Bipartisan legislation introduced in the Senate this week would make it easier for consumers to secure financing to purchase manufactured housing.
The Preserving Access to Manufactured Housing Act, introduced by Sens. Joe Donnelly, D-Ind., Pat Toomey, R-Pa., Joe Manchin, D-W.Va., and Tom Cotton, R-Ark., would amend federal regulations put in place following the Dodd-Frank Act that have resulted in most loans for manufactured housing being classified as high cost.
"Manufactured housing plays an important role in homeownership options, which have unfortunately been constrained by excessive regulations by the CFPB," Cotton said in a press release. "As we've seen, unintended consequences of these regulations have limited the housing and mortgaging choices of hard-working Americans in many rural areas, like my home state of Arkansas."
The Consumer Financial Protection Bureau released guidelines in 2013 that went into effect last year which expanded the range of loan products considered to be "high-cost" under the Home Ownership and Equity Protection Act.
As part of these guidelines, many small-balance loans, which consumers often use to purchase manufactured housing, were classified as high-cost loans. This hurt the manufactured housing industry as it increased the liability lenders faced in making these loans, which reduced credit available to would-be homeowners in this space.
"Due to the increased lender liabilities associated with making and obtaining high-cost mortgages, many lenders have exited the manufactured housing market," the Manufactured Housing Institute said in a press release supporting the legislation.
The Senate bill would amend the thresholds of what loans are considered to be high-cost. Currently, a mortgage is classified as high-cost if the transaction is for less than $50,000 and the interest rate on the loan exceeds the average prime offer rate by more than 8.5%, according to the senators' statement. The bill would revise these thresholds to APOR + 10% for transactions under $75,000.
Additionally, the legislation makes clear that manufactured home retailers and salespersons are not loan originators, since current CFPB definitions are based on traditional mortgage market roles and do not apply as well to the manufactured housing industry, according to the trade group's press release.
"This bill excludes manufactured housing retailers and sellers from the definition of a loan originator, so long as they are only receiving compensation for the sale of the home and not engaged in financing the loans," the Manufactured Housing Institute said.
Reps. Stephen Fincher, R-Tenn., Terri Sewell, D-Ala., Andy Barr, R-Ky., and Kyrsten Sinema, D-Ariz., introduced companion legislation in the House last month. Since then, an additional 16 lawmakers have cosponsored that bill.
This Senate bill represents Donnelly's second attempt at addressing the roadblocks consumers face when attempting to finance the purchase of a manufactured home. He previously introduced a similar bill in 2013 that received co-sponsorship from 16 senators. Previous companion legislation in the House in 2014 was co-sponsored by 114 representatives and approved by the House Financial Services Committee. Neither bill made it through the full Congress before yearend.
"We hope to keep the momentum building for quick passage during this session of Congress," said Nathan Smith, chairman of the Manufactured Housing Institute, in the release.