MFH News and Views: Freddie and Fannie Go Under The Microscope; Task Force Investigates Number of Chattel Loans Made
Checking up on the 2008 Housing and Economic Recovery Act‘s (HERA) success, the Federal Housing Finance Agency (FHFA) has been looking to track any evidence of purported progress made with Fannie Mae and Freddie Mac’s mandated “duty to serve underserved markets,” and making financing more readily available for prefabricated housing.
The uniquely American dream of homeownership is fleeting for many hard working middle, and lower income families. Soaring home prices, health care costs combined with stagnant wages have prevented that dream from becoming a reality for many citizens. With recent reports indicating the percentage of home ownership is at its lowest level in over 50 years.
Fortunately, there is a bright solution available for middle and lower income families to participate in the American dream of affordable, quality home ownership … today’s modern manufactured homes.
Since the great recession of 2008-2011 the sales of new manufactured homes have increased significantly, while traditional site built homes have decreased. Primarily thanks to the cost of a new manufactured home, built as well, if not superior, to a comparable site built home at about one-half the price (not including the cost of land).
Currently, the main obstacle preventing manufactured homes from filling the housing affordability gap and reducing the nation’s housing crisis is the lack of fair and equitable low-interest financing served by the government-backed enterprises – Fannie Mae and Freddie Mac.
Unlike traditional homebuilders and buyers, manufactured homes not permanently attached to property have only “chattel” loans available. These “home only” loans are considerably more expensive with shorter maturities because of a lack of a secondary market for manufactured homes that are not secured by real estate.
A glimmer of hope was detailed in a “good news” report posted December 28, 2015, by ManufacturedHomes.com titled, FHFA Plan Could Positively and Significantly Change How Manufactured Homes Are Sold, Sited, and Financed. In that report, the Federal Housing Finance Agency (FHFA) indicated their willingness to experiment with financing manufactured home loans that are not secured by real estate. FHFA agreed to allow the two enterprises to conduct a pilot program to determine what improvements could be made in originating and servicing that could make chattel loans safer for purchase by the enterprises.
Fast forward eight months later to the present. There has been little progress towards the FHFA going forward with the experiment regarding reasonable financing of manufactured homes that are not secured by the land upon which they are sited.
The following are excerpts reported in a Bradley Financial Services Perspectives Blog dated 8/5/16 by William Matchneer of Bradley Arant Boult Cummings llP, referencing the status of a Freddie Mac chattel loan initiative.
MFH Analysis: As the 2016 political season unfolds, optimism that Freddie Mac and/or Fannie Mae will at some point honor their duty to serve the underserved manufactured housing market mandated by Section 1129 of the Housing and Economic Recovery Act of 2008 (HERA) continues to wane. More than eight years later … and nothing has changed. Manufactured housing industry and government agencies appear to be perfectly happy to continue “kicking the can” further down the road.
Some might wonder why a handful of industry stakeholders wouldn’t embrace the prospect of building and selling more homes – which would obviously be realized if lower cost financing were available to home purchasers. Could it be there are powerful entities who are happy with the chattel financing’s status quo and who profit handsomely from the revenues generated by its high priced chattel lending charges? Just wondering…