On November 29, the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity held a hearing, “The State of Manufactured Housing.” The hearing was held in Danville, Virginia, which is in the 5th Congressional District of Virginia and represented by Subcommittee Vice Chair Robert Hurt (R-VA).
“I love my home. Built after the regulatory codes were fully operational, my home is attractive and energy efficient. I have a disability that prevents me from working so affordability and being able to live on one level really improves my quality of life. I love my house,” said Carla Burr, a manufactured home owner, in her testimony. Ms. Burr also went on to describe why sales of manufactured homes have declined in recent years: a weak economy, limited and expensive financing options; limited access to homeownership benefits and assistance, and “a feudal system that traps home owners and strips their wealth.”
Ms. Burr explained that in manufactured housing communities, about one-third of manufactured homes are placed on land leased by the home owner. The rent on the land beneath her home has increased to $919 a month from about $400 seven years ago. Moving is not an option, Ms. Burr said, because the cost to move her home would be about $20,000. Also, there is nowhere to move. There are no other manufactured home parks near her and she cannot afford to purchase land, she said in her testimony.
Ms. Burr said that laws that grant residents a right of first refusal, require advance notice from the landowner or provide tax incentives for land owners to sell the land to residents help preserve people’s housing. In Virginia, where Ms. Burr lives, manufactured home park owners are not required to notify residents at all when they decide to sell the land beneath their homes.
Adam Rust, research director with the Community Reinvestment Association of North Carolina, discussed the decline of the manufactured housing industry in his testimony. One of the factors, he said, is the lack of a strong secondary market for manufactured home loans, classified as chattel loans. “I understand the concern of the FHFA. Almost one in five chattel loans end up in default. Buying chattel debt presents a legitimate challenge to safety and soundness. Nonetheless, that performance is really a product of how loans are made. Chattel loans use most of the unsound features (interest‐only adjustable-rate mortgages, balloon payments) that brought down our mainstream mortgage financing system. The better approach is to use GSE participation as a lever to reform loans on homes titled as personal property. If the GSEs only bought ‘high‐quality’ loans with fixed‐rate fully‐amortizing features and with strong consumer protections, than they would have the effect of cleaning up lending. Fewer borrowers would default. Most likely there would be less depreciation in the value of manufactured homes,” Mr. Rust said in his testimony.
“The language of the Dodd‐Frank Act contemplates that the [Consumer Financial Protection Bureau] will have supervisory authority over non‐bank financial institutions that offer or provide any ‘consumer financial product….’ If chattel lenders are singled out for supervision by the CFPB, then we can expect to see a major impact on how loans are negotiated and originated. Chattel loans are frequently made by subsidiaries or affiliates of manufacturers. These non‐bank entities offer terms with higher interest rates, shorter terms, and fewer consumer protections,” Mr. Rust’s testimony continued.
Kevin Clayton, president and chief executive officer of Clayton Homes, testified that manufactured housing accounted for 72% of all new homes sold for less than $125,000 in 2010. Mr. Clayton testified that the GSEs have “had little involvement and displayed little interest in financing and securitizing manufactured home loans. Less than 1% of GSE business comes from manufactured housing and none of that comes from manufactured home personal property loans. This is in spite of data indicating that since 1989 manufactured housing has accounted for 21% of all new single family homes sold in America.”
Access all testimony from the hearing at: http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=269659