur anytime soon

MHI Testifies Before House Subcommittee on Financial Institutions and Consumer Credit on Negative Impacts of Dodd-Frank and SAFE Acts

MHI and the manufactured housing industry testified before the U.S. House of Representative’s ever-important Committee on Financial Services’ Subcommittee on Financial Institutions and Consumer Credit. Tom Hodges, Clayton Homes’ General Counsel represented MHI and the industry by detailing the unforeseen, negative consequences of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the Secure and Fair Enforcement of Mortgage Licensing Act (SAFE Act) will have on manufactured housing lending.

Other groups testifying included the Securities Industry and Financial Markets Association, the National Consumer Law Center, the National Association of Mortgage Brokers, the National Association of Home Builders, the National Association of Realtors, and the Mortgage Bankers Association. MHI was the only manufactured housing industry group invited to testify before the Subcommittee.

With respect to Dodd-Frank’s impact on manufactured housing, Hodges pointed to specific regulations being developed by the Consumer Financial Protection Bureau (CFPB) as key areas of concern:

• New high-cost mortgage definitions that do not adequately account for the price pressures on small-balance manufactured home loans, which may diminish consumer accessibility to this form of sustainable housing;

• Lack of regulatory guidance in applying the SAFE Act definition of a mortgage originator to the unique activities of those selling manufactured homes may diminish the level of customer assistance available to those seeking to purchase affordable manufactured housing; and

• Limitations on points and fees for “qualified mortgages” could serve as a disincentive for serving the already credit-constrained manufactured housing market due to the fact that the costs to originate such loans cannot adequately be recouped.

Hodges urged the Subcommittee to support efforts for more statutory guidance to the Consumer Financial Protection Bureau to ensure that none of the three areas negatively impact the ability of lenders or retailers to provide affordable loans to people seeking to purchase manufactured homes. Hodges also pointed out that the manufactured housing industry supports the bipartisan bill, Preserving Access to Manufactured Housing Act (H.R. 3849)which would provide relief to consumers and the industry.

To view a webcast of the hearing, click here. For more information, on H.R. 3849, click here.

CFPB Updates

CFPB Publishes Rulemaking Agenda

On July 18th, the Consumer Financial Protection Bureau (CFPB) released its Unified Agenda of Federal Regulatory and Deregulatory Actions, which outlines the rulemaking activities for the coming 12-month cycle. It also includes recently-completed rulemakings. The agenda provides an overview of the CFPB’s extensive rulemaking activities, including proposed and finalized rules and rules on the drawing board. Click here to view the agenda.

Bureau Unveils Mortgage Disclosures, Exempts Chattel Transactions

On July 9th, the CFPB issued a notice of proposed rulemaking for a new mortgage disclosure required under Dodd-Frank that consolidates disclosure information required under TILA and RESPA. To view the proposed form, click here.

In commentary to the proposed rule, the Bureau proposes exempting “chattel-dwelling loans (such as those secured by mobile homes) that do not involve real property from complying with these new disclosure requirements. The agency estimates that nearly “one-half of the closing cost content of the integrated disclosures is not applicable to such transactions because they more closely resemble motor vehicle transactions than true mortgage transactions.” The Bureau added that “although chattel-dwelling loans are subject to TILA, excluding them from coverage of the integrated disclosures would not excuse them from TILA’s disclosure requirements. Rather, they would remain subject to the existing closed-end TILA disclosure requirements.” The CFPB also indicated that it would be revising the TILA disclosures in the future. Manufactured home loans that include real property would be subject to the new integrated disclosures.

Comments will be accepted on the new disclosures until November 9th. Click here to view the proposed rule.

House Members Push for Safe Harbor Treatment of Qualified Mortgages

On July 16th, House Financial Institutions Subcommittee Chairman Shelley Moore Capito (R-WV), Rep. Brad Sherman (D-CA), and 104 other House members urged the CFPB to structure the “qualified mortgage”—or QM—designation under the pending ability-to-repay rule as a strong legal safe harbor. MHI, in its recent testimony to the House Financial Services Committee and in its comments to the CFPB, has advocated for a safe harbor to those lenders making qualified mortgages. Such a designation would only limit lender liability, but preserve those financing options that still remain available for those seeking to purchase manufactured housing. Click here to view the letter.

CFPB Unveils High-Cost Mortgage Regulations

On July 9th, the CFPB released a proposed rule implementing new Home Ownership and Equity Protection Act (HOEPA) High-Cost Mortgage regulations as required under the Dodd-Frank Act. Click here to view the rule. The Bureau will accept comments through September 7th.

Under the Act, purchase money loans are now subject to HOEPA guidelines for mortgages considered “high cost.” A mortgage would be defined as high cost if the APR charged to the borrower exceeds the average prime offer rate (APOR) by more than 6.5 percentage points or, if it is a personal property loan less than $50,000, by 8.5 percentage points.

The proposed rule would implement five changes regarding HOEPA loans:

• Increase the scope of mortgages eligible to be considered high-cost mortgages.
• Apply an expanded definition of “finance charge” in calculating whether a mortgage qualifies as a high-cost mortgage.
• Revise the triggers for determining if a mortgage qualifies as a high-cost mortgage.
• Impose additional restrictions on terms that can be included in the mortgage.
• Impose expanded counseling requirements.

The commentary accompanying the proposed rule notes that the statute sets forth different threshold triggers for first-lien transactions depending on whether the transaction is secured by a dwelling that is personal property and the total loan amount is less than $50,000. The Bureau understands that first-lien transactions that are secured by a dwelling that is personal property, such as certain manufactured housing loans, often have higher APRs than other first-lien transactions secured by a dwelling that is not personal property. Accordingly, the Bureau also seeks comment or data specifically on the separate percentage point trigger for first-lien transactions that are secured by a dwelling that is personal property and for which the total loan amount is less than $50,000, and whether any adjustment to the percentage point or the total loan amount for such first-lien transactions would better protect consumers or is warranted by the need for credit.

Given the significant impact these provisions will have on manufactured home lending and coupled with the Bureau’s ability to adjust the thresholds outlined in the statute, MHI will be submitting comments and developing sample comments for submittal by those within the manufactured housing industry.

MHI Testifies on Accessible Housing

On July 11th, MHI testified before the Access Board on its proposed rulemaking to amend the Americans with Disabilities Act (ADA) and the Architectural Barriers Act (ABA) Accessibility Guidelines to adopt new standards for emergency accessible housing purchased by the federal government, states, and local jurisdictions that build or purchase federally subsidized emergency transportable housing. Click here to view the proposed rule.

Mr. Jayar Daily, Vice President of Operations for American Homestar Corporation and MHI’s Lois Starkey presented comments on the rule, which included virtually all of the recommendations of a 2007 Advisory committee for which MHI served as a member. MHI’s remarks contained the following highlights:

• Supported new, more flexible and updated standards specifically designed for disaster survivors, with special mobility and communication needs, including specifications for showers, tubs and bathroom fixtures, kitchen counters and cabinets, and bedroom lighting.

• Supported new, more flexible requirements for ramp design and construction on small sites.

• Confirmed that the industry is able to provide all types of home design to meet the needs of all consumers, and said that the accessible guidelines developed by the Access Board are beneficial to manufacturers who wish to design and construct accessible housing.

• Urged HUD to adopt the guidelines of the U.S. Access Board for federally subsidized housing, rather than the more antiquated standards currently in use.

• Recommended that the U.S. Access Board consider providing training and education for manufacturers who wish to enhance the skills of their workforce.

Uniform Law Commission Votes to Approve Uniform Manufactured Housing Act

On July 18th, at its Annual Meeting, the Uniform Law Commission (ULC) voted to approve the Uniform Manufactured Housing Act which has been under consideration by the Manufactured Housing Act Drafting Committee for the past two years. On July 14th, the Manufactured Home Act Drafting Committee presented the proposed Act to the entire Commission. Commissioners opposing the Act raised objections and offered five amendments, all of which were rejected. After the presentation, the Drafting Committee met to address several syntax issues that were raised, none of which were substantive.

Prior to the Annual Meeting of the ULC, MHI worked with Marc Lifset of the law firm McGlinchey Stafford to collect 49 signatures from industry leaders (including state associations, community owners, manufacturers and lenders) to a letter that expressed the industry’s opposition to the draft Act. Click here to view the letter.

The Uniform Manufactured Housing Act provides for an optional election to treat manufactured homes as real property, including unaffixed homes on leased land. Under the draft Act, conversion to real property is optional, but a retailer must give notice to a buyer when the purchase agreement is signed that the buyer may elect to have the home treated as real estate if the home will be located on land owned or controlled by the buyer, and the retailer may not direct the buyer to classify the home as either personalty or realty.

The stated purposes of the Act are to increase the availability of affordable financing for manufactured homes now conveyed and encumbered as personal property; clarify the point in time when a home is converted to real property; simplify the method of conveying and encumbering a home; enhance consumer protections; and bring uniformity to a diverse array of state manufactured home titling laws. However, the Act fails to accomplish any of these objectives, and may even be counter-productive to them.

To view the Act as it was approved by the ULC, click here.

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