Regulations for manufactured home loans

A careful reading of CFED’s website reveals they support today’s quality, affordable manufactured housing (MH).  CFED’s Doug Ryan, Rep. Stephen Fincher (R-Tenn.) and hundreds representing both parties in Congress agree on this.  Quality affordable living – and thus MH – are bipartisan issues.

However, Ryan’s The Hill blog post cites sources designed to undercut Fincher’s op-ed to The Hill calling for tweaks to Dodd-Frank.  Why?

{mosads}First, while each is entitled to their own opinions, we’re not entitled to our own facts.

Ryan arguably knows his key allegations on MH lending are flawed, regardless of what his cited sources allegedly indicate. Ryan knows because MH finance experts, this writer and others have privately informed him about key MH realities.  

Speaking about independent MH finance expert Dick Ernst, Ryan admitted: “…he (Ernst) knows more about this stuff.” Ryan said that weeks after Ernst and a non-Berkshire-Hathaway MH lender privately walked him through the realities of MH financing.

The following are key facts policy makers, advocates for quality affordable housing and today’s MH should know:

As Fincher correctly stated, a manufactured home can often be financed with a payment lower than rent. A 2011 Fannie Mae graphic and 2014 GAO report on MH underscore that fact. 

What is commonly overlooked is that MH payments are less than rent even with the higher rates on an MH personal property loan vs. conventional housing lending.

The reason for higher rates on MH is simple business math. The cost to originate a $35,000 loan are similar to the cost of originating a $350,000 loan.  Since there are no federal guarantees for conventional MH lending, no real secondary market and thus no risk to tax payers – naturally the rates, points and fees for an MH lender need to be higher to have a chance to profit.

Added risks caused by current CFPB regulations pushed smaller and low-rate lenders out of the MH finance market.  That harms MH owners, consumers and sellers.

Giant U.S. Bank pointed to low volume and high regulatory risks when they pulled out from MH lending in late 2014.

If MH home-only lending was truly “predatory” – implying high profit – why aren’t lenders rushing into the MH market? Instead, lenders left or scaled back on MH loans for similar reasons cited by U.S. Bank. That’s harming MH homeowners, potential buyers and businesses.

Millions of personal property (home only or “chattel”) MH loans were made over the years.  Yet CFPB’s first report on consumer complaints by loan type or lender reveals no MH lending ranking high in complaints for origination or loan servicing.

CFPB’s director, Richard Cordray, himself suggested in his Senate testimony (1:41:34 – 1:45:57) that the Bureau may need to fine-tune the place where rates, points and fees on MH loans should be.

Policies Ryan supports harm MH consumers and MH businesses. Shockingly, MH buyers are pushed into 36 percent rate payday-style loans. Even at 36 percent an MH buyer can pay less than rent on an inexpensive home.  But why not give buyers the choice of saving 2/3rds on their interest by allowing MH lenders to profitably make smaller loans again?

Ryan lacks good answers. Why resort to red-herring or artful-dodge methods on the issue of S 682/HR 650? Could Ryan – like the Center for Public Integrity’s reporter – have an undisclosed conflict-of-interest?

Fincher’s aptly named bill – Preserving Access to Manufactured Housing Act (HR 650/S 682) protects the value of some 1.7 million MHs (+/-), homes that might refi or sell with a loan balance under $20,000.  HR 650/S 682 unmuzzles what ought to be the free speech rights of MH sales people to advise buyers.

That’s all good for homeowners, consumers and business. That’s good public policy. The Senate should promptly pass the bill, and/or CFPB should change their policies on MH lending ASAP.

Kovach is an MH veteran, consultant and publisher of MHLivingNews.com and MHProNews.com, the industry’s top trade publications.