Credit for mortgages in general are declining as new regulations and approaching ones are coming on line, says Yahoo! Finance. They cite the Mortgage Bankers Association and AllRegs as their sources, explaining too that tightening credit will result in fewer loans.
Their report says that a significant impact will be felt by all home loans under $100,000. Since the Manufactured Housing Institute (MHI) reports that some 75% of all loans in the U.S. under $125,000 are manufactured homes, this will harm access to credit for many current and potential home buyers.
But this impact is not only going to be felt by those who own ‘any’ low cost housing, be it a condo, older conventional housing, new or newer manufactured homes and pre-HUD Code ‘mobile homes.’ When lower cost homes suffer in value, those who could sell and trade up to larger or more costly homes are impacted and so the chain of events begins that will ultimately impact virtually every home owner in the U.S..
Yahoo! Finance notes the following changes coming:
- Starting January 1, the new rules put out by the Consumer Financial Protection Bureau kick in, which places bright lines around what the agency considers ability to repay, and also limits points and fees on loans.
- The Qualified Mortgage (QM) rules were intended to provide some sort of safe harbor from borrower lawsuits, but the unintended consequence has been that lenders are reluctant to originate non-QM loans.
- One big bright line with QM loans is the debt-to-income limit of 43%. If a borrower debt to income ratio is above that level, they’ll be able to sue the lender for making a loan the lender “knew” the borrower wouldn’t be able to repay.
- Some lenders are doing non-QM loans, but they’re requiring lots of home equity. Most are not considering a loan with a loan-to-value ratio over 70%.
- Another wrinkle of QM is that the points and fee cap of 3% make loans with principal amounts under $100,000 more or less money losers for the originators, given the fixed costs of making a loan and the liability/loan risk.
Conventional home builders and realtors are concerned, as restricting mortgages slows home sales and harms the economy. The are not alone, as manufactured housing pros have concerns too.
The Manufactured Housing Institute (MHI) – in concert with over 50 other non-profit groups in the U.S. that represent professionals and home owners – has therefor launched an effort to avoid the harm caused on all forms of housing, but which will particularly impact manufactured homes as America’s most affordable homes.
The MHI backed legislation is known as HR 1779 or the “Preserving Access to Manufactured Housing Act” and will modify regulations that would otherwise harm access to credit and home values. While it is intended to provide relief for millions who own pre-HUD Code mobile or post-national safety and construction code manufactured homes, the bill would benefit others too, as noted above.
In fact, Yahoo! Finance says that conventional housing builders Lennar and KB Home mentioned tight credit as an issue during their recent earnings calls.
Of all the legislation moving through Congress related to financial reform, this is arguably the most bi-partisan. GovTrack reports that there are already 93 co-sponsors to HR 1779, 79 Republicans and 13 Democrats. The Senate version of this bill is pending as this is being written, but has Democratic and Republican champions poised in the U.S. Senate to file or ‘drop’ the bill as well.
HR 1779 addresses issues related to costs and fees. It also clarifies and removes the LO Comp rule ‘muzzle’ that would keep sales people from assisting prospective buyers on certain questions and that will protect lenders from having to potentially count certain income against points and fees calculations.
A number of legal experts have reviewed the laws in question agree that HR 1779 will work to preserve the lending that keeps Manufactured Housing accessible. This will help other forms of housing too.
Please call the Capitol Switchboard at (202) 224-3121 and ask your Congressman to support HR 1779. Or find your Congressman via this link and call, fax or email your congressional representative’s office and ask them to support HR 1779. You can quickly find your congressional representative at this link ContactingTheCongress.org.
Together with manufactured home owners, professionals and other people of good will, supporting HR 1779 will provide the relief needed from the unintended consequences of the legislation which has caused the CFPB to issue the regulations that will limit financing on housing that costs less than 100,000. Please act today and then get your friends and contacts to do the same. ##
(Editor’s Note: The logos used above are those of the respective organizations, and their use does not imply they have vetted this analysis or agree with any or all of its contents.)