Comment Detail

Comment

Federally-regulated manufactured housing is the nation’s most affordable source of home ownership, with an average purchase cost of $45.41 per square foot, as compared with $97.10 per square foot for a site-built home (exclusive of land) as calculated by the U.S. Census Bureau. And the method of financing the HUD Code industry’s most affordable homes -- chosen and favored by the vast majority of manufactured housing consumers -- is via a personal property (or “chattel”) loan secured by the home itself. Thus, Census Bureau data shows that a full 80% of today’s manufactured homes across the United States are titled as personal property. In Mississippi’s 2nd district, the proportion of chattel-financed homes is even higher.
Despite manufactured housing’s role as the nation’s premier source of affordable home-ownership, both the industry and the mostly lower and moderate-income American families who rely on manufactured housing have been the target of discrimination by the Government Sponsored Enterprises (Enterprises) that provide secondary-market and securitization support for most home loans in the United States. Over the past decade-plus, manufactured housing obligations have constituted less than 1% of the loan portfolios of both GSEs, even though manufactured housing has long represented a much larger share of the total single-family housing market. To make matters worse for Americans facing the greatest difficulty in becoming home owners, the Enterprises have not purchased any manufactured housing chattel loans for approximately 15 years and, historically, have not provided any type of secondary market or securitization support for such loans, which provide Americans who might otherwise be totally excluded from the American Dream of home ownership, with access to the industry’s most affordable homes.

To remedy this discrimination, Congress enacted a “Duty to Serve Underserved Markets” (“DTS”) on the part of the Enterprises -- specifically including the manufactured housing market -- as part of the Housing and Economic Recovery Act of 2008 (HERA). DTS is a mandatory statutory directive to the Enterprises and, by extension, the Federal Housing Finance Agency (FHFA), as the Enterprises’ federal regulator -- to, among other things: “develop loan products and flexible underwriting guidelines to facilitate a secondary market for mortgages on manufactured homes for very low, low and moderate-income families.” (See, 12 U.S.C. 4565(a)). Moreover, to ensure that the term “mortgages” is not misconstrued to limit the scope of DTS to manufactured home real estate “mortgage” loans, Congress, in the same section of HERA, expressly provided that “in determining whether an Enterprise has complied” with DTS, FHFA -- as the Enterprises’ regulator – “may consider loans secured by both real and personal property” (i.e., manufactured home-only “chattel loans”). (See, 12 U.S.C. 4565(d)(3)).

In a 2010 proposed DTS implementation rule, however, FHFA completely excluded manufactured home personal property loans from DTS participation and subsequently failed to adopt any final DTS implementation rule.

Later, in 2014, following the appointment of my former congressional colleague, Hon. Melvin Watt, as the new Director of FHFA, the Agency publicly – and correctly -- committed to “re-visting” the DTS mandate and with it, the Enterprises’ “obligations” under HERA. In a July 28, 2014 letter to Director Watt, I stated: “… I would like to add my voice to those calling for the implementation of a modified DTS rule, including all types of manufactured housing loans (i.e., chattel, real estate and land-home hybrid) as soon as possible. As you know, manufactured housing … has seen a drastic decline, resulting primarily from discriminatory federal policies that have severely limited the availability of consumer financing for working families who rely on these inherently affordable homes the most. That discrimination, which is totally at odds with President Obama’s housing policies, needs to end and the full implementation of DTS, as intended by Congress, would go a long way toward achieving that goal, while simultaneously reinvigorating the manufactured housing industry and its ability to provide well-paying job opportunities in the primarily rural communities where its manufacturing facilities are located.”

While none of the points raised in my 2014 letter with respect to the urgent need for Enterprise support for manufactured housing chattel loans have changed, FHFA, on December 18, 2015, published a “new” proposed DTS implementation rule that would continue to exclude manufactured housing chattel loans from DTS participation. Having reviewed that proposal, however, it is apparent that FHFA continues to rely on highly-limited, outdated and skewed information concerning the past performance of manufactured home chattel loans, and has failed to conduct its own analysis of the relevant performance metrics or underwriting criteria that could be used to structure a chattel loan support program, on a going basis, that would be profitable for both the Enterprises and investors.

And, while I understand that the 2015 FHFA proposed rule does reference a possible “pilot program” for manufactured housing chattel loans in lieu of the full inclusion of such loans in DTS – given the history of the Enterprises in refusing to provide any support for such loans and broadly discriminating against such borrowers – any such program, which FHFA has indicated would be discretionary in any event, would be wholly inadequate and insufficient to meet the DTS mandate. Quite simply, Americans in need of affordable housing and home ownership opportunities need full relief under DTS now, not more time wasted with experiments and inconsequential half-measures.

Consequently, I once again urge FHFA, under the leadership of Director Watt, to take a fresh look at the full inclusion of manufactured housing chattel loans in DTS – without the baseless pre-conceptions regarding such loans that took hold under prior FHFA management -- and, given their critical importance to so many lower and moderate-income Americans, provide for the full participation of manufactured home chattel loans in any final DTS implementation rule. Doing so will also help to promote policies at both FHFA and the Enterprises that more closely parallel those of the Administration in providing legitimate home ownership opportunities and support for credit-worthy working Americans rather than wealthier purchasers with less need for government-based resources.

Opening DTS to full participation by chattel borrowers would not only help struggling homebuyers nationwide, but would specifically benefit the approximately 90% of manufactured homebuyers in Mississippi’s second district who rely on chattel-financed manufactured homes, and the many more who would like to access such financing and purchase an affordable manufactured home, but cannot due to current discriminatory policies. Moreover, full implementation of DTS – including its chattel element – would lead to significant new job opportunities in the second district from its manufactured housing producers and related industries. Conversely, the status quo on DTS will lead to continuing second district job losses stemming from a diminished manufactured housing sector.
My office stands ready to assist FHFA with the full implementation of the Duty to Serve, consistent with both the letter and intent of HERA.

Sincerely,

Bennie G. Thompson
Member of Congress