Financing is often at the heart of any deal involving a major purchase. Manufactured home sales follows that patten, with some two out of three new homes being sold involving lending. In an exclusive video interview for Inside MH, Sam Landy spoke with us about the upcoming Senate Banking Committee hearing, Dodd-Frank and the Preserving Access to Manufactured Housing Act (HR 650 and S 682).
Sam Landy, JD, is the President and CEO of UMH Properties, Inc. (NYSE-UMH). UMH is one of many manufactured home community (MHC) operators which has curtailed or ended making loans to consumers it was successfully making previously. Why?
Landy clearly explains that since the Consumer Financial Protection Bureau (CFPB) regulations were initiated, they stopped making loans due to the well meaning, but unintended consequences of Dodd-Frank.
As a result, the CFPB imposed regulatory risks and burdens are keeping tens of thousands of could-be manufactured home owners renting.
Further, as our “read-hot” featured article – Dodd-Frank and Manufactured Home Financing: The Place Where Good Intentions and Unintended Consequences Collide – dramatically demonstrates, the MHIndustry’s reforms ARE consumer projections. The alternatives for millions of consumers are worse, thus the need for the reforms of Dodd-Frank, which even Barney Frank supported for Manufactured Housing.
Virtual Strategy (image above), The Street Insider, Yahoo! Finance and others have
picked up the MHLivingNews story. Why? Perhaps because it presents a balance and accuracy missing in the Seattle Times/Center for Public Integrity connected stories?
Billions in Lending Now Lost for MH Buyers?
There have been estimates that multiple billions of dollars in financing has been originated by MHCommunity owner/operators over the past 15 years. The related or “captive finance” arms of those MHCs created homeownership opportunities for tens of thousands of singles, couples and families annually. They were often loans made to those that could not obtain credit from a traditional lender.
However, thanks to the current regulations, thousands of would-be MH home buyers a year are renting instead of becoming homeowners. If MH retailer, Alan Amy is correct,about the harmful impact of CFPB regulations, then changing those regs could boost new home production by some 20,000 homes in 2015. That would mean some 20,000 new jobs in manufactured home production alone.
To keep the Sam Landy video under 3 ½ minutes, we edited out some relevant comments which Mr. Landy made, such as:
> acknowledging that a number of MHCommunites he knows that we’re making loans to manufactured home buyers, have since curtailed or stopped making them due to concerns over regulatory risks;
> the significant degree of harmful impact on the MH Industry, workers and home owners that Dodd-Frank regulations have had;
> a number of references to how Dodd-Frank unintentionally harms manufactured home (MH) buyers and current MH home owners, and that something must be done to correct the problems federal regulations have created.
Are You Kidding? Predatory Lending?
Some in the media have recently asserted that manufactured home lending is at times allegedly “predatory.” Really?
That is self-evidently illogical or a deliberate falsehood.
If MH loans were so profitable, why aren’t hundreds of lenders rushing into the MH “home only” lending space? More on that from experts on both sides of the issue, in the MHLivingNews article linked below.
In fact, due to CFPB regulations, MH lenders have been pushed out of lending. UMH’s CEO mentioned Modern Financial in Bensalem, PA as being an MH lender he personally knows in his market that is leaving the MH lending business.
Inside MH spoke to Bob Drudind, who explained that their lending operation was indeed shutting down. Their website states: “Modern Financial is a family owned and operated business established in 1977. With over 30 years experience in manufactured home financing and insurance…”
Now, they are closing their doors, said Mr. Drudind. The reason? Because the banks and financial institutions they once worked with to fund their loans to consumers withdrew from the MH lending business, due to various regulatory hurdles and burdens.
Modern Financial had brokered loans for U.S. Bank, which pulled out of MH lending in late 2014. Drudind also mentioned other lenders who pulled out of MH lending that they once did business with; naming PNC, Sun National and Crest Savings Bank.
Each of these lenders, said Drudind, were motivated by the harmful challenges created by new regulations that pushed them out of the MH lending space.
This loss of lending harms those MH owners who have the most affordable homes. Why? Because most lenders can no longer afford the costs and risks involved in making loans under $20,000.
After Mr. Landy read this article…
…it motivated him to contact us to personally share the negative impact on the industry of CFPB regulations. He is not alone. We have consumers and other business professionals who have reached out, ready to tell their stories of how the current state of the CFPB’s regulations has harmed them and their customers.
There are an estimated 1.5 million +/- MH home owners who have homes which would sell for less than $20,000. As Landy said during this interview, all of those home owners are directly harmed by the current state of CFPB regs as they apply to manufactured homes.
Lending above $20,000 on new and pre-owned manufactured homes is still available. but only from a limited number of national lenders. The CFPB has the ability to change the standards, but has so far resisted doing so. Changing those current CFPB rules as they apply to manufactured housing would attract more lenders and this create more home ownership opportunities.
Those who argue against the changes sought in the Preserving Access to Manufactured Housing Act don’t realize (or perhaps ignore?) the many contradictions in their arguments. They are removing choices from potential home buyers. They are harming the values of hundreds of thousands of existing home owners. Those home owners may not discover that until they try to sell their homes.
Coalition for Changing Dodd-Frank to benefit Consumers
A coalition including the National Association of Realtors (see below), the Mortgage Bankers Association and others is thus backing the Manufactured Housing Industry’s goal of reforming Dodd-Frank in a way that Barney Frank himself thought wise.
ArkansasNews, in the story with the photo shown above, reported in a story by By Peter Urban (GateHouse Media Washington Bureau, [email protected]) on April 16, 2015 as follows.
“WASHINGTON — Rules aimed at preventing another collapse of the housing financial system are making it harder to sell manufactured homes that are otherwise an affordable option in rural America, according to Hot Springs Realtor Chris Polychron.
Polychron, who is serving as president of the National Association of Realtors, told the Senate Banking Committee on Thursday that he supports legislation that would carve out an exemption for manufactured housing from the Dodd-Frank law so that more loans could be made to buyers.” (See more at: http://arkansasnews.com/news/arkansas/testimony-dodd-frank-hurting-manufactured-home-loans)
So it isn’t just a handful of Berkshire-Hathaway affiliated companies that seek or would benefit from passage in the Senate of S 682, The Preserving Access to Manufactured Housing Act. MH home owners and buyers are clearly the biggest winners.
As a 2014 study by the GAO referenced in the MHLivingNews story by award winning journalist Jan Hollingsworth (linked here) prove, even when manufactured “home only” lending rates are higher, MH is still the most affordable form of permanent housing available. It is still more affordable than renting a comparable apartment or house in most markets.
Is denying access to home ownership for low-to-moderate income Americans the goal. Seattle Times/Center for Public Integrity in their recent coverage on this issue? Because it makes no sense to argue that because some default on their loans, that all those like them should also be denied home ownership. Using that sort of pseudo-logic on mainstream housing, automotive or RVs would harms those markets too.
Without naming those who have attacked our industry in recent weeks, Sam Landy’s
points refutes many of their claims and the obvious impact of the current federal regulations. If you want justice for those who own or seek low cost manufactured homes, Mr. Landy de facto gives you plenty of good reasons in this 3 ½ minute video why you should call the Capitol Switchboard at 202-226-8000, before Thursday May 21 at 10 AM. Ask both of your U.S. Senators to support S 682. ##