[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
                   THE STATE OF MANUFACTURED HOUSING

=======================================================================

                             FIELD HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         INSURANCE, HOUSING AND
                         COMMUNITY OPPORTUNITY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 29, 2011

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-86



                  U.S. GOVERNMENT PRINTING OFFICE
72-627                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                   SPENCER BACHUS, Alabama, Chairman

JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts, 
    Chairman                             Ranking Member
PETER T. KING, New York              MAXINE WATERS, California
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
JUDY BIGGERT, Illinois               BRAD SHERMAN, California
GARY G. MILLER, California           GREGORY W. MEEKS, New York
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
JOHN CAMPBELL, California            JOE BACA, California
MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
KEVIN McCARTHY, California           DAVID SCOTT, Georgia
STEVAN PEARCE, New Mexico            AL GREEN, Texas
BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
    Pennsylvania                     KEITH ELLISON, Minnesota
LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
ROBERT HURT, Virginia
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee

                   Larry C. Lavender, Chief of Staff
      Subcommittee on Insurance, Housing and Community Opportunity

                    JUDY BIGGERT, Illinois, Chairman

ROBERT HURT, Virginia, Vice          LUIS V. GUTIERREZ, Illinois, 
    Chairman                             Ranking Member
GARY G. MILLER, California           MAXINE WATERS, California
SHELLEY MOORE CAPITO, West Virginia  NYDIA M. VELAZQUEZ, New York
SCOTT GARRETT, New Jersey            EMANUEL CLEAVER, Missouri
PATRICK T. McHENRY, North Carolina   WM. LACY CLAY, Missouri
LYNN A. WESTMORELAND, Georgia        MELVIN L. WATT, North Carolina
SEAN P. DUFFY, Wisconsin             BRAD SHERMAN, California
ROBERT J. DOLD, Illinois             MICHAEL E. CAPUANO, Massachusetts
STEVE STIVERS, Ohio


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    November 29, 2011............................................     1
Appendix:
    November 29, 2011............................................    25

                               WITNESSES
                       Tuesday, November 29, 2011

Burr, Carla, manufactured housing resident.......................    15
Clayton, Kevin, Secretary, Executive Committee, Manufactured 
  Housing Institute (MHI)........................................     6
Craddock, Tyler, Executive Director, Virginia Manufactured and 
  Modular Housing Association (VAMMHA)...........................     8
Czauski, Henry S., Acting Deputy Administrator for the Office of 
  Manufactured Housing Program, U.S. Department of Housing and 
  Urban Development..............................................     4
Rush, Stanley, Account Executive, MHD Empire Service Corporation, 
  and Vice Chair, Virginia Manufactured and Modular Housing 
  Association (VAMMHA)...........................................    10
Rust, Adam, Research Director, Community Reinvestment Association 
  of North Carolina..............................................    13
Weiss, Mark, Senior Vice President, Manufactured Housing 
  Association for Regulatory Reform (MHARR)......................    17
Yates, Scott, President, Yates Homes, and Past Chair, Virginia 
  Manufactured and Modular Housing Association...................    11

                                APPENDIX

Prepared statements:
    Donnelly, Hon Joe............................................    26
    Fincher, Hon. Stephen........................................    27
    Burr, Carla..................................................    29
    Clayton, Kevin...............................................    36
    Craddock, Tyler..............................................    45
    Czauski, Henry S.............................................    50
    Rush, Stanley................................................    55
    Rust, Adam...................................................    58
    Yates, Scott.................................................    65


                   THE STATE OF MANUFACTURED HOUSING

                              ----------                              


                       Tuesday, November 29, 2011

             U.S. House of Representatives,
                 Subcommittee on Insurance, Housing
                         and Community Opportunity,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 9:08 a.m., at 
the Danville Municipal Building, 4th Floor City Hall, Danville 
City Council Chambers, 427 Patton Street, Danville, Virginia, 
Hon. Robert Hurt [vice chairman of the subcommittee] presiding.
    Members present: Representative Hurt.
    Mr. Hurt. [presiding]. Good morning. I want to, first of 
all, welcome everybody to today's hearing.
    As you all know, I am Robert Hurt, and I am a Member of 
Congress. I represent Danville and all of Southside Virginia in 
Congress. My district runs from Greene County, north of 
Charlottesville, all the way down to the North Carolina line, 
just a few miles from here, and runs from Martinsville in Henry 
County all the way over to South Hill and Lawrenceville over to 
the east.
    So it is a very large district, and manufactured housing is 
very important to us here in Southside for two reasons. Number 
one, of course, it provides affordable housing for thousands of 
people all across my district, which is extremely important, 
especially in this economy when we have 9 percent unemployment.
    Number two, it is also important because it is a provider 
of jobs. We have a vibrant manufactured housing sector here, as 
is the case across the country, and we have many jobs that are 
associated with this business here.
    And so, as we look at ways in Washington that we can make 
it easier for small businesses to succeed, as we look for ways 
on our Financial Services Committee that we can help ameliorate 
the effects of legislation that has been adopted in the past, 
as well as the economic troubles that we currently face, this 
hearing is an opportunity to focus on a very important part of 
what I think will be an inevitable economic recovery.
    Unfortunately, it is taking longer, I think, than anybody 
would like. But I do believe that we will get there. And the 
evidence that we will receive today will be very helpful in our 
committee's deliberations.
    As I said, I am a member of the Financial Services 
Committee. I am also the vice chairman of the Insurance, 
Housing and Community Opportunity Subcommittee. I am the only 
member of the subcommittee who will be here today, but I can 
tell you that everything that we hear today, we will record.
    We have a staff member from the Financial Services 
Committee here, Mr. Tallman Johnson, and we will take that 
evidence and we will carry it back with us to Washington. It 
will be made part of the record, and we will be able to use 
that as we go forward and look for legislative responses and 
regulatory responses that we believe will help the situation.
    I also wanted to recognize two folks on my staff. Kelly 
Simpson is my legislative director. And we also have Denise Van 
Valkenburg, who is our director of constituent services.
    Before I get started, I did want to recognize a few people 
that I really appreciate being here. Delegate Danny Marshall. 
There is Danny. Danny, of course, is our delegate in Richmond. 
Thank you, Danny, for being here.
    When I was in the House of Delegates, he and I were on the 
Counties, Cities, and Towns Committee in the General Assembly, 
a committee that dealt with a lot of these issues. Thank you 
for being here, Danny.
    I wanted to recognize Don Merricks' chief bottle washer. 
Where is Gayle? There is Gayle Barts. Don couldn't be with us 
today, but I did want to thank him for sending Gayle, his able 
assistant.
    We have a couple of folks from the city council. We have 
Fred Shanks. Thank you, Fred, for being here. And Buddy Rawley 
was here. I don't know if he is still here. There is Buddy. 
Thank you, Buddy, for being here.
    We have James Snead, who is a member of the Board of 
Supervisors and also the Mayor of Ringgold. And we also have 
Jimmy Gillie, who is our commissioner of revenue here in the 
city. I don't know if he is still here. Jimmy, thank you for 
being here. And we also have our city attorney, Clarke 
Whitfield.
    And I am told that we have a special guest as well, Mayor 
Sherman Saunders. I just want you to know, Mr. Mayor, that I 
told my staff that I do not want to sit in Mayor Saunders' 
chair.
    [laughter]
    Mr. Hurt. So I am going to sit down here. But Mayor 
Saunders, it is so nice of you to be with us, and thank you for 
hosting us here. This is our Mayor, Sherman Saunders. Thank 
you, Mr. Saunders. I appreciate you being here.
    [applause]
    Mr. Hurt. So, with those introductions, I would like to 
bring this hearing of the Subcommittee on Insurance, Housing 
and Community Opportunity to order, and I will begin by making 
an opening statement, and then I will invite our witnesses to 
make opening statements.
    Good morning, and welcome to today's Financial Services 
Committee field hearing on the state of the manufactured 
housing industry.
    I want to thank all of our witnesses for traveling here to 
Danville this morning to examine the manner in which Federal 
laws and regulations impact these manufacturers, and the 
affordable housing they produce, as well as jobs they create 
here in Virginia's Fifth District and across the country.
    The term ``manufactured home'' refers to a home built in a 
factory in accordance with the construction standards set forth 
in the National Manufactured Housing Construction and Safety 
Standards Act of 1974, which is administered by the Department 
of Housing and Urban Development (HUD). HUD not only 
establishes the construction standards for units of 
manufactured housing, but it also coordinates inspections of 
these manufacturers' facilities to ensure that the homes they 
produce meet the quality and safety guidelines HUD maintains.
    Manufactured housing plays a significant role in the 
Nation's housing stock, supplying millions of units of 
affordable housing to individuals and families across the 
country. These homes are constructed in quality-controlled, 
HUD-regulated settings that produce cost-effective homes, 
expanding consumer access to affordable housing options.
    The industry is also a source of employment for thousands 
of Americans, hundreds of which reside and work here in 
Virginia's Fifth District. From Rocky Mount to South Hill, from 
Charlottesville to Danville, the Fifth District is home to a 
number of manufacturers, retailers, suppliers, and related 
services, which create numerous jobs in connection with 
manufactured and modular housing.
    The impact of the industry cannot be overstated at a time 
when 9 percent of Americans are unemployed. Many communities in 
my district have even higher rates of unemployment.
    According to the data from the Census Bureau, the 
manufactured housing industry experienced strong sales in the 
mid- to late 1990s, exceeding 300,000 units sold annually. 
Since then, these sales figures have steadily declined, with 
approximately 50,000 units sold in 2010. Today's hearing will 
explore the causes of these trends and the impact of the 
relevant Federal laws and regulations on the manufactured 
housing industry's ability to respond to changing economic 
conditions.
    Among the most critical factors in the purchase of a home 
is access to financing. Consumers are finding it increasingly 
difficult to obtain financing for manufactured homes, which, in 
turn, reduces demand for the product, ultimately resulting in 
fewer jobs for manufacturers and related businesses and fewer 
choices available to the consumer.
    The majority of manufactured home purchases are financed as 
personal property, rather than real property mortgages. This 
method of financing results in comparatively smaller loan 
balances with shorter durations, but higher interest rates, 
given that most personal property loans cannot be securitized 
in the secondary market like a conventional mortgage.
    Given the unique nature of this model of finance, we must 
be mindful that laws governing traditional mortgage finance may 
not be as effective in the manufactured housing market, case in 
point, the unintended consequences created by the Dodd-Frank 
Act. Dodd-Frank broadened the definition of high-cost loans 
under the Home Ownership and Equity Protection Act (HOEPA) and 
also imposed new requirements on loans considered to be high-
cost loans under HOEPA.
    While these provisions were well-intentioned, we must 
identify and mitigate the unintended consequences they 
produced: decreased access to affordable choices for consumers; 
and fewer jobs in the manufactured housing industry. This 
hearing will examine these and other issues that are impacting 
the manufactured housing industry and the consumers who utilize 
its products.
    Again, I want to express my appreciation for today's 
witnesses, each of whom will speak to their expertise in a 
particular facet of the manufactured housing industry. I look 
forward to your testimony.
    Without objection, your written statements will be made a 
part of the record, and you will each be recognized for a 5-
minute summary of your testimony.
    The first witness who will be testifying today is Mr. Henry 
Czauski, Acting Deputy Administrator for the Manufactured 
Housing Program at HUD.
    Thank you, Mr. Czauski, for coming from Washington. It is 
my understanding that you came by way of Blacksburg, but we are 
glad to have you here. So you are recognized for 5 minutes.

STATEMENT OF HENRY S. CZAUSKI, ACTING DEPUTY ADMINISTRATOR FOR 
THE OFFICE OF MANUFACTURED HOUSING PROGRAM, U.S. DEPARTMENT OF 
                 HOUSING AND URBAN DEVELOPMENT

    Mr. Czauski. I want to thank Chairman Hurt and the other 
distinguished members of the subcommittee for the opportunity 
to testify today.
    My name is Henry Czauski, and I am the Acting Deputy 
Administrator for the Office of Manufactured Housing Program 
with the U.S. Department of Housing and Urban Development.
    My remarks will touch on some of the key aspects of 
manufactured housing legislation, the role HUD plays in 
implementing that legislation, the benefits to the 
stakeholders, and label fees.
    In 1974, Congress enacted the National Manufactured Housing 
Construction and Safety Standards Act, which was amended by the 
Manufactured Housing Improvement Act of 2000. Congress found 
that manufactured housing plays a vital role in meeting the 
housing needs of the Nation and that manufactured homes provide 
a significant resource for affordable homeownership and rental 
housing accessible to all Americans.
    HUD established a program to administer and carry out the 
many purposes of this legislation, which was intended to: 
protect the quality, durability, safety, and affordability of 
manufactured homes; provide for establishment of uniform 
nationwide Federal construction standards; encourage innovative 
and cost-effective construction techniques; protect residents; 
establish a balanced consensus process to develop standards; 
and ensure uniform and effective enforcement of those 
standards.
    To carry out these purposes, Congress included stakeholders 
in the process--manufacturers, retailers, consumers, State 
regulators, administrative and monitoring contractors, and 
others. A Manufactured Housing Consensus Committee was 
established as a Federal advisory committee to provide 
recommendations to HUD on adopting and revising Federal 
standards and regulations. This committee is composed of 21 
voting members, including 7 producers/retailers, 7 persons 
representing consumer interests, and 7 persons representing 
public officials and the general interest.
    An administering organization authorized by Congress 
assists the committee in its mission. This committee is an 
active body and in the past year has met on four occasions, and 
its subcommittees have held ongoing meetings throughout the 
year.
    The Federal standards have been the subject of ongoing 
review and updating. Over the years, HUD promulgated numerous 
standards, including standards that limited formaldehyde 
emissions in manufactured homes, improved wind safety 
requirements after Hurricane Andrew, enhanced smoke alarm 
standards, and upgraded electrical safety requirements. These 
standards are preemptive of State or political subdivision 
standards to ensure nationwide uniformity and 
comprehensiveness.
    In order to assure compliance with these standards, 
manufacturers contract for inspection services with primary 
inspection agencies accepted by HUD. The Department conducts 
nationwide monitoring and inspections to assure that the 
standards are maintained.
    Congress also authorized that States may assume 
responsibility for enforcement of standards, upon approval of a 
State plan approved by HUD. At the current time, 37 States have 
established plans. HUD assumes responsibility for enforcement 
of standards in the 13 States that do not have established 
plans. During the past 2 years, 2 national and 4 regional 
meetings with State regulators were held to provide guidance 
and ensure uniformity of standard administration among the 
States.
    Once a manufactured home is determined to meet Federal 
standards, a certification label is permanently affixed to each 
home. This red label assures the consumer that the home was 
constructed in accordance with the Federal standards.
    Congress authorized the Secretary to establish and collect 
a fee for this label to offset expenses incurred in carrying 
out the legislation. The current label fee was set at $39 in 
2002. In Fiscal Year 2000, prior to the fee increase, label fee 
income of $11 million was collected.
    As a result of reductions in the production of manufactured 
homes, fee income in Fiscal Year 2008 fell to $5.7 million. In 
Fiscal Year 2011, fee income fell to less than $3 million.
    To supplement the reduced label fee income, Congress 
provided a direct appropriation of $5.4 million in Fiscal Year 
2009. The appropriation rose to $9 million in Fiscal Year 2011. 
For Fiscal Year 2012, the appropriation was set at $2.5 
million.
    These label fees are used for conducting inspections and 
monitoring, providing funding to the States that have approved 
plans, administering the consensus committee, and 
administration of the enforcement of installation standards, 
and a dispute resolution program.
    In closing, I would like to state that the Federal 
standards serve to protect the quality, durability, safety, and 
affordability of manufactured housing. I want to thank you for 
the opportunity to provide testimony today, and I would be 
pleased to answer any questions.
    [The prepared statement of Mr. Czauski can be found on page 
50 of the appendix.]
    Mr. Hurt. Thank you, Mr. Czauski.
    The next witness that we will recognize for 5 minutes is 
Mr. Kevin Clayton, who is the president and CEO of Clayton 
Homes. And he joins us from Maryville, Tennessee.
    Thank you, Mr. Clayton, for being here. And we will 
recognize you for 5 minutes.

  STATEMENT OF KEVIN CLAYTON, SECRETARY, EXECUTIVE COMMITTEE, 
              MANUFACTURED HOUSING INSTITUTE (MHI)

    Mr. Clayton. Thank you, Mr. Chairman, and members of the 
subcommittee, for the opportunity to testify this morning.
    My name is Kevin Clayton. I serve as the secretary of the 
Manufactured Housing Institute, or I will refer to that as MHI 
in my remarks.
    I am also the president and CEO of Clayton Homes. The 
current chairman of MHI, Joe Stegmayer, sends his regards. He 
has a facility nearby in Rocky Mount. I know that you visited 
that facility, and we appreciate your interest and support of 
the industry.
    My written testimony has been submitted for the record.
    For over 60 years, manufactured housing has been critical 
as a single-family housing alternative for hard-working, low- 
to moderate-income families across this Nation. Most 
manufactured homes are located in rural America, where there 
are few apartments or other housing alternatives available.
    The average cost of a new manufactured home is only $63,000 
versus $270,000 for a site-built home. More importantly, the 
median annual income of a manufactured homeowner is $32,000, 
versus $60,000- plus for other homeowners.
    An even greater indication of the Nation's reliance on 
manufactured homes as an affordable housing alternative is that 
72 percent of all new homes sold under $125,000 are 
manufactured homes. Additionally, since 1989, manufactured 
housing has served roughly 20-plus percent of all new home 
sales.
    The American dream is homeownership, and the unintended 
effects of new regulation and lack of the secondary market by 
the GSEs is a path to tragically wipe out the remains of this 
important housing segment. The implementation of the Dodd-Frank 
Act amendments to the Home Ownership and Equity Protection Act 
stands to critically affect this industry. HOEPA, which defines 
high-cost mortgages, is designed to protect consumers and 
prevent predatory lending.
    The law uses APR limits for the annual percentage rate and 
fees charged on a loan to determine whether the loan is a high-
cost mortgage. Prior to the Dodd-Frank Act, HOEPA only applied 
to non-purchase finance or refinance loans, but now will apply 
to all manufactured housing loans as well.
    With no secondary market, the cost of capital for 
manufactured housing lenders starts at a much higher rate, and 
the limits within the Dodd-Frank Act are based off of the 
current artificially low mortgage rates. This makes it very 
difficult, and impossible in many cases, for a lender in our 
industry in the future to be able to charge enough interest 
rate to offset the cost of originating and servicing the loans 
and stay underneath those limits.
    For example, a $200,000 site-built loan and a $50,000 
manufactured home loan, they cost the same in dollars to 
originate and service a loan. But as a percentage of each 
loan's size, it is significantly different in interest rate 
spread. This difference is effectively discriminating against 
the smaller size manufactured home loans, putting them at a 
much higher risk of being categorized as high-cost mortgages, 
even though there is nothing predatory about manufactured 
housing loans.
    The impact of this provision is significant. Of the 
400,000-plus loans that our company has made since 1972, more 
than 50 percent of those would have not been done because they 
would have been classified as a high-cost mortgage under the 
Dodd-Frank amendments.
    Due to the liabilities and stigma associated with high-cost 
mortgages, lenders typically refuse to make these types of 
loans. The other real impact of HOEPA will be felt by the 19 
million Americans who live in manufactured homes, who could see 
their ability to resell their homes effectively wiped out 
because lenders would be unwilling to provide the financing 
needed to help them sell their homes.
    Our regulatory challenges are not limited to HOEPA and the 
Dodd-Frank Act. The industry is already feeling the impact of 
the SAFE Act, which requires States to establish standards for 
licensing mortgage loan originators. Unfortunately, there has 
been a lack of clarity and uniformity in applying the SAFE Act 
to the manufactured housing market, specifically the 
manufactured home retailers and their salespeople.
    Similar to real estate brokers, manufactured home retailers 
are in the business of assisting customers through the home-
buying process. However, unlike conventional real estate, there 
are a limited number of banks that offer financing for 
manufactured housing. Without the assistance of the retailer 
and salespeople, the consumer would be--it is very difficult to 
locate a manufactured housing lender.
    Salespeople are fundamentally involved in the business of 
selling homes, not originating mortgage loans. When they do not 
receive an incentive or compensation from a lender, then they 
should not be fearful to show a customer what financing options 
are available or answer basic questions about the lending 
process.
    Additionally, as States have attempted to implement the 
SAFE Act, the impact has been inconsistent. Because of delays 
in the Federal rulemaking and the resulting differences and 
approaches taken at State levels, manufactured home retailers 
are often concerned with providing the most basic level of 
technical assistance and service to customers.
    While MHI fully supports the mission of the SAFE Act, 
consideration should be made for the unique manufactured home-
buying process. Our industry is critical for housing and 
providing jobs in America. Over the past decade, new 
manufactured home construction has declined nearly 80 percent, 
which has accounted for 160 plant closures, more than 7,500 
retail center closures, and the loss of over 200,000 jobs.
    More importantly, thousands of manufactured home customers 
may be limited in their ability to purchase, sell, or refinance 
homes. Without action in these key areas, the people who live 
in manufactured homes and those whose livelihood is connected 
to this industry face significant risk.
    I thank you for the opportunity to testify and welcome your 
questions later.
    [The prepared statement of Mr. Clayton can be found on page 
36 of the appendix.]
    Mr. Hurt. Thank you, Mr. Clayton, for your testimony.
    The next witness who will testify will be Tyler Craddock, 
and he is the executive director for the Virginia Manufactured 
and Modular Housing Association. He is in Richmond, and he is 
from Southside.
    Welcome, Tyler, and you are recognized for 5 minutes.

   STATEMENT OF TYLER CRADDOCK, EXECUTIVE DIRECTOR, VIRGINIA 
     MANUFACTURED AND MODULAR HOUSING ASSOCIATION (VAMMHA)

    Mr. Craddock. Thank you, Mr. Chairman. Thank you for the 
opportunity to testify this morning on the state of the 
manufactured housing industry, and thank you for hosting this 
hearing.
    My name is Tyler Craddock, and I am the executive director 
of the Virginia Manufactured and Modular Housing Association.
    Founded in 1965, VAMMHA is the voice of the factory-built 
housing industry in Virginia. We represent producers and 
retailers of manufactured and modular housing, community 
owners, lenders, suppliers, and others involved in providing 
Virginians with well-constructed, factory-built, affordable 
housing choices.
    While most of our work is at the State and local level, we 
recognize that manufactured housing, by its very nature, 
requires a great deal of attention to Federal legislative and 
regulatory activity. For that reason, we are active members of 
and work in close partnership with the Manufactured Housing 
Institute, very ably represented here this morning by Kevin 
Clayton, with Clayton Homes.
    Manufactured housing is an important component of the 
housing stock here in Virginia. According to the 2010 census, 
it comprises about 5.6 percent of the overall housing stock in 
the Commonwealth. But that does not tell the entire story.
    In many rural localities, especially in Southside and 
southwest Virginia, according to the 2000 census data--that is 
the latest data we have available on a county-by-county basis--
the proportion of manufactured homes exceeds 15 to 20 percent 
of the housing stock. That is no small wonder, given the 
relative lack of construction labor in many rural communities 
and the affordable nature of manufactured homes in Virginia.
    In 2010, for example, the average cost of a new 
manufactured home in Virginia minus land was $58,500. In spite 
of manufactured housing's status as an affordable choice for 
many Virginia families, the manufactured housing industry in 
Virginia is limping along at present.
    In 1990, over 5,400 homes were shipped into Virginia. That 
number rose to over 7,000 homes in the mid- to late 1990s and 
dropped over time to only 1,155 homes in 2010. Thus far in 
2011, we are at approximately 30 percent off of our numbers 
from 2010, having only 670 shipments as of the end of 
September.
    The decline in manufactured home shipments is mirrored in 
the decline we have seen in the number of manufactured homes 
actually produced here in Virginia. In 1990, 3,595 homes were 
produced in the Commonwealth. In the years that followed, that 
number went as high as 4,422 homes in 1998, but declined to 
only 113 homes in 2009.
    While many of the issues we face are State or local in 
nature, and others testifying today can offer more in-depth 
perspective on the Federal issues affecting our industry, I 
would certainly be remiss if I did not highlight a couple of 
issues that have arisen as I have visited with VAMMHA members 
around the State. First and foremost, the lack of financing 
from manufactured home purchasers is putting many of our 
customers and our industry overall in a pinch.
    Time and time again, retailers tell me that they have 
customers who are ready and willing to purchase a new home, but 
they cannot get financing for the purchase. In many cases, 
these are families who, in years past, would have had no 
trouble qualifying for a loan, but they cannot do so now.
    In addition, for our customers who qualify, there remains 
the real threat that their home will not appraise for a value 
that will allow their home purchase to move forward. While 
appraisals are tighter across-the-board for the entire housing 
industry, a number of my members report that the problem lies 
not so much with appraisals in general, but with specific 
appraisers who do not understand our product and its unique 
nature. As such, there may be an opportunity for the industry 
and HUD to work in partnership to help ensure that appraisers 
are well educated with respect to manufactured homes.
    Another issue that continues to concern our membership is 
the SAFE Act. While the final rule promulgated by HUD earlier 
this summer provides some helpful guidance and flexibility for 
our State regulators, it does not entirely clarify issues of 
critical concern to the industry.
    The industry is seeking additional statutory language to 
clarify that licensed manufactured home salespersons not 
engaged in loan origination activities are not mortgage loan 
originators and, thus, subject to licensing. As it stands, 
given the unique nature of the retail side of our industry, 
manufactured home retailers, who are not in the business of 
making loans, could be on the hook for thousands in licensing 
fees at a time when they can least afford it.
    In addition, the industry is seeking relief for those who 
originate only a small number of manufactured home loans on an 
annual basis and for those sellers financing the sale of their 
own manufactured homes. At a time when financing options are 
very limited for manufactured home buyers, regulatory burdens 
imposed by the SAFE Act are further limiting the few financing 
options available to low- and moderate-income manufactured home 
buyers.
    Mr. Chairman, thank you for the opportunity to testify, and 
I certainly welcome any questions.
    [The prepared statement of Mr. Craddock can be found on 
page 45 of the appendix.]
    Mr. Hurt. Thank you, Mr. Craddock.
    We also have with us Stan Rush, who is an account 
representative with MHD Empire Services Corporation here in 
Danville. Mr. Rush, thank you very much for joining us today, 
and we will recognize you for 5 minutes.
    Thank you, sir.

   STATEMENT OF STANLEY RUSH, ACCOUNT EXECUTIVE, MHD EMPIRE 
SERVICE CORPORATION, AND VICE CHAIR, VIRGINIA MANUFACTURED AND 
              MODULAR HOUSING ASSOCIATION (VAMMHA)

    Mr. Rush. Thank you, Chairman Hurt, and members of the 
subcommittee for the opportunity to testify regarding the state 
of manufactured housing personal property financing.
    My name is Stanley Rush, and I am an account executive with 
MHD Empire. I am also currently serving as vice chair of the 
Virginia Manufactured and Modular Housing Association.
    I have in worked many different areas of the manufactured 
housing industry since 1981 with almost 20 years of 
manufactured housing personal property financing experience. 
The most serious obstacle that exists with personal property 
financing is the SAFE Act and its inherent regulations.
    Primarily, States do not know how to enforce the new 
regulations. Most States, especially Virginia, already had 
predatory lending laws that were passed years ago. The SAFE Act 
has confused a situation that was working.
    The SAFE Act creates confusion for the manufactured housing 
salespeople who are assisting customers with the process of 
obtaining financing for affordable homes they want to purchase. 
There is great uncertainty about the SAFE Act and how it 
applies with respect to the need for manufactured housing 
salespeople to obtain a mortgage loan originator's license to 
be able to assist with a credit application.
    Manufactured housing salespeople are licensed and regulated 
by the State. Any additional licensure is costly and 
unnecessary, as the salespeople are not making any lending 
decisions, merely helping with paperwork.
    The SAFE Act is also preventing manufactured housing 
community owners from doing their own financing, which is 
necessary at this time because so many sources of money are no 
longer available. While the recent guidance from HUD and 
conversations between our industry and State regulators have 
been helpful, they are based only on current interpretations 
and, as such, are subject to change in the future.
    Additionally, these positive first steps do not completely 
address the industry's concerns. That is why we strongly 
encourage you to support clarifying language to state that 
manufactured housing salespersons not engaged in loan 
origination do not need to be registered, and language that 
provides some relief to folks making only a few loans and 
sellers financing the sale of their own homes.
    At one time, there were more than a dozen national lenders 
doing manufactured housing personal property financing. Now, we 
are down to four. One of the reasons personal property 
financing has become so scarce is that banks are being told by 
regulators that if it is the least bit out of the ordinary, 
don't do it.
    Manufactured housing personal property financing is out of 
the ordinary, and thus, the banks stay away. The new financial 
regulatory format is only making this situation worse.
    Our industry is by no means perfect. None is. But we have 
gotten caught up in a perfect storm of unintended consequences 
that, on top of the prolonged poor economy, is keeping our 
customers out of the most affordable housing available today.
    Thank you again, Chairman Hurt, for the opportunity to 
testify today, and I will be glad to answer any questions that 
you may have.
    [The prepared statement of Mr. Rush can be found on page 55 
of the appendix.]
    Mr. Hurt. Thank you for your testimony, Mr. Rush.
    And now, it is my pleasure to introduce Scott Yates, who is 
president of Yates Homes in Pittsylvania County. It is a 
family-owned business that has operated since 1986, and thank 
you very much for coming down to the big City of Danville--
    [laughter]
    Mr. Hurt. --to testify. You are recognized for 5 minutes.

  STATEMENT OF SCOTT YATES, PRESIDENT, YATES HOMES, AND PAST 
 CHAIR, VIRGINIA MANUFACTURED AND MODULAR HOUSING ASSOCIATION 
                            (VAMMHA)

    Mr. Yates. Thank you, Congressman Hurt, for giving me the 
opportunity to appear before you today.
    My name is Scott Yates, and I am president of Yates Homes, 
a family-owned business that has operated in Pittsylvania 
County since 1986.
    Over the course of my career, I have sold manufactured and 
modular homes, and I own and operate a manufactured housing 
community. I am also a member of the Virginia Manufactured and 
Modular Housing Association, have served as its chairman, and I 
am also a member of the executive committee, the board of 
directors, and had the pleasure of being elected to MHI, 
representing Virginia for a number of years.
    From day one, I have sold manufactured homes because I knew 
there was a need for affordable housing, but wanted to help 
consumers realize the American dream of homeownership. For 
quality of life and economic competitive reasons, every 
community needs a steady, well-built supply of affordable 
housing choices, and I decided early on that I wanted to play a 
part in helping provide that in Southside Virginia.
    Since 1986, I have seen our industry hit some of its 
highest points, and likewise, I have been through some of its 
toughest times, as is the case today. At the peak of the 
industry, our business sold 180 houses a year and employed 19 
people. As the economy went into a tailspin and the housing 
market slowed to a crawl, I have had to adjust our company to 
only 5 employees, including myself and my partner, and we are 
only selling 30 homes a year.
    This being the third downturn we have been through and the 
longest of my career, I think we have outsmarted ourselves for 
the sake of fixing the housing problem and forgotten 
commonsense resolutions. With the constant pressure of 
government regulation at all levels, and a lack of reliable 
financing sources for customers, we have turned to modular 
homes instead of manufactured homes.
    The finance community has turned from manufactured homes 
because of secondary markets not wanting to buy portfolios that 
contain this type of housing. The true loser is the customer 
who wants to provide shelter for their family at an affordable 
price and who understands that manufactured housing is a viable 
option to do exactly that.
    Four years ago, we recognized that lending sources for 
manufactured home buyers were drying up. As such, we deemed it 
necessary to explore an alternative business model so that our 
company could survive. We moved into modular homes because they 
are built to the prevailing local codes, which is the Virginia 
Uniform Statewide Building Code, the same standard that applies 
to site-built homes.
    They have fewer restrictions for customers seeking 
financing and feature many of the same terms as the site-built 
homes. With manufactured homes, the interest rates are 
generally higher. In addition, we observed that the appraisals 
were coming in well below the price for which the home had 
sold.
    Finally, it got to the point that selling manufactured 
homes was a losing scenario from a financial point of view. We 
were selling at a lower margin and being cut to the point that 
we could not make a small profit to keep our company going.
    In this scenario, however, the true loser is not me or our 
company. The true loser is the American people. Not every 
family can afford a home over $100,000. These are the families 
today who are suffering the most in our economy. They are being 
squeezed between job losses and the increasing cost of 
providing necessities like food, clothing, and whatever type of 
shelter for their families.
    In time, this leads to more people depending on our 
government to support them, thereby perpetuating the cycle of 
entitlement and spending that has brought our Nation to the 
brink of financial destruction. That is certainly not what this 
country was founded on, and in my opinion, it is not the 
direction our forefathers had in mind when they bravely affixed 
their names to the Declaration of Independence.
    In closing, I would like to share a story from my first 
year in business. A couple came in with two children. The 
loving father and mother wanted to provide a home for their 
family. We had a $4,000 used manufactured home for sale. They 
wanted to put it on the property that their family owned.
    The father and mother had saved and worked hard to purchase 
this home. When they wrote us a check for the $4,000, the 
notation in the memo line contained two very simple, but 
powerful words, ``a home.''
    I never forgot that family, and those words that remind us 
that whether a home has a $1 million price tag or a $4,000 
price tag, it is a home that meets their housing needs and 
provides a home for their family.
    Chairman Hurt, thank you for the opportunity to testify 
today, and I welcome any questions.
    [The prepared statement of Mr. Yates can be found on page 
65 of the appendix.]
    Mr. Hurt. Thank you very much, Mr. Yates.
    I would now like to recognize for 5 minutes Mr. Adam Rust, 
who is the research director for the Community Reinvestment 
Association of North Carolina, and he comes to us from Durham, 
North Carolina.
    Mr. Rust. That is right.
    Mr. Hurt. So thank you for being with us, and you are 
recognized for 5 minutes.

     STATEMENT OF ADAM RUST, RESEARCH DIRECTOR, COMMUNITY 
           REINVESTMENT ASSOCIATION OF NORTH CAROLINA

    Mr. Rust. Honorable Chairman Hurt, thank you for inviting 
me to testify before your panel today.
    My name is Adam Rust, and I am the research director for 
the Community Reinvestment Association of North Carolina. Our 
main focus is housing finance. I am the author of, ``This Is My 
Home: The Challenges and Opportunities of Manufactured 
Housing.'' And since 2010, I have served as a general member of 
HUD's Manufactured Housing Consensus Committee.
    In my opinion, today there is no better example of a 
community that is obstructed from accessing good credit than 
the local manufactured housing park. That is why I think it is 
important that this hearing is happening today.
    To your first question, what has caused the manufactured 
housing industry to go from 300,000 units produced in 1999 to 
only 50,000 units in 2010? I would offer that an equally valid 
question is, what would help the manufactured housing industry 
ship more homes in the near future?
    I see two opportunities--better participation by the GSEs 
and a better industry effort to take advantage of demographic 
change in our population. The manufactured housing industry 
finds it hard to ship more units because fewer people can get 
the financing they need to buy the homes.
    I agree with the sentiment expressed by Mr. Rush, Mr. 
Clayton, Mr. Yates, and Representative Hurt. Your opinion of 
personal property lending may determine your thoughts on the 
most important issues for how credit is accessed, how we 
interpret the way that the GSEs operationalize their duty to 
serve in the case of manufactured housing.
    The GSEs have expressed that they want to narrow their 
commitment to only real property. I believe that we need to 
find a middle ground. I believe that the GSEs can be a lever 
that elevates the quality of manufactured housing lending for 
personal property. I imagine that if a GSE did focus on buying 
these loans, it would serve as a lever to elevate the quality 
of lending.
    I think there are important conditions to set with that, 
including full disclosure under RESPA for closing costs, no 
balloon payments, and loans that do not bind people unable to 
get a refinance in the near future.
    Secondly, the manufactured housing industry needs to do a 
better job of serving people with disabilities. We know the 
population is graying. The point of purchase is not when you 
know if you will need a home with disability protections. As an 
example, you never know if you are going to need a seatbelt, 
but I believe that we are all glad that cars now come with 
seatbelts.
    We know the population is graying, and I think it is about 
finding a middle ground. And to that, I want to say that I 
voted against the sprinkler proposal. But hallway widths are an 
important topic.
    I have two letters that I have brought today from the 
Paralyzed Veterans of America and the American Association of 
People with Disabilities. Both of them specifically asked the 
Manufactured Housing Consensus Committee to establish a minimum 
hallway width of 36 inches in the HUD code.
    The actions to consider with regard to financing include 
that the GSEs should not just focus on real property, but also 
on personal property loans, and that we change the rules 
associated with the GSEs' MH Select program, which currently 
require PMIs for some homes with higher LTVs. For better or 
worse, there were less than 200 PMI contracts written for 
manufactured homes in 2010, compared to more than 10,000 just 
as recently as 2004. The products are not being offered.
    We need to create credit enhancement facilities for second 
position loans to help people acquire manufactured housing 
parks. And last, we need to engage and encourage State housing 
finance agencies to use their tax credit dollars to encourage 
manufactured housing lending.
    Straight to the third question, what role will the CFPB 
play for the manufactured housing industry under Dodd-Frank, I 
believe that Dodd-Frank will reward the good guys by 
eliminating the competitive threat posed by a race to the 
bottom among financing companies. CFPB's focus is on consumer 
protection. It is not the SAFE Act. It is different.
    And here is what is wrong with personal property lending. 
We know that it is hard to shop around for a better loan when 
the financing comes from a retailer that is selling the home. 
It is even harder when there is no requirement for closing 
costs. And then, ultimately, the homes come with features that 
may change the ultimate resale value of the home, including 
balloon payments or prepayment penalties.
    One in five borrowers ends up unable to make their 
payments. Some people are getting these loans that they 
couldn't qualify for a mortgage. It is bad for consumers, and 
it stands to reason that this will be bad for the future of the 
industry.
    In fact, the problems facing manufactured housing took 
place and developed before the idea of the CFPB was even 
imagined. The CFPB will not regulate manufacturers. It will 
supervise, enforce, and write rules only for nonbank financial 
institutions and only if they are considered larger 
participants.
    The CFPB is only about making sure that people get the best 
financed product that they deserve, and I think that enhancing 
the role of the GSEs is the first step to making that happen.
    Ultimately, and to conclude, as transactions become more 
transparent and as more finance products prove to be sound, 
results will be seen and the quality of manufactured housing 
communities and the experience that owners have and in the 
perception of the industry--I believe that the only way that 
the industry will go forward and return to health is to address 
this issue of financing.
    Thank you.
    [The prepared statement of Mr. Rust can be found on page 58 
of the appendix.]
    Mr. Hurt. Thank you, Mr. Rust.
    The next witness that we will hear from is Ms. Carla Burr. 
She is a manufactured housing resident, and she is from 
Chantilly, Virginia. And we will recognize you, Ms. Burr, for 5 
minutes.

     STATEMENT OF CARLA BURR, MANUFACTURED HOUSING RESIDENT

    Ms. Burr. Thank you.
    Good morning, Vice Chairman Hurt, and I thank you for the 
opportunity to testify.
    My name is Carla Burr, and I am a proud owner of a 
manufactured home in Chantilly, Virginia. But I am not just 
representing myself. I am representing 17 million families who 
live in these homes across this country.
    Owners of manufactured homes are frequently ignored by 
Federal housing policy. So I am very grateful that we have this 
attention paid to it today.
    We believe if you want to understand why manufactured home 
sales have dropped so dramatically, it is critical to ask the 
homeowners and buyers and residents among these communities: 
Would you recommend them to others? Would you recommend your 
child buy one?
    I would certainly recommend someone buy a manufactured 
home. My only mistake was putting it in a park, where I have no 
control. The issues regarding manufactured housing in a 
community such as ours is so grave that people are walking in 
and turning in their title to their home because they can't 
sell it. It is too old. They can't get a replacement.
    There are many people in our community who are suffering so 
badly that they can't even buy food. It is a toss-up between 
food and medical bills and lot rent.
    In my particular community, the lot rent is going to 
increase this next year to $919 a month. In most communities, 
we are finding the lot rent is higher than the mortgage, and 
this is unconscionable. In some communities, the lot rent is 
almost equal to the mortgage.
    We know one homeowner in my community, their lot rent is 
like $100 less than their mortgage. A $2,000 a month payment 
for a manufactured home in a community is just absurd.
    What we are facing right now is a constant threat by the--
not manufactured housing, but by the landlord of this property. 
We are really considering how we are going to try and get out 
of this community. We would like to buy it. We would love to 
buy the property.
    In fact, if I had the chance to buy the land my house sits 
on, I would do it in a heartbeat. But there are no provisions. 
We don't have any rights as far as homeowners. There is no 
right of first refusal for us.
    The landlord could basically sell the property out from 
under us, and we would never know until the sale happened. And 
then, we would be frantically trying to find someone to buy our 
home for less than what it is worth.
    Right now, we have been successful as a community in 
getting our property taxes lowered because the assessment 
values were way out of line. We felt that they were using this 
Wingate appraisal method to actually assess our homes, and we 
found it to be absurdly unrealistic. My house I could probably 
sell for less than half of what I paid for it, and I would be 
lucky to get that.
    Anyway, for the nearly 3 million homeowners like me on 
leased land, we are in a financially precarious position. We 
are not notified if the land owner decides to sell. Like I 
said, we don't have right of first refusal.
    There are practices of certain community owners that 
further erode the value of my investment if I want to sell. For 
example, landlords can refuse to sell to someone who wants to 
buy my home. They can limit how I market my house. They can 
steer potential buyers to other homes within the community, 
toward their product, which is happening in my community.
    In my community, it has gotten so bad that people are 
turning in their title, which I have said. We feel like 
prisoners in a feudal system.
    The other practice is where management is not equitably 
applying the rules across-the-board. They single out those of 
us who are taking action to effect change. They try and 
persuade other homeowners to not attend our meetings because we 
are really seeking to get the whole community involved.
    They single out those of us who are taking action, and they 
use tactics to scare the homeowners. ``We are not going to 
renew your lease.'' Whether they do it or not, we don't know. 
This is an unacceptable position to be in, in any community.
    And why is the manufactured housing community singled out? 
Because of nonexistent protection under the law. Although 
Virginia does have some vague laws about this type of 
retaliation, and even our rental agreement says the landlord 
cannot retaliate, they basically ignore those rules.
    I truly believe that manufactured housing can be a part of 
the solution to our need for affordable homes, and can create 
jobs, save energy, and provide attractive homes for people who 
want to buy them.
    There is much that Congress can do to improve the 
regulatory marketplace so buyers get the best possible loans, 
and ensure that Federal agencies use their resources to help 
homeowners buy a quality home that they can afford, and require 
protections for owners living in communities. Everyone--the 
people who build the homes, the people who sell the homes, the 
people who finance the homes, and the people who buy these 
homes--should work together to improve outcomes for buyers like 
me.
    I would love to provide an unqualified recommendation for 
manufactured housing. However, until we fix the financing issue 
to provide equal access benefits and ensure secure tenure, 
manufactured home sales will remain slack.
    Finally, as an owner of a manufactured home, I really look 
forward to the day when we have equal rights under the law as a 
homeowner. Whether it is stick-built or some other condominium, 
we are also petitioning our local representatives in Virginia 
to pursue some sort of rent control or restructuring so that 
land owners cannot raise the lot rent without impunity. And 
there needs to be some sort of ceiling.
    We know rent control is gone for the most part in this 
country, but for our purposes, there is no way we can stay. We 
have determined there is no affordable housing in Fairfax 
County. It doesn't exist. And an article in the Washington Post 
even confirmed that.
    So thank you for listening.
    [The prepared statement of Ms. Burr can be found on page 29 
of the appendix.]
    Mr. Hurt. Thank you, Ms. Burr, very much for your 
testimony.
    Not on the program is a gentleman from the Manufactured 
Housing Association for Regulatory Reform. His name is Mark 
Weiss. He is behind you, Ms. Burr. If we could get that 
microphone to him, I would like to ask unanimous consent to 
recognize him to make a brief statement for the record.
    He comes from Washington.

 STATEMENT OF MARK WEISS, SENIOR VICE PRESIDENT, MANUFACTURED 
       HOUSING ASSOCIATION FOR REGULATORY REFORM (MHARR)

    Mr. Weiss. Thank you, Mr. Chairman. I appreciate the 
opportunity to speak here today.
    Mr. Hurt. Yes, sir. Thank you.
    Mr. Weiss. My name is Mark Weiss, and I am senior vice 
president of the Manufactured Housing Association for 
Regulatory Reform.
    MHARR is a national trade association of mostly smaller 
producers of HUD-regulated manufactured housing. MHARR first 
requested an oversight hearing on the HUD Manufactured Housing 
Program and was promised such a hearing by Chairman Bachus 
earlier this year. MHARR specifically requested an oversight 
hearing on HUD's failure to fully and properly implement key 
reform provisions of the Manufactured Housing Improvement Act 
of 2000.
    We expressed our wish to present testimony showing the 
devastating impact of that failure on the industry and 
particularly the smaller independent manufacturers that MHARR 
represents, as well as American consumers of affordable 
housing, which would then provide the committee with a basis to 
seek answers from HUD officials on those issues.
    The smaller businesses represented by MHARR have major and 
specific grievances based on HUD's failure to fully and 
properly implement those key reforms of that law, reforms that 
were designed to ensure that manufactured homes are treated as 
housing rather than the trailers of yesteryear. Some of those 
reforms have been distorted, others have been ignored, and yet 
others have been effectively read out of the Act entirely by 
process of interpretation.
    We trust and hope that during the next session of the 112th 
Congress, a hearing on those specific implementation issues 
will be held where our small business members and their 
witnesses can appear and testify before the committee. In the 
interim, we would ask that my statement be included in the 
record, as well as a series of fact sheets specifically 
addressing those implementation issues that we have prepared 
and will submit to the committee.
    Mr. Hurt. Without objection, those documents will be 
admitted to the record. And thank you for your statement, Mr. 
Weiss.
    Mr. Weiss. Thank you, Mr. Chairman.
    Mr. Hurt. Now, we will commence with a period of 
questioning for the witnesses, and I will ask a few questions.
    First up, Ms. Burr, thank you for your testimony. One of 
the things that I was wondering about as you testified was 
whether or not there is a market for being able to sell your 
home in the, I don't know if you call it the secondhand market 
or used market?
    Ms. Burr. Yes.
    Mr. Hurt. Is there a market for that? And I would imagine 
living in Fairfax County, like you do, that it would be very 
difficult to find affordable housing in Fairfax County. We 
would, just for the record, invite you to move to Pittsylvania 
County.
    [laughter]
    Mr. Hurt. But with that said, is there a vibrant market at 
this time for used manufactured housing?
    Ms. Burr. Not from what we can see. The county has actually 
made it so difficult. They have changed the zoning on some of 
the land. You can't actually move it. If you buy a piece of 
land in Fairfax County, it is probably zoned in such a way that 
you can't put your home on it. So even if I could move it, 
there is nowhere to move it.
    And I have checked with communities like ours all the way 
into Maryland and West Virginia. They don't have lots big 
enough to put my house on. And if you want to buy a piece of 
property, the zoning doesn't allow you to move it there. So we 
are stuck.
    Mr. Hurt. Okay. Thank you.
    And Mr. Rust, I would like to ask you a question. If you 
would try to use the microphone for the court reporter, if you 
don't mind?
    Thank you for your testimony, Mr. Rust. I was wondering if 
you could just address--you talked a lot about the GSEs, and of 
course, that is something that has taken up a lot of our focus 
in Washington is dealing with Fannie Mae and Freddie Mac and 
how do we--taxpayers provided a $160 billion bailout for those 
two organizations. And I think that there is across-the-aisle 
support for trying to wind those down.
    The key, the key to the success for that, though, will be 
bringing the private sector into the secondary mortgage market. 
That is the only way it works if we don't want to make it worse 
for housing and make it worse for the real estate market.
    So I was wondering if you could speak to that. Obviously, 
it would be nice to see that secondary mortgage market evolve 
in the private sector, and I didn't know if you had any 
comments as it relates to that?
    Mr. Rust. It is true that there is hardly a market for 
those kind of homes on the private investor side. One issue 
that--
    Mr. Hurt. How do we correct that without--
    Mr. Rust. Okay. So I am worried about the loan level price 
adjustments, which are a series of costs that are imposed on 
the delivery of manufactured homes or any mortgage to the 
secondary market. And specifically, I am concerned about the 
additional costs that are passed on for borrowers even when 
they haven't demonstrated a poor credit record.
    There is an additional fee specifically designated for a 
manufactured home so that is raising cost that is passed on 
either in the interest rate or in the closing costs. And so, 
that is one thing I would encourage you to look at because I 
think it is a little bit under the radar, and it has been 
taking place since about 2009 and continues to evolve. But it 
is really hurting the secondary market and liquidity.
    Mr. Hurt. Okay. Thank you.
    Mr. Yates, I have a question for you. Thank you again for 
your testimony, and I appreciate the 35 years of experience 
that you bring to this.
    When you think about the regulatory structure, and I don't 
mean just as it relates specifically to manufactured housing 
and modular housing, but the regulatory structure generally, 
just as a small business, a family-owned business for 35 years, 
I would imagine that those regulatory burdens, whether it be 
taxes or whether it be environmental issues, can you talk a 
little bit about that burden just generally as a small 
business?
    And do you have any advice for us in terms of how we make 
it easier for you to succeed so that you are not--your 
testimony is very compelling when you talk about how your 
business has changed in the last 10 years.
    Mr. Yates. The regulatory environment is a moving target. 
It is constantly moving. I will give you one quick example. 
Basically, bringing the consumer back into it because that is 
what drives all of our businesses. It is not just myself; it is 
the consumer.
    In Pittsylvania County today, it costs $700, approximately 
$725 just to get a well and septic permit. Now that is before 
you do anything. That is just a permit on the property to say, 
I can put a home here, whether it is a manufactured home, a 
modular home, or a stick-built home.
    But from the consumer, the regulation that is coming down, 
the permit for this, the permit for that, and I understand the 
State needs its funding, local government needs its funding. 
But--
    Mr. Hurt. It all adds up, doesn't it?
    Mr. Yates. Absolutely. And it takes people who want to buy 
from our business, it takes them off of the buying arena 
because these fees keep adding up.
    I can remember when my closing files used to be this big. 
Now, they are this big.
    Mr. Hurt. Right.
    Mr. Yates. We had someone out of Richmond come in last week 
and check our company. We are visible. So we are constantly 
getting people in, making sure you have this license, you have 
that license. I am not saying license is a bad thing. I think 
it needs to be regulated.
    But again, as I said in my statement, when we get past, 
when we outsmart ourselves and we forget the commonsense 
approach to, number one, the consumer, and number two, to 
business, we are hurting from top to bottom all the way down.
    Mr. Hurt. Sure. Thank you.
    Mr. Rush, you talked a little bit about the appraisal 
standards and the changes that were brought by Dodd-Frank. And 
I was wondering if you could just talk a little bit about those 
appraisal standards and how those changes have and will affect 
the marketplace.
    Mr. Rush. The problem that has come into, and I think it is 
affecting the real estate market also is that the Federal 
guidelines are one thing, and then each lender has their own 
set of guidelines for how they are doing manufactured housing 
and how they are doing site-built housing.
    Right now, we have a situation where a modular home can be 
built to the statewide building code and the frame can be left 
under it. And if that is the case, then the Federal guidelines 
from FHA are that the appraiser has to appraise it like a 
manufactured house, a HUD code manufactured house, which means 
they can only use comps that are HUD code houses. That limits 
the comps, especially in the market today, where there are not 
that many being sold, and there are almost none being resold 
because of the appraisal process and the lack of financing.
    So they are condensing us down into a little, small pinhole 
that is not helping the industry, and it is drastically hurting 
the industry as far as appraisals. We need to be able to comp a 
mod to a mod if that is--or site-built because they are built 
to the same code, whether it has a frame under it or it doesn't 
have a frame under it. That is just one area where the 
appraisals are being affected.
    The other thing is that they are not supposed to be using 
foreclosures for comps, and the appraisers are. And it is 
hurting the prices because people are doing short sales. 
Lenders are doing short sales. We don't have any bigger problem 
with foreclosures than the site-built industry, but we all have 
them right now with the way the economy has been going for such 
a long period of time, with folks out of work.
    So there are foreclosures out there in both the site-built 
and the manufactured housing industry. These things are all, as 
I said in my testimony, a perfect storm of negative things that 
are affecting our industry.
    Mr. Hurt. Good deal. Thank you, Mr. Rush.
    Tyler, a question for you. From your viewpoint in Richmond, 
can you just talk a little bit about how the Federal--dealing 
with HUD and the Federal regulations, as well as the State 
regulations and the local regulations that Mr. Yates was 
talking about, can you talk about that dynamic? What are the 
regulations that are the hardest to deal with? Who can learn 
from whom maybe is another way to--
    Mr. Craddock. Certainly. A couple of issues specifically. 
One, of course, and we have mentioned it, is the SAFE Act. That 
is one of the poster children because in Virginia we have the 
State corporation commissions and the Bureau of Financial 
Institutions, which regulates--which is enforcing the SAFE Act 
in Virginia, for lack of a better term.
    What that has created in this dynamic is--and we have seen 
it in other States--that is why I am talking to my counterparts 
in other States--is this dynamic where we have State regulators 
who may be willing to work with us on some of the flexibility 
that our industry needs, but they feel that their hands are 
tied because of the guidance they are getting from HUD. And 
certainly as a lobbyist, you are not going to lobby the State 
government, saying you need to go against what HUD is telling 
you, go against the Federal Government. Don't mind the 
supremacy clause, etc.
    One of the other areas where we see that dynamic play out, 
though, and we didn't mention it as much here, is in the actual 
administration of the HUD code itself. The thing about this, 
you have, for lack of a better term, a Federal building code 
that is a Federal code that is administered in Virginia by the 
State. We have an SAA, a State administrative agency, which is 
the Virginia Department of Housing and Community Development, 
but then is enforced by local officials.
    So you have this building code that really is being acted 
upon at three different levels. And what that ends up at the 
end of the day, I have had retailers tell me you end up in a 
situation where local building official says ``X'' needs to--
putting a house on the site, ``X'' needs to be done.
    The retailer says, no, that is not what is in the HUD code. 
So you end up with this 2-day runaround trying to call Richmond 
and get an answer because Richmond is trying to enforce 
something on behalf of HUD. And so, it does create a confusing 
dynamic at times.
    Mr. Hurt. How do you fix that?
    Mr. Craddock. That is the million dollar question. Because 
when you are out there, when you are waiting on a certificate 
of occupancy for a home, do you really want to butt heads with 
the same inspector who is going to not only be inspecting this 
home, but the next one that you hopefully have closing in 2 
weeks and 2 or 3 weeks after that?
    A lot of the key for us, we have found, rather than some 
sort of punitive fix or slap on the wrist is just simply better 
education and communication. In a lot of instances, as far as 
administration of the HUD code on the local level and the 
building official level is simply working--and our SAA has been 
really good and diligent about this, but it is just moving that 
process forward. It is a process that is ongoing so we have to 
keep working at it.
    Mr. Hurt. Okay. Thank you very much, Mr. Craddock.
    Mr. Clayton, I would love it if you could--if you had 
anything to add to his question that I asked about the Federal, 
State, and local dynamic. And then I also wanted you to 
comment, if you could, it is my understanding that HUD intends 
to raise the label fee from $39 per label to $60 per label. And 
I wanted to find out if you had any thoughts on how that would 
affect the marketplace. So, if you could address both of those 
issues?
    Mr. Clayton. There is nothing specifically I would add to 
that. I think HUD is faced with doing what we have all had to 
do when our sales are running about 20 percent of where they 
once were. We have all had to make drastic cutbacks. So I think 
looking at what the real requirement budget need is versus only 
shipping 50,000 homes this year needs to be looked at 
carefully.
    Mr. Hurt. Okay. Do you have anything to add in terms of the 
Federal, local, and State--the regulatory dynamic?
    Mr. Clayton. I thought that was addressed very well 
already. What our industry desperately needs right now is 
legislation that will move forward, that will modify HOEPA loan 
limits. Otherwise, what little is left of the industry, half of 
that will be wiped out.
    Because when you take a home-only customer who is not 
financing land in and you are operating and the limits are 
basically 6.5 percent over an artificially low, where Treasury 
is helping buy down mortgage rates. So it is based off of that, 
that spread there. When our cost of funds are starting out--
because we have no secondary market, we have no GSE support or 
Treasury support. There has been no government help whatsoever.
    Our cost of funds starting out is double because we are 
going through normal commercial paper debt instruments. We 
start out at a double. And that just wasn't thought about and 
recognized in the creation of the Dodd-Frank.
    So it is very logical. Everybody that you mention this to, 
they see the need to change it. We have great Republican 
support. There needs to be some Democratic support urgently to 
move that forward and stop it.
    It is the last piece of the housing segment that needs to 
be hurt right now. Our best-selling model right now is below 
$50,000. That is where the economy is. That is all that most 
people can afford right now. And that is an underserved market.
    It is in rural America, where there are few apartments out 
in rural America, and there are certainly not affordable 
housing options.
    Mr. Hurt. Thank you very much.
    Mr. Clayton. Thank you.
    Mr. Hurt. Mr. Czauski, I wonder if you could just address 
the fee issue, raising the fee from $39 to $60 per label? And 
then conclude with anything else you might want to add.
    Mr. Czauski. There has been discussion about raising the 
fee, as you are aware, to $60. And it is currently under review 
within the Department. Going from a fee of $39 to $60 is 
somewhat of an increase, especially at a time when the industry 
has been depressed and the number of homes being built has gone 
down.
    The Manufactured Housing Program is unique, and I have been 
with HUD for 32 years, 30 of which were in the Office of the 
General Counsel. So I have worked with many programs. This is 
the only one with a Federal advisory committee, consensus 
committee. And any regulations that are implemented go through 
that consensus committee.
    That consensus committee is composed of manufacturers and 
retailers, consumers, as well as State regulators. So all the 
parties involved at this table and in this room are represented 
on that consensus committee. And that committee makes a 
recommendation to the Department, and that will also occur with 
regard to the fee issue.
    The Department is interested in getting feedback with 
regard to the impact of any fees on the industry, on the 
consumers, and how that will affect the industry. So I think it 
is an opportunity for everybody to provide feedback, and it is 
a second bite of the apple because even after those 
recommendations are provided, and there is a regulation that 
would increase the fee, there is the opportunity for public 
comment.
    And that is something the Department is interested in 
hearing. It is very interested in making sure that the industry 
is stable and yet protecting the consumers.
    Mr. Hurt. I thank you for that, and I trust that you all 
will take that seriously because I think, as Mr. Yates was 
pointing out, it is just a little fee, a little fee, a little 
bit here, a little bit there, and the next thing you know, you 
are talking about something that is a barrier to being able to 
do what the consumer wants to do. And I think that is something 
all of us at every level of government have to be really keenly 
aware of.
    So thank you for your answer.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 30 days for Members to submit written questions to these 
witnesses and to place their responses in the record.
    I also understand that Congressman Fincher has a statement 
that he would like to have entered into the record. And so, I 
would ask unanimous consent for that. Without objection, that 
is so ordered.
    I would also like to recognize--I think Larry Campbell is 
here, from the city council. Thank you, sir, for being here.
    I wanted to again thank the city for making this available. 
Many thanks to Mayor Saunders and all of the staff who put this 
together.
    I also thank the Sheriff's Office, and all of our staff 
here who worked so hard to put this together.
    Finally, let me thank everybody in the audience who 
attended today. I am very grateful to you all for your interest 
in this subject and, of course, thanks to each of the witnesses 
for traveling here today to be with us. I think this hearing 
was very helpful to us, and I know that it will be very useful 
as we go back to Washington and consider these important 
subjects.
    And so, with that, this hearing is now adjourned.
    Thank you.
    [Whereupon, at 10:21 a.m., the hearing was adjourned.]


                            A P P E N D I X



                           November 29, 2011


[GRAPHIC] [TIFF OMITTED] T2627.001

[GRAPHIC] [TIFF OMITTED] T2627.002

[GRAPHIC] [TIFF OMITTED] T2627.003

[GRAPHIC] [TIFF OMITTED] T2627.004

[GRAPHIC] [TIFF OMITTED] T2627.005

[GRAPHIC] [TIFF OMITTED] T2627.006

[GRAPHIC] [TIFF OMITTED] T2627.007

[GRAPHIC] [TIFF OMITTED] T2627.008

[GRAPHIC] [TIFF OMITTED] T2627.009

[GRAPHIC] [TIFF OMITTED] T2627.010

[GRAPHIC] [TIFF OMITTED] T2627.011

[GRAPHIC] [TIFF OMITTED] T2627.012

[GRAPHIC] [TIFF OMITTED] T2627.013

[GRAPHIC] [TIFF OMITTED] T2627.014

[GRAPHIC] [TIFF OMITTED] T2627.015

[GRAPHIC] [TIFF OMITTED] T2627.016

[GRAPHIC] [TIFF OMITTED] T2627.017

[GRAPHIC] [TIFF OMITTED] T2627.018

[GRAPHIC] [TIFF OMITTED] T2627.019

[GRAPHIC] [TIFF OMITTED] T2627.020

[GRAPHIC] [TIFF OMITTED] T2627.021

[GRAPHIC] [TIFF OMITTED] T2627.022

[GRAPHIC] [TIFF OMITTED] T2627.023

[GRAPHIC] [TIFF OMITTED] T2627.024

[GRAPHIC] [TIFF OMITTED] T2627.025

[GRAPHIC] [TIFF OMITTED] T2627.026

[GRAPHIC] [TIFF OMITTED] T2627.027

[GRAPHIC] [TIFF OMITTED] T2627.028

[GRAPHIC] [TIFF OMITTED] T2627.029

[GRAPHIC] [TIFF OMITTED] T2627.030

[GRAPHIC] [TIFF OMITTED] T2627.031

[GRAPHIC] [TIFF OMITTED] T2627.032

[GRAPHIC] [TIFF OMITTED] T2627.033

[GRAPHIC] [TIFF OMITTED] T2627.034

[GRAPHIC] [TIFF OMITTED] T2627.035

[GRAPHIC] [TIFF OMITTED] T2627.036

[GRAPHIC] [TIFF OMITTED] T2627.037

[GRAPHIC] [TIFF OMITTED] T2627.038

[GRAPHIC] [TIFF OMITTED] T2627.039

[GRAPHIC] [TIFF OMITTED] T2627.040

[GRAPHIC] [TIFF OMITTED] T2627.041

[GRAPHIC] [TIFF OMITTED] T2627.042

