Chariman's Corner: Putting the Qualified Mortgage Dilemma in Perspective

The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by President Obama on July 21, 2010. The Act implements financial reform supported by the Democratic Party and the Obama administration. Passed as a response to the late-2000s recession, the Act is bringing the most significant changes to financial regulation in the U.S. since the reform that followed the Great Depression. The biggest threat to the manufactured housing industry and the Texas Manufactured Housing Association is the impact the new, more stringent regulations might have on loans under $50,000.
I did some research using sales data available on the Texas Department of Housing and Community Affairs Manufactured Housing Division (TDHCA MH) website. I also researched the Statistical Surveys data my company subscribes to and both sources confirmed my concerns. According to TDHCA MH data, single section homes comprised 60 percent of new home retail sales for the five months ending May 31, 2012. When I ran a retail selling price analysis in Statistical Surveys for the three months ending March 31, 2012, the most recent period available, I found that 92 percent of all single sections sold at retail had a selling price of $55,000 or less and 7 percent of multi-sections fell into that bracket. There were 1097 new-home single-section sales with lender liens titled as personal property (chattel loans) during the first five months of 2012. Assuming 93 percent fall below a $55,000 sales price, which with a 10 percent down payment would mean a loan balance of $55,000 or less, 1020 single-section homes and 71 multi-section homes would be affected by the new regulations. That is 27 percent of all new HUD Code sales and 52 percent of all personal property financed sales.
I don’t need to tell you how that could affect our industry. Just the manufacturer dues revenue, which accounts for approximately 75 percent of TMHA revenue, would decline by 27 percent. There are 16 active HUD Code plants in Texas, and if you assume a workforce of 150 at each of these plants a reduction in production could result in 648 Texans losing their jobs. Additionally, that doesn’t even consider the 55 active licensed out-of-state plants. Texas currently has 747 active Retailer license holders and 1002 active licensed Retail Sales license holders. Based on a 27 percent reduction in sales due to the impact of the new regulation, we could see a reduction of 202 retail outlets and 271 retail sales licensees respectively. In total, not even counting lenders, contractors, suppliers and so forth, we might face a loss of 1120 jobs in our core member group.
The new regulations could also add significant barriers to affordable home ownership with no alternative housing options. There could be a an annual reduction in new HUD Code manufactured housing sales in Texas of 2650 units based on the current run rate if loans of $50,000 and less are highly regulated. Current manufactured home owners wanting to sell their home will find it very difficult to get financing for their buyers under the new regulations. We can’t let this happen. MHI, TMHA and other interested parties are taking steps to educate those writing the regulations at the federal level about our industry and its unique financing model. The outcome is not guaranteed, but at least we are attempting to influence the rule writing and not just sitting on the sidelines.