The Manufactured Housing Institute (MHI) held their annual Winter Meeting and Legislative Conference in Washington, DC, earlier this week. IMHA Executive Director Mark Bowersox represented our association at the meeting. Here is his summary of the event:
MHI brought in a number of financial and political speakers such as Byron York, Chief Political Correspondent at the Washington Examiner and of Fox News; Frank Nothaft, VP and Chief Economist at Freddie Mac; William Matchneer, Senior Counsel for the Consumer Financial Protection Bureau; Congressman Stephen Fincher (R-Tenessee); and Indiana Senator Joe Donnelly.
While each speaker covered a variety of political and economic trends and their impacts on the housing market, the workshops were dominated by discussion about additional federal regulations. Specific concerns focused on the latest Consumer Financial Protection Bureau (CFPB) rulings about the implementation of Dodd-Frank regulations. The CFPB issued more than 6,000 pages of final rules on a number of different issues in January, and compliance dates for these federal regulations will be next January. Three key rulings include:
- High-Cost Mortgage Restrictions
- Appraisals for Higher-Priced Mortgage Loans
- Loan Originator Compensation
The overwhelming majority of conference attendees felt that these regulations, if they go into effect as written, will have more of a negative impact on our industry than the SAFE Act has had.
High-Cost Mortgage Restrictions put limits on annual percentage rates (APR), points and fees involved in housing loans. These caps were designed for longer-term, higher-balance mortgage loans that can be backed by Fannie Mae and Freddie Mac and are not appropriate for personal property loans from private lenders. If APR, points or fees limits are exceeded a loan would be considered "High-Cost" and would carry additional liabilities to the lender. MHI believes these restrictions will eliminate 20-50% of manufactured home loans.
Under the rules for Higher-Priced Mortgage Loans, existing HUD-code homes must be appraised by a licensed or certified appraiser and the appraisal must include a physical inspection of the interior of the home. For this regulation, "higher-priced" mortgages are loans for a principle dwelling where the APR exceeds the average prime offer rate for a comparable transaction by 1.5% or more for first-lien loans. These rules would apply regardless of whether or not the manufactured home is secured by real estate but new manufactured homes and pre-HUD code "mobile" homes are exempt from this requirement. Based on public comments, the regulating agencies intend to publish a supplemental proposal to further investigate whether this should apply to existing manufactured homes.
The new Loan Originator Compensation guidelines exclude employees of manufactured housing retailers who assist customers applying for credit provided they do not:
- Take a consumer credit application
- Offer or negotiate credit terms available from a creditor
- Advise a consumer on credit terms (including rate, fees and other costs) available from a creditor
If the employee is considered to have engaged in any of the above activities, the compensation they earn (including sales commission) could be considered loan originator compensation and may be included in points & fees caps which would often push a loan into requirements and restrictions on High-Cost mortgages.
It's important to note that the three actions listed above will be regulated by the federal guidelines for the Dodd-Frank Act and not state regulations based on SAFE Act guidelines.
For example, the SAFE Act restricts retailers from "steering" a consumer to a particular lender. In Dodd-Frank regulations the concept of "steering" is replaced with "referring" which can be interpreted to be more inclusive and more restrictive than "steering". According to MHI's attorney, helping a consumer fill out a credit application would make the sales person a loan originator under Dodd-Frank even though it may be allowed under SAFE.
MHI is leading the industry efforts to change these regulations before they go into effect next January, and they are pursuing changes in both rulemaking and in legislation. While in Washington I was able to meet with Senator's Dan Coats and Joe Donnelly, Congresswoman Jackie Walorski and key staff members for Congressman Marlin Stutzman to express our concerns and ask them to support industry efforts to fix these regulations. MHI expects legislation to be introduced in both the US House and the US Senate that would eliminate these concerns but the likelihood they will pass is still unknown.
As soon as bill numbers are assigned we will encourage all IMHA members to contact your congressman about these issues.