[Congressional Record Volume 161, Number 53 (Tuesday, April 14, 2015)]
[House]
[Pages H2178-H2188]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1500
PRESERVING ACCESS TO MANUFACTURED HOUSING ACT OF 2015
Mr. FINCHER. Mr. Speaker, pursuant to House Resolution 189, I call up
the bill (H.R. 650) to amend the Truth in Lending Act to modify the
definitions of a mortgage originator and a high-cost mortgage, and ask
for its immediate consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 189, the bill
is considered read.
The text of the bill is as follows:
H.R. 650
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Preserving Access to
Manufactured Housing Act of 2015''.
SEC. 2. MORTGAGE ORIGINATOR DEFINITION.
Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is
amended--
(1) by redesignating the second subsection (cc) and
subsection (dd) as subsections (dd) and (ee), respectively;
and
(2) in paragraph (2)(C) of subsection (dd), as so
redesignated, by striking ``an employee of a retailer of
manufactured homes who is not described in clause (i) or
(iii) of subparagraph (A) and who does not advise a consumer
on loan terms (including rates, fees, and other costs)'' and
inserting ``a retailer of manufactured or modular homes or
its employees unless such retailer or its employees receive
compensation or gain for engaging in activities described in
subparagraph (A) that is in excess of any compensation or
gain received in a comparable cash transaction''.
SEC. 3. HIGH-COST MORTGAGE DEFINITION.
Section 103 of the Truth in Lending Act (15 U.S.C. 1602) is
amended--
(1) by redesignating subsection (aa) (relating to
disclosure of greater amount or percentage), as so designated
by section 1100A of the Consumer Financial Protection Act of
2010, as subsection (bb);
(2) by redesignating subsection (bb) (relating to high cost
mortgages), as so designated by section 1100A of the Consumer
Financial Protection Act of 2010, as subsection (aa), and
moving such subsection to immediately follow subsection (z);
and
(3) in subsection (aa)(1)(A), as so redesignated--
(A) in clause (i)(I), by striking ``(8.5 percentage points,
if the dwelling is personal property and the transaction is
for less than $50,000)'' and inserting ``(10 percentage
points if the dwelling is personal property or is a
transaction that does not include the purchase of real
property on which a dwelling is to be placed, and the
transaction is for less than $75,000 (as such amount is
adjusted by the Bureau to reflect the change in the Consumer
Price Index))''; and
(B) in clause (ii)--
(i) in subclause (I), by striking ``or'' at the end; and
(ii) by adding at the end the following:
``(III) in the case of a transaction for less than $75,000
(as such amount is adjusted by the Bureau to reflect the
change in the Consumer Price Index) in which the dwelling is
personal property (or is a consumer credit transaction that
does not include the purchase of real property on which a
dwelling is to be placed) the greater of 5 percent of the
total transaction amount or $3,000 (as such amount is
adjusted by the Bureau to reflect the change in the Consumer
Price Index); or''.
The SPEAKER pro tempore. The gentleman from Tennessee (Mr. Fincher)
and the gentlewoman from California (Ms. Waters) each will control 30
minutes.
The Chair recognizes the gentleman from Tennessee (Mr. Fincher).
General Leave
Mr. FINCHER. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days in which to revise and extend their remarks and
submit extraneous materials on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Tennessee?
There was no objection.
Mr. FINCHER. Mr. Speaker, I yield myself as much time as I may
consume.
Mr. Speaker, before I start, I want to thank Chairman Hensarling and
the leadership that he has shown in his ability to work with us and
allow us to do these commonsense pieces of legislation that help our
districts all over this country, especially my home State of Tennessee
and the Eighth Congressional District. So I just want to definitely
make sure I thank him for his leadership and support.
Mr. Speaker, I am pleased to be the sponsor of H.R. 650, the
Preserving Access to Manufactured Housing Act. Access to affordable
housing is of vital importance to families in my district and all
across the United States. Unfortunately, due to CFPB mortgage
regulations that do not reflect the unique nature of the manufactured
home sales process, access to financing for manufactured homes is in
serious jeopardy.
Manufactured housing serves as a critical option for those who cannot
otherwise afford to buy a home. Homes are commonly available at lower
monthly payments than what it costs to rent. And the average price of a
manufactured home is less than $43,000, compared to an average price of
$177,000 for a site-built home. Almost three-quarters of families
living in manufactured homes have annual incomes under $40,000.
But this important source of homeownership for American families is
being threatened by current high-cost mortgage rules that are too
inflexible and often lead to the denial of financing for certain homes,
particularly those that are lower priced, more affordable options.
Since the CFPB's Home Ownership and Equity Protection Act ``high
cost'' rules consider cost as a percentage of a loan, smaller size
loans, like manufactured home loans, often violate points and fee caps.
Manufactured home loans are typically associated with fixed interest
rates, full amortization, shorter loan terms, and the absence of
alternative features, such as balloon payments, negative amortization,
no down payment loans, et cetera, to allow them to satisfy conservative
and prudent underwriting standards, and H.R. 650 won't change this.
Because of the resulting ``high-cost'' designation and increased
lender liability associated with it, some lenders have stopped making
manufactured housing loans altogether, and others have stopped
originating loans under $20,000. Many community owners have said that
their tenants are being forced to sell their homes well below market
value to cash buyers because potential buyers can't find financing.
These below-market sales don't just hurt sellers; they hurt every
homeowner in the community who feels a huge loss on the equity of their
home.
Additionally, since the CFPB's rule on the loan originator definition
has gone into effect, retailers have been forced to stop providing
technical assistance to consumers during the process of home buying.
This bill modifies the definition of high-cost loans so that
manufactured housing loans are not unfairly swept under the high-cost
loan designation simply due to their size.
Mr. Speaker, this bill would help ensure the availability of
financing options for manufactured homes while preserving the necessary
consumer protections in the Dodd-Frank Act and the SAFE Act. Let me say
that one more time. This bill would help ensure the availability of
financing options for manufactured homes while preserving the necessary
consumer protections in the Dodd-Frank Act and the SAFE Act.
H.R. 650 not only preserves Dodd-Frank's core consumer protections,
but it helps consumers by restoring access to financing. Such financing
enables working families and retirees to obtain housing that is much
cheaper than renting or conventional home mortgage options.
CFPB, HUD, and State oversight of manufactured lending will continue.
Consumers will continue to have the wide range of mortgage protections
established by Dodd-Frank, including the QM ``ability to repay''
requirement, the prohibition on steering incentives, the prohibition
against steering a consumer to a loan that has predatory
characteristics, the prohibition on mandatory arbitration, loan term
disclosure requirements, and the other State and Federal laws.
This bill is about ensuring access to affordable housing, especially
in rural America, where rental properties are not as abundant as in
urban areas. This bill enjoys broad bipartisan support by groups
including the National Association of Realtors, the Mortgage Bankers
Association, the Manufactured Housing Institute, the National
Organization of African Americans in Housing, the National Association
of Federal Credit
[[Page H2179]]
Unions, the National Association of Mortgage Professionals, the
California Association of Mortgage Professionals, and numerous
manufactured housing State associations.
This bill, Mr. Speaker, is a compromise from last year's bipartisan
bill. In an effort to gain even more support on both sides of the
aisle, we introduced a bipartisan compromise again this Congress. This
is not a Democrat or a Republican issue. It is an affordability of
housing issue for rural America. We cannot forget about rural America,
Mr. Speaker. These are my constituents and the constituents of many
folks here who serve in this body.
So, Mr. Speaker, I urge my colleagues today to support this. With
that, I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Mr. Speaker, I rise today in opposition to H.R. 650, which would
undermine the Dodd-Frank Wall Street Reform Act and eliminate consumer
protections for some of the country's most vulnerable borrowers.
Mr. Speaker, the talking points describe this bill as one that
preserves access to manufactured housing. But the reality is that we
have learned this bill is a solution to a problem that does not exist.
We agreed that this issue needed additional study last year, and
reports we have received from the Consumer Financial Protection Bureau,
the manufactured housing industry, and the Center for Public Integrity
have all shown us that this measure would not create access to
affordable housing but would instead allow an incredibly profitable
industry to make even more money by charging exorbitant interest rates
and fees to low-income borrowers.
The industry itself asserts that it has been growing and is highly
profitable even with the Dodd-Frank mortgage protections in place. In
fact, according to its trade association, the manufactured housing
industry recorded shipment increases in every month of 2014. The
Manufactured Housing Association for Regulatory Reform found that 2014
marked a ``fifth consecutive year of annual industry production
increases.''
Even one of the world's investors, Berkshire Hathaway Chairman Warren
Buffet, has been touting the post-Dodd-Frank profitability of
manufactured housing. In a letter to his shareholders, he pointed out
that Clayton Homes, Berkshire's highly profitable manufacturing housing
subsidiary, earned a total of $558 million in 2014--an increase of 34
percent over 2013. Yes, that is a 34 percent increase, even after the
Dodd-Frank rules were in place.
Unfortunately, Mr. Speaker, this is the same Clayton Homes that was
the subject of a recent Seattle Times-Center for Public Integrity joint
investigation that found this manufactured housing empire profits in
every imaginable way--from producing the housing, to selling the
housing, to originating loans that take advantage of vulnerable
consumers and leave them virtually no way to refinance.
So, Mr. Speaker, I insert this article into the Record. This, again,
is a scathing article that was produced by The Seattle Times.
[From the Seattle Times and The Center for Public Integrity, April 7,
2015]
The Mobile-Home Trap: How a Warren Buffett Empire Preys on the Poor
EPHRATA, Grant County.--After years of living in a 1963
travel trailer, Kirk and Patricia Ackley found a permanent
house with enough space to host grandkids and care for her
aging father suffering from dementia. So, as the pilot cars
prepared to guide the factory-built home up from Oregon in
May 2006, the Ackleys were elated to finalize paperwork
waiting for them at their loan broker's kitchen table.
But the closing documents he set before them held a
surprise: The promised 7 percent interest rate was now 12.5
percent, with monthly payments of $1,100, up from $700.
The terms were too extreme for the Ackleys. But they'd
already spent $11,000, at the dealer's urging, for a concrete
foundation to accommodate this specific home. They could look
for other financing but desperately needed a space to care
for her father.
Kirk's construction job and Patricia's Wal-Mart job
together weren't enough to afford the new monthly payment.
But, they said, the broker was willing to inflate their
income in order to qualify them for the loan. ``You just need
to remember,'' they recalled him saying, ``you can refinance
as soon as you can.''
To their regret, the Ackleys signed.
The disastrous deal ruined their finances and nearly their
marriage. But until informed recently by a reporter, they
didn't realize that the homebuilder (Golden West), the dealer
(Oakwood Homes) and the lender (21st Mortgage) were all part
of a single company: Clayton Homes, the nation's biggest
homebuilder, which is controlled by its second-richest man--
Warren Buffett.
Buffett's mobile-home empire promises low-income Americans
the dream of homeownership. But Clayton relies on predatory
sales practices, exorbitant fees, and interest rates that can
exceed 15 percent, trapping many buyers in loans they can't
afford and in homes that are almost impossible to sell or
refinance, an investigation by The Seattle Times and Center
for Public Integrity has found.
Berkshire Hathaway, the investment conglomerate Buffett
leads, bought Clayton in 2003 and spent billions building it
into the mobile-home industry's biggest manufacturer and
lender. Today, Clayton is a many headed hydra with companies
operating under at least 18 names, constructing nearly half
of the industry's new homes and selling them through its own
retailers. It finances more mobile-home purchases than any
other lender by a factor of six. It also sells property
insurance on them and repossesses them when borrowers fail to
pay.
Berkshire extracts value at every stage of the process.
Clayton even builds the homes with materials--such as paint
and carpeting--supplied by other Berkshire subsidiaries.
More than a dozen Clayton customers described a consistent
array of deceptive practices that locked them into ruinous
deals: loan terms that changed abruptly after they paid
deposits or prepared land for their new homes; surprise fees
tacked on to loans; and pressure to take on excessive
payments based on false promises that they could later
refinance.
Former dealers said the company encouraged them to steer
buyers to finance with Clayton's own high-interest lenders.
Under federal guidelines, most Clayton mobile-home loans
are considered ``higher-priced.'' Those loans averaged 7
percentage points higher than the typical home loan in 2013,
according to a Times/CPI analysis of federal data, compared
to just 3.8 percentage points for other lenders.
Buyers told of Clayton collection agents urging them to cut
back on food and medical care or seek handouts in order to
make house payments. And when homes got hauled off to be
resold, some consumers already had paid so much in fees and
interest that the company still came out ahead. Even through
the Great Recession and housing crisis, Clayton was
profitable every year, generating $558 million in pre-tax
earnings in 2014.
The company's tactics contrast with Buffett's public
profile as a financial sage who values responsible lending
and helping poor Americans keep their homes.
Berkshire Hathaway spokeswoman Carrie Soya and Clayton
spokeswoman Audrey Saunders ignored more than a dozen
requests by phone, email and in person to discuss Clayton's
policies and treatment of consumers. In an emailed statement,
Saunders said Clayton helps customers find homes within their
budgets and has a ``purpose of opening doors to a better
life, one home at a time.''
First, a dream
As Buffett tells it, his purchase of Clayton Homes came
from an ``unlikely source'': Visiting students from the
University of Tennessee gave him a copy of founder Jim
Clayton's self-published memoir, ``First a Dream,'' in early
2003. Buffett enjoyed reading the book and admired Tim
Clayton's record, he has said, and soon called CEO Kevin
Clayton, offering to buy the company.
``A few phone calls later, we had a deal,'' Buffett said at
his 2003 shareholders meeting, according to notes taken at
the meeting by hedge-fund manager Whitney Tilson.
The tale of serendipitous dealmaking paints Buffett and the
Claytons as sharing down-to-earth values, antipathy for Wall
Street and an old-fashioned belief in treating people fairly.
But, in fact, the man who brought the students to Omaha said
Clayton's book wasn't the genesis of the deal.
``The Claytons really initiated this contact,'' said Al
Auxier, the Tennessee professor, since retired, who
chaperoned the student trip after fostering a relationship
with the billionaire.
CEO Kevin Clayton, the founder's son, reached out to
Buffett through Auxier, the professor said in a recent
interview, and asked whether Buffett might explore ``a
business relationship'' with Clayton Homes.
At the time, mobile-home loans had been defaulting at
alarming rates, and investors had grown wary of them. Kevin
Clayton was seeking a new source of cash to relend to
homebuyers. He knew that Berkshire Hathaway, with its perfect
bond rating, could provide it as cheaply as anyone. Later
that year, Berkshire Hathaway paid $1.7 billion in cash to
buy Clayton Homes.
Clayton provided more than half of new mobile-home loans in
eight states. In Texas, the number exceeds 70 percent.
Clayton has more than 90 percent of the market in Odessa, one
of the most expensive places in the country to finance a
mobile home.
To maintain its down-to-earth image, Clayton has hired the
stars of the reality-TV show ``Duck Dynasty'' to appear in
ads.
The company's headquarters is a hulking structure of metal
sheeting surrounded by
[[Page H2180]]
acres of parking lots and a beach volleyball court for
employees, located a few miles south of Knoxville, Tenn. Next
to the front door, there is a slot for borrowers to deposit
payments.
Near the headquarters, two Clayton sales lots sit three
miles from each other. Clayton Homes' banners promise ``$0
CASH DOWN.'' TruValue Homes, also owned by Clayton,
advertises ``REPOS FOR SALE.'' Other nearby Clayton lots
operate as Luv Homes and Oakwood Homes. With all the
different names, many customers believe that they're shopping
around.
House-sized banners at dealerships reinforce that
impression, proclaiming they will ``BEAT ANY DEAL.'' In some
parts of the country, buyers would have to drive many miles
past several Clayton-owned lots, to reach a true competitor.
Guided into costly loans
Soon after Buffett bought Clayton Homes, he declared a new
dawn for the moribund mobile-home industry, which provides
housing for some 20 million Americans. Lenders should require
``significant down payments and shorter-term loans,'' Buffett
wrote.
He called 30-year loans on mobile homes ``a mistake,''
according to notes Tilson took during Berkshire Hathaway's
2003 shareholders meeting.
``Home purchases should involve an honest-to-God down
payment of at least 10% and monthly payments that can be
comfortably handled by the borrower's income,'' Buffett later
wrote. ``That income should be carefully verified.''
But in examining more than 100 Clayton home sales through
interviews and reviews of loan documents from 41 states,
reporters found that the company's loans routinely violated
the lending standards laid out by Buffett.
Clayton dealers often sold homes with no cash down payment.
Numerous borrowers said they were persuaded to take on
outsized payments by dealers promising that they could later
refinance. And the average loan term actually increased from
21 years in 2007 to more than 23 years in 2009, the last time
Berkshire disclosed that detail.
Clayton's loan to Dorothy Mansfield, a disabled Army
veteran who lost her previous North Carolina home to a
tornado in 2011, includes key features that Buffett
condemned.
Mansfield had a lousy credit score of 474, court records
show. Although she had seasonal and part-time jobs, her
monthly income often consisted of less than $700 in
disability benefits. She had no money for a down payment when
she visited Clayton Homes in Fayetteville, N.C.
Vanderbilt, one of Clayton's lenders, approved her for a
$60,000, 20-year loan to buy a Clayton home at 10.13 percent
annual interest. She secured the loan with two parcels of
land that her family already owned free and clear.
The dealer didn't request any documents to verify
Mansfield's income or employment, records show. Mansfield's
monthly payment of $673 consumed almost all of her
guaranteed income. Within 18 months, she was behind on
payments and Clayton was trying to foreclose on the home
and land.
Many borrowers interviewed for this investigation described
being steered by Clayton dealers into Clayton financing
without realizing the companies were one and the same.
Sometimes, buyers said, the dealer described the financing as
the best deal available. Other times, the Clayton dealer said
it was the only financing option.
Kevin Carroll, former owner of a Clayton-affiliated
dealership in Indiana, said in an interview that he used
business loans from a Clayton lender to finance inventory for
his lot. If he also guided homebuyers to work with the same
lender, 21st Mortgage, the company would give him a discount
on his business loans--a ``kickback,'' in his words.
Doug Farley, who was a general manager at several Clayton-
owned dealerships, also used the term ``kickback'' to
describe the profit-share he received on Clayton loans until
around 2008. After that, the company changed its incentives
to instead provide ``kickbacks'' on sales of Clayton's
insurance to borrowers, he said.
Ed Atherton, a former lot manager in Arkansas, said his
regional supervisor was pressuring lot managers to put at
least 80 percent of buyers into Clayton financing. Atherton
left the company in 2013.
During the most recent four-year period, 93 percent of
Clayton's mobile-home loans had such costly terms that they
required extra disclosure under federal rules. Among all
other mobile-home lenders, fewer than half of their loans met
that threshold.
Customers said in interviews that dealers misled them to
take on unaffordable loans, with tactics including last-
minute changes to loan terms and unexplained fees that
inflate loan balances. Such loans are, by definition,
predatory.
``They're going to assume the client is unsophisticated,
and they're right,'' said Felix Harris, a housing counselor
with the nonprofit Knoxville Area Urban League.
Some borrowers felt trapped because they put up a deposit
before the dealer explained the loan terms or, like the
Ackleys, felt compelled to swallow bait-and-switch deals
because they had spent thousands to prepare their land.
Promise denied
A couple of years after moving into their new mobile home,
Kirk Ackley was injured in a backhoe rollover. Unable to
work, he and his wife urgently needed to refinance the costly
21st Mortgage loan they regretted signing.
They pleaded with the lender several times for the better
terms that they originally were promised, but were denied,
they said. The Ackleys tried to explain the options to a 21st
supervisor: If they refinanced to lower payments, they could
stay in the home and 21st would get years of steady returns.
Otherwise, the company would have to come out to their rural
property, pull the house from its foundation and haul it
away, possibly damaging it during the repossession.
They both recall being baffled by his reply: ``We don't
care. We'll come take a chainsaw to it--cut it up and haul it
out in boxes.''
Nine Clayton consumers interviewed for this story said they
were promised a chance to refinance. In reality, Clayton
almost never refinances loans and accounts for well under 1
percent of mobile-home refinancings reported in government
data from 2010 to 2013. It made more than one-third of the
purchase loans during that period.
Of Washington's 25 largest mobile-home lenders, Clayton's
subsidiaries ranked No. 1 and No. 2 for the highest interest
rates in 2013. Together, they ranked eighth in loans
originated.
``If you have a decrease in income and can't afford the
mortgage, at least a lot of the big companies will do
modifications,'' said Harris, the Knoxville housing
counselor. ``Vanderbilt won't even entertain that.'' In
general, owners have difficulty refinancing or selling their
mobile homes because few lenders offer such loans. One big
reason: Homes are overpriced or depreciate so quickly that
they generally are worth less than what the borrower owes,
even after years of monthly payments.
Ellie Carosa, of Napavine, Lewis County, found this out the
hard way in 2010 after she put down some $40,000 from an
inheritance to buy a used home from Clayton priced at about
$65,000.
Clayton sales reps steered Carosa, who is 67 years old and
disabled, to finance the unpaid amount through Vanderbilt at
9 percent interest over 20 years.
One year later, Carosa was already having problems--peeling
paint and failing carpets--so she decided to have a market
expert assess the value of her home. She hoped to eventually
sell the house so the money could help her granddaughter,
whom she adopted as her daughter at age 8, attend a local
college to study music. Carosa was stunned to learn that the
home was worth only $35,000, far less than her original
down payment. ``I've lost everything,'' Carosa said.
`Rudest, most condescending' agents
Berkshire's borrowers who fall behind on their payments
face harassing, potentially illegal phone calls from a
company rarely willing to offer relief.
Carol Carroll, a nurse living near Bug Tussle, Ala., began
looking for a new home in 2003 after her husband had died,
leaving her with a 6-year-old daughter. Instead of a down
payment, she said, the salesman assured her she could simply
put up two acres of her family land as collateral.
In December 2005, Carroll was permanently disabled in a
catastrophic car accident in which two people were killed.
Knowing it would take a few months for her disability
benefits to be approved, Carroll said, she called Vanderbilt
and asked for a temporary reprieve. The company's answer:
``We don't do that.''
However, Clayton ratcheted up her property-insurance
premiums, eventually costing her $803 more per year than when
she started, she said. Carroll was one of several Clayton
borrowers who felt trapped in the company's insurance, often
because they were told they had no other options. Some had as
many as five years' worth of expensive premiums included in
their loans, inflating the total balance to be repaid with
interest. Others said they were misled into signing up even
though they already had other insurance. Carroll has since
sold belongings, borrowed money from relatives and cut back
on groceries to make payments. When she was late, she spoke
frequently to Clayton's phone agents, whom she described as
``the rudest, most condescending people I have ever dealt
with.'' It's a characterization echoed by almost every
borrower interviewed for this story.
Consumers say the company's response to pleas for help is
an invasive interrogation about their family budgets,
including how much they spend on food, toiletries and
utilities.
Denise Pitts, of Knoxville, Tenn., said Vanderbilt
collectors have called her multiple times a day, with one
suggesting that she cancel her Internet service, even though
she home-schools her son. They have called her relatives and
neighbors, a tactic other borrowers reported.
After Pitts' husband, Kirk, was diagnosed with aggressive
cancer, she said, a Vanderbilt agent told her she should make
the house payment her ``first priority'' and let medical
bills go unpaid. She said the company has threatened to seize
her property immediately even though the legal process to do
so would take at least several months.
Practices like contacting neighbors, calling repeatedly and
making false threats can violate consumer-protection laws in
Washington, Tennessee and other states.
Last year, frequent complaints about Clayton's aggressive
collection practices led Tennessee state officials to contact
local housing counselors seeking information about
[[Page H2181]]
their experiences with the company, according to two people
with knowledge of the conversations.
Treated like car owners
Mobile-home buyers who own their land sites may be able to
finance their home purchases with real-estate mortgages,
which give them more federal and state consumer protections
than the other major financing option, a personal-property
loan. With conventional home mortgages, companies must wait
120 days before starting foreclosure. In some states, the
foreclosure process can take more than a year, giving
consumers a chance to save their homes.
Despite these protections, two-thirds of mobile-home buyers
who own their land end up in personal-property loans,
according to a federal study. These loans may close more
quickly and have fewer upfront costs, but their rates are
generally much higher. And if borrowers fall behind on
payments, their homes can be seized with little or no
wanting.
Those buyers are more vulnerable because they end up being
treated like car owners instead of homeowners, said Bruce
Neas, an attorney who has worked for years on foreclosure and
manufactured-housing issues in Washington state.
Tiffany Galler was a single mother living in Crestview,
Fla., in 2005 when she bought a mobile home for $37,195 with
a loan from 21st Mortgage. She later rented out the home.
After making payments over eight years totaling more than
the sticker price of the home, Galler lost her tenant in
November 2013 and fell behind on her payments. She arranged
to show the home to a prospective renter two months later.
But when she arrived at her homesite, Galler found barren
dirt with PVC pipe sticking up from the ground.
She called 911, thinking someone had stolen her home.
Hours later, Galler tracked her repossessed house to a
sales lot 30 miles away that was affiliated with 21st. It was
listed for $25,900.
Clayton wins concessions
The government has known for years about concerns that
mobile-home buyers are treated unfairly. Little has been
done.
Fifteen years ago, Congress directed the Department of
Housing and Urban Development to examine issues such as loan
terms and regulations in order to find ways to make mobile
homes affordable. That's still on HUD's to-do list.
The industry, however, has protected its interests
vigorously. Clayton Homes is represented in Washington, DC,
by the Manufactured Housing Institute (MHI), a trade group
that has a Clayton executive as its vice chairman and another
as its secretary. CEO Kevin Clayton has represented MHI
before Congress.
MHI spent $4.5 million since 2003 lobbying the federal
government. Those efforts have helped the company escape much
scrutiny, as has Buffett's persona as a man of the people,
analysts say.
``There is a Teflon aspect to Warren Buffett,'' said James
McRitchie, who runs a widely read blog, Corporate Governance.
Still, after the housing crisis, lawmakers tightened
protections for mortgage borrowers with a sweeping overhaul
known as the Dodd-Frank Act, creating regulatory headaches
for the mobile-home industry. Kevin Clayton complained to
lawmakers in 2011 that the new rules would lump in some of
his company's loans with ``subprime, predatory'' mortgages,
making it harder for mobile-home buyers ``to obtain
affordable financing.''
Although the rules had yet to take effect that year, 99
percent of Clayton's mobile-home loans were so expensive that
they met the federal government's ``higher-priced''
threshold.
Dodd-Frank also tasked federal financial regulators with
creating appraisal requirements for risky loans. Appraisals
are common for conventional home sales, protecting both the
lender and the consumer from a bad deal.
Clayton's own data suggest that its mobile homes may be
overpriced from the start, according to comments it filed
with federal regulators. When Vanderbilt was required to
obtain appraisals before finalizing a loan, company officials
wrote, the home was determined to be worth less than the
sales price about 30 percent of the time.
But when federal agencies jointly proposed appraisal rules
in September 2012, industry objections led them to exempt
loans secured solely by a manufactured home.
Then Clayton pushed for more concessions, arguing that
manufactured-home loans tied to land should also be exempt.
Paul Nichols, then-president of Clayton's Vanderbilt
Mortgage, told regulators that the appraisal requirement
would be costly and onerous, significantly reducing ``the
availability of affordable housing in the United States.''
In 2013, regulators conceded. They will not require a
complete appraisal for new manufactured homes.
Ms. MAXINE WATERS of California. The investigation found that Clayton
locked one disabled veteran in Tennessee, Dorothy Mansfield, into an
expensive loan even though the required monthly payment would leave her
only $27 to cover the rest of her living costs. Other borrowers were
quoted inexpensive loan terms only to see interest and fees skyrocket
once they had put down a nonrefundable deposit--or paid out large
amounts of money to prepare their land for installation of the home.
Just like subprime borrowers in the financial crisis, many looking to
purchase manufactured housing were convinced to take out high-cost
loans because they were sold false promises that they would be able to
refinance to lower rates in the future.
Former Clayton salespeople have blown the whistle. They are coming
forward, and they are talking. They have attested that they have
pressured consumers to use Clayton-affiliated financing even if it
wasn't the best deal, and some even received kickbacks for putting
customers into more expensive loans.
If enacted, H.R. 650 would allow abusive lenders to charge up to
nearly 14 percent interest before consumer protections are triggered,
more than four times what the average borrower is paying on a home
loan. There is not one Member of Congress who would pay or is paying 14
percent interest, 12, 13, 11 percent interest. This is outrageous.
In the coming years, this number could very well grow to 16 percent,
17 percent, and likely 18 percent as interest rates rise back to
normal. Even worse, the bill would also make it legal for Clayton sales
personnel to steer borrowers toward high-cost loans--loans from other
parts of the Clayton conglomerate--that are not in their interest--a
practice we banned for all loan originators after the financial crisis.
Mr. Speaker, when it comes to manufactured housing, consumers are
already exposed to significant risk: high interest rates, the inability
to refinance, and in many cases, depreciation that starts as soon as
the manufactured home is sold. Today, we consider a measure that would
even further roll back key protections.
This measure would do away with a number of protections current law
affords to many high-cost loans such as stiffer penalties for bad actor
lenders, additional disclosures for investors and consumers who
purchase high-cost mortgages, mandatory counseling so borrowers would
know what they are getting into, and even the ability of borrowers to
have their loan rescinded if lenders don't follow the law. They would
lose all of these protections.
As the Consumer Financial Protection Bureau noted in their study of
the manufactured housing industry, the individuals who apply for loans
for manufactured housing ``include consumers that may be considered
more financially vulnerable and, thus, may particularly stand to
benefit from strong consumer protections.'' And now, in addition to the
CFPB's report, we have investigative reporting that puts names, faces,
and individual stories of woe to the CFPB's description of market
practices and policy failures.
Finally, the Obama administration has said that they ``strongly
oppose'' this bill because it would ``put lowest income and
economically vulnerable consumers at significant risk of being
subjected to predatory lending and being steered into more expensive
loans even when they qualify for lower cost alternatives.''
Rolling back consumer protections amidst evidence that the
manufactured housing industry needs more oversight is a dangerous
giveaway to a sector that already profits handsomely at the expense of
vulnerable borrowers.
{time} 1515
Mr. Speaker and Members, I would urge my colleagues to oppose this
legislation.
I reserve the balance of my time.
Mr. FINCHER. Mr. Speaker, I yield myself 1 minute.
I enter into the Record a letter from Mr. Barney Frank back in 2011,
a former chairman and former ranking member of our committee, on this
issue:
Thank you for your thoughtful letter about the negative
impact of the Financial Reform bill on manufactured housing.
I'm very proud of the work I have done with the manufactured
housing industry for years and was regretful to realize that
we did have this problem. I do not think it is necessary to
include manufactured housing as part of our effort to prevent
abusive mortgage practices, and I am now working with my
staff to see if we can find a way to make a change that would
deal with the problem you currently point out.
Mr. Speaker, so much of what the ranking member, my colleague on the
other side of the aisle is saying--we are
[[Page H2182]]
not messing with those parts of the bill that strengthen protections.
All we are doing is fixing the unintended consequences that happened
with the Dodd-Frank bill being so big.
With that, I yield 5 minutes to the gentleman from Texas (Mr.
Neugebauer), my good friend, the chairman of the Financial Institutions
Subcommittee.
Mr. NEUGEBAUER. Mr. Speaker, I thank the gentleman from Tennessee.
This bill isn't about profits; it is about providing an opportunity
for American families to have housing choices.
H.R. 650 is an important bill for communities in my district, the
Texas 19th District, and communities across America. For most of my
career, I was in a home building business. For many small communities
in my district, the town would make efforts to go out and work to
recruit a new employer.
Oftentimes, this could be a manufacturer, cotton, or dairy production
facility. This goal was to help develop the economy and provide job
opportunities for the folks. However, in many of these communities,
there is already a limited amount of housing stock available.
In order for these communities to grow, you have to have sufficient
housing availability to attract those businesses. You can't grow your
community if folks don't have a place to live, and so the manufactured
housing industry has been an integral part of providing housing for
rural America. Unfortunately, under the new mortgage rules coming out
of CFPB, the manufactured housing industry is facing some pretty
significant headwinds and regulatory obstacles.
Last summer, I had the opportunity to go and visit a manufactured
housing dealer in my district. The dealer began by telling me stories
of family after family that were unable to serve because of the new
mortgage restrictions.
For some of these young families, this is the first home that they
may own. It may be a manufactured home worth only $15,000 or $20,000,
and they are very proud of it. Unfortunately, today, many of the
families in rural America have run out of places to turn to achieve the
American Dream and own an affordable home.
Today, I want to address the issue of consumer protection. When
consumer protection starts limiting consumer choices, then we have gone
too far.
Unfortunately, I think many of the CFPB rules have gone too far. They
are not only negatively impacting the consumers, but we also have a
duty to make sure that the people we represent have the opportunities
to make their own financial decisions about their housing and not the
Federal Government and not one agency to make that decision for them.
This bill, H.R. 650, makes important corrections to the definition of
a mortgage originator under the Truth in Lending Act. It is a
bipartisan bill that ensures low- and moderate-income families have
access to credit for the purchase of affordable homes.
It ensures that the CFPB rules are properly calibrated and don't
consider small-balance manufactured home loans as high-cost loans under
the Housing Ownership and Equity Protection Act.
For those reasons, I thank Mr. Fincher and the bipartisan sponsors
for their work on this bill, and I support its final passage.
I just want to mention that, when you look at a lot of these small
communities--and it has been mentioned, Well, sometimes, people can
rent, or they can own; and, in some cases, people say, you know--and
rightfully so--that, sometimes, manufactured housing is a lower cost of
housing for some of those people.
Let me say this: in some of these communities, it is not about
whether you have a choice to rent or to own; in some cases, there is
just not adequate housing stock in those communities.
If you want to choke a little small community across America, you
take away the ability to provide housing. That is one of the main
infrastructures for any community to grow. In many of these
communities, there hasn't been a new house built in those communities
in 30 or 40 years.
What you are saying to those small communities, because we are so
intent in protecting Americans and we don't trust them to make their
own decisions, we are just going to take away any opportunity that
those small communities have to prosper and grow in the future.
Now, I don't think that is what the Founding Fathers of this country
intended. They intended for this to be the land of opportunity. If we
continue to do these kinds of things, we take away the opportunities of
Americans that want to live in those communities.
Mr. Speaker, I encourage passage of this.
Ms. MAXINE WATERS of California. Mr. Speaker, I think it is important
for people to know that that letter that was read was back in 2011, and
that was prior to the Consumer Financial Protection Bureau's very
investigative reporting.
I yield 3 minutes to the gentlewoman from Alabama (Ms. Sewell).
Ms. SEWELL of Alabama. Mr. Speaker, I thank Ranking Member Waters.
Today, I stand in support of H.R. 650, the Preserving Access to
Manufactured Housing Act. Manufactured housing serves as an affordable
and sustainable housing option for roughly 22 million Americans. In my
State of Alabama, more than 300,000 families reside in manufactured
housing, which comprises in excess of 14 percent of the State's housing
market.
In districts like mine, where we face tremendous economic disparities
and suppressed rental markets, manufactured housing must remain an
option. Oftentimes, it is the only safe and affordable mortgage option
available to families.
Without this bill, working families and retirees with poor credit or
limited income can't obtain credit at all and are forced into more
expensive housing options; and, in some parts of my district, the more
rural parts of my district, the only option for many is manufactured
housing.
H.R. 650 makes a simple but necessary adjustment to these thresholds
to enable lenders to fully meet the demand for affordable, responsible
loans for manufactured homes.
In many ways, Mr. Speaker, this bill is an acknowledgement that
manufactured housing is different from regular dwelling housing. It is,
in fact, not real property, but personal property, more like a car than
it is like a home.
The fact of the matter is I believe that Dodd-Frank did not
anticipate--was an unintended consequence of Dodd-Frank--that
manufactured housing would get wrapped into the regulatory scheme for
dwelling homes.
In fact, most of the lenders are not loan originators, as it would be
in the mortgage context; rather, they are lenders giving limited
options--I should say giving families, working families, the only
option in many, many of the jurisdictions, the rural communities, that
I represent.
With all due respect, I don't see this as a predatory lending bill.
This is all about access to affordability. I, like the ranking member,
strongly advocate against predatory lending, would not be supportive of
an industry that preys upon the most vulnerable in the community.
In fact, many of my constituents represent vulnerable communities.
Instead, I really see this as an opportunity for them, many of the
communities I represent, to have affordable housing at all.
It is with that that I ask my colleagues on both sides of the aisle
to consider H.R. 650 as an opportunity for rural communities all across
America to have, as a viable option, manufactured housing.
I want to repeat something that was very important. In no way does
this bill take away consumer protections. The consumer protections that
were established by Dodd-Frank are really important.
The SPEAKER pro tempore. The time of the gentlewoman has expired.
Ms. MAXINE WATERS of California. I yield the gentlewoman an
additional 30 seconds.
Ms. SEWELL of Alabama. The consumers will continue to have the wide
range of consumer protections that Dodd-Frank affords and which I think
many of us agree with.
Steering would be prohibited. We would still have truth-in-lending
disclosures, which are critically important, and loan-term disclosures
that are critically important; and the prohibitation against mandatory
arbitration and other State laws are not affected.
[[Page H2183]]
I see this not as a predatory lending bill, but an access to
affordable housing bill, and I ask my colleagues to support H.R. 650.
Mr. FINCHER. Mr. Speaker, I would like to thank the gentlewoman from
Alabama for supporting the legislation.
I yield such time as he may consume to the gentleman from Kentucky
(Mr. Barr).
Mr. BARR. Mr. Speaker, I thank the gentleman for yielding, and I want
to thank the gentleman from Tennessee for his leadership on this very
important issue, Mr. Fincher, for being a champion for affordability of
housing and manufactured housing in particular.
I want to thank all of my colleagues who are supporting this
important legislation that I had cosponsored, the Preserving Access to
Manufactured Housing Act, and it is a bipartisan bill, and that is
important.
Affordable manufactured housing is a key source of housing for many
of our constituents, particularly those living in rural areas,
including my district in central and eastern Kentucky, many of those
individuals who could not otherwise afford to buy or even rent a home.
Unfortunately, due to the regulatory requirements of the Dodd-Frank
Act, many lenders have stopped offering loans for manufactured houses.
The loans in question are generally fixed-rate, fixed-termed, fully
amortized, small-dollar loans that have nothing in common with the bad
mortgage loans that brought down the housing market in 2008; yet the
Consumer Financial Protection Bureau has treated retailers of
manufactured homes as ``mortgage originators,'' despite the fact that
they do not originate loans.
Furthermore, the small-dollar amounts of manufactured housing
triggers high-cost regulatory controls since points and fees represent
a proportionally larger share of a small-dollar loan than a larger 30-
year mortgage on real property.
These definitions increase the regulatory and liability burdens on
retailers and lenders, driving them from the market and resulting in
higher costs and reduced choice for prospective home buyers.
In fact, due to the increased lender liability associated with this
mortgage designation, some manufactured housing lenders have stopped
making manufactured home loans entirely, and others have stopped
originating manufactured home loans under $20,000, which is a typical
price point.
The legislation before us today does nothing to roll back existing
protections against predatory lending, as has been said previously by
my friend on the other side of the aisle, Congresswoman Sewell.
H.R. 650 merely clarifies the definitions for mortgage originators in
high-cost loans to correct an unfortunate consequence of these
regulations that the Federal Government will be protecting homeowners
right out of their homes.
This legislation will reduce the bureaucratic red tape, increase
access to affordable manufactured housing for American families, and
let me just conclude by saying this in response to some of the
arguments made by the ranking member. She made the point that
manufactured home sales are increasing. Well, that is not an argument
against this legislation.
On the contrary, it underscores the extent to which Americans are
relying on manufactured housing in the Obama economy and the need to
preserve access to lower-priced, more affordable homes, homes such as
manufactured homes, which commonly are available at lower monthly
payments than what it cost even to rent. It also reinforces the need
for this legislation because we need to preserve access to affordable
housing.
This argument, this canard that this is somehow rolling back consumer
protections for lower-income homeowners, this is not true at all. This
legislation does nothing to roll back consumer protections. I simply do
not define consumer protection as a law that tries to protect people in
a way that makes access to housing completely unreachable. That is not
consumer protection.
I urge my colleagues on both sides of the aisle to support this
bipartisan piece of legislation that preserves access to affordable
housing and preserves commonsense consumer protections.
Ms. MAXINE WATERS of California. Mr. Speaker, I think it is important
for me to correct statements that have been made more than once by the
opposite side of the aisle about consumer protections.
H.R. 650 would remove consumer protections afforded to borrowers of
high-priced mortgage loans under the Home Ownership and Equity
Protection Act, as enhanced by Dodd-Frank, for manufactured housing
loans that currently receive such protections.
{time} 1530
Those protections include:
Prior to making a high-cost mortgage, the lender must receive written
certification that the consumer has received counseling from a HUD-
approved counselor or State agency. That would be out. Restrictions on
loan terms for high-cost mortgages, including the loan payments
currently only allowed in very limited circumstances; prepayment
penalties banned; a limitation of due-on-demand features of loans;
creditors banned from recommending default on an existing loan to be
refinanced by a high-cost mortgage; no fees can be charged by services
or creditors to modify or renew or extend a high-cost mortgage; late
fees capped at 4 percent of past due payments and the pyramiding of
fees banned; no fees for borrowers to receive a payoff statement;
charges that qualify for points and fees cannot be financed into
principal balance; a ban on issuing two loans in order to evade HOEPA
coverage by splitting fees and rates.
All of these are protections that would be eliminated.
Mr. Speaker, I yield 2 minutes to the gentleman from Missouri (Mr.
Cleaver).
Mr. CLEAVER. Mr. Speaker, I would argue that the fact that home sales
are increasing for manufactured homes is even more of a reason for us
to want to be protective of some kind of an industry that is growing.
I represent areas in which there are a number of manufactured homes
throughout the rural parts of Missouri that are included in the Fifth
Congressional District. I am a capitalist. I believe that people ought
to be able to make money. I think they ought to make money in the
manufactured home industry, and I would like for them to make money in
the Fifth Congressional District.
Yet I think that everyone in here would agree that we have all had
questions about what happens when a car is purchased and the driver
drives it around the corner and loses about $1,200 in depreciation.
Nobody I have ever met or had a conversation with said, Oh, I
understand that. The car depreciates almost as soon as you sign the
note. What happens is that this is an unintended reason for more, I
think, congressional oversight of this particular industry because
these homes also lose value like automobiles. Let me give you an
example from the Seattle study. This is sad, and I will try and do this
quickly, Mr. Speaker.
Tiffany Galler is a single mother who was living in Florida in 2005.
She bought a mobile home for $37,165. With the loan she purchased from
21st Mortgage, she then rented the home out. She made payments for 8
years, payments totaling more than the sticker price of the home.
Galler lost her tenant in November of 2013, and she fell behind on her
payments. She arranged to show the home to a prospective renter 2
months later, but when she arrived at her home site, Ms. Galler found
barren dirt with PVC pipe sticking up from the ground. She called 911,
thinking someone had stolen her home, but she found out later that her
home was 30 miles away and was up for sale for $25,900.
The SPEAKER pro tempore. The time of the gentleman has expired.
Ms. MAXINE WATERS of California. I yield the gentleman an additional
30 seconds.
Mr. CLEAVER. That is a real reason for us not only to look at this
industry but to protect people as it is growing.
Mr. FINCHER. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas (Mr. Williams), my good friend.
Mr. WILLIAMS. I thank the gentleman from Tennessee for his leadership
on this issue.
Mr. Speaker, I rise today in support of H.R. 650, a bipartisan piece
of legislation that would make commonsense changes to Dodd-Frank and
restore
[[Page H2184]]
clarity to a market that has been hit hard by unnecessary regulations.
Texas builds or manufactures over 25 percent of the Nation's new
manufactured homes--almost 12,000 last year. To put that in
perspective, Texas is home to 19 manufacturing facilities with an
average of 185 skilled workers per factory. At a time when our Nation
is still recovering from the financial crisis of 2008, now is the time
to free small businesses from harmful regulations that only hurt hard-
working Americans. I cannot emphasize enough how important it is to
have access to affordable financing for manufactured homes, especially
in central Texas, where the average home price for a manufactured home
is $60,000.
The one-size-fits-all regulatory approach under the CFPB is clearly
not working. Instead of protecting potential consumers, the CFPB has,
once again, gotten it wrong. Treating lending products for manufactured
housing as high cost and predatory clearly will not protect consumers,
but it will reduce access to small balance loans.
With increased lender liabilities, obtaining a high-cost mortgage has
become nearly impossible. Having critical resources for low- to
moderate-income families is vital in many parts of rural America. By
passing the Preserving Access to Manufactured Housing Act, Congress can
correct one of the many unintended consequences of the Dodd-Frank Act.
This bill is fair, and this bill is logical. It must pass. I urge its
immediate passage.
In God we trust.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield 2 minutes to
the gentlewoman from Arizona (Ms. Sinema).
Ms. SINEMA. Thank you, Ranking Member Waters, for yielding.
Mr. Speaker, manufactured housing is a key form of affordable housing
in my State, particularly in rural and underserved communities. More
than 300,000 families in Arizona live in manufactured homes.
Manufactured homes provide an affordable housing choice for many low-
and moderate-income families.
Existing manufactured home owners and potential buyers are negatively
impacted by current regulations. These rules inadvertently curtail a
consumer's ability to access manufactured home loans or to receive
effective assistance in the manufactured home buying process. These
regulations unintentionally create situations where borrowers are not
allowed to be matched with lenders who can help them in a timely and
efficient manner.
For example, if a Realtor in Arizona works with a veteran who wants
to use his or her VA eligibility to purchase a home, the Realtor
connects the veteran with a number of lenders who offer VA home loans.
Due to the current restrictions placed on retail salespeople, the
process is different if a veteran shops for a manufactured home.
Manufactured home sale centers have a marketing table where lenders
place marketing and lending materials. Manufactured home salespeople
cannot assist veterans in finding lenders. Instead, when a veteran
enters the home center, she is instructed to go to the table and sift
through the countless brochures and loan programs by herself to
determine which lender is best. There may be a dozen different lenders'
information displayed on this table. As you can imagine, this is a very
daunting and discouraging process for most borrowers, especially for
first-time home buyers.
Had the salesperson simply been able to point the veteran in the
direction of a lender that offers VA loans, the veteran would have been
taken care of immediately and would have been able to have made
an informed and confident decision.
H.R. 650 will remedy the unintended consequences of current
regulations, providing potential home buyers with more options, better
advice, and more confidence when buying a new home.
The bill also amends the definition of a ``high-cost mortgage'' and
corresponding thresholds to ensure that consumers of small balance
mortgage loans will have the opportunity to access mortgage credit. I
would encourage my colleagues to join me in supporting this important
legislation.
Mr. FINCHER. Mr. Speaker, I yield such time as he may consume to the
gentleman from Arkansas (Mr. Hill).
Mr. HILL. Thank you, Mr. Fincher, for yielding on this important
measure, and thank you for your leadership.
Mr. Speaker, it pains me to stand in opposition to my friend, the
ranking member of the committee, and in support of H.R. 650, but I
believe that H.R. 650 is a commonsense bill that actually preserves
financing options for manufactured homes while preserving and
maintaining consumer protections.
I want to add too that my friend from Missouri noted the health of
the industry, and I would like to provide a countercomment on that. In
the last decade alone--this very tough economic decade that we have
had--there has been an 80 percent decline in the production of
manufactured housing in the country. Some 160 plants have closed, and
there has been a loss of some 200,000 jobs. Therefore, this industry is
important to our Nation. As a percentage of total housing units, in my
home State of Arkansas, we have 170,000 units, which is some 13 percent
of housing units in our State--one of the largest percentages in the
country.
For many years, I was a community banker with offices in the
Mississippi Delta region of Arkansas. For many of our families,
especially in rural areas, manufactured housing is not only the best
option for housing, but it is the best option for clean, safe, modern,
and affordable housing. Often, due to low volumes in these kinds of
towns, it is the only option, as many of my colleagues have noted.
However, under the new mortgage rules issued by the Consumer
Financial Protection Bureau, many of these manufactured housing loans
are now automatically considered high cost and, therefore, would
subject both the consumers to higher costs and the lenders to greater
liability. Therefore, many of my old colleagues in community banking
offer fewer loans, and that impacts hard-working, low- to moderate-
income families across Arkansas and particularly in rural America,
families whose only objective is to own a home, to have the dream of
homeownership.
The Director of the CFPB has acknowledged that its rules may, in
fact, have this issue of constraining credit, but as the executive
director of Arkansas Manufactured Housing Association said in a recent
letter:
Most low-income Arkansas families don't have the luxury
when it comes to their mortgage options, and many of our
member businesses won't last through a few more years of
decline in sales.
Mr. Speaker, I submit this letter for the Record.
Arkansas Manufactured
Housing Association,
Hon. French Hill,
House of Representatives, Longworth House Office Building,
Washington, DC.
Dear Congressman Hill: Congratulations on your election to
Congress representing Arkansas' 2nd District and on your
selection to the House Financial Services Committee.
During the campaign, we visited briefly about how the
implementation of `The Dodd-Frank Act' (and the avalanche of
additional regulation created by the Act) hinders job
creation and increases the cost of financial services for
Arkansas consumers and businesses. More specifically, we
discussed how `Dodd-Frank' has adversely impacted the members
of the Arkansas Manufactured Housing Association (AMHA) and
their customers--low-to-moderate income homebuyers throughout
the state.
Over the past year, the Consumer Financial Protection
Bureau (CFPB) has implemented a number of final rules, issued
interpretations of those rules, and clarifications of the
interpretations of those rules--all in defense of practices
that continue to disrupt consumer lending for low-to-moderate
income homebuyers, particularly to purchasers in
predominantly rural markets like Arkansas.
At Congressional hearing about the Dodd-Frank's `Ability to
Repay' (ATR) and `Qualified Mortgage' (QM) rules, one of the
CFPB's key witnesses testified that the Bureau recognizes ``.
. . that concerns about liability under the Dodd-Frank Act's
`Ability-To-Repay' requirement might cause creditors to
constrain their lending--particularly in the first few YEARS
after the rule takes effect.''
In response to that statement--on behalf of an industry
which over the past decade has experienced an 80 percent
decline in new home production; the closure of more than 160
manufacturing facilities; and the loss of more than 200,000
American jobs--I would say that most low-to-moderate income
Arkansas families don't have the luxury of taking a `wait and
see approach' when it comes to their mortgage options and
that many of our member businesses won't last through another
`few YEARS' of decline in production and sales.
Throughout its continued rulemaking, the CFPB has
demonstrated a fundamental lack of understanding about
manufactured home lending. And, through the implementation of
rules like ATR and QM, the Bureau has created additional
challenges for manufactured
[[Page H2185]]
home purchasers and lenders wishing to offer mortgage loans
on manufactured homes.
As you are undoubtedly aware, lenders which provide
specific mortgage products for the manufactured home industry
(particularly personal property type `home only' [chattel]
loans), community banks and other financial institutions will
likely offer fewer manufactured home loan options if such
loans are not able to be classified as `qualified mortgages'.
The liability created by Dodd-Frank on such loans (classified
as `high cost' or `high priced') will prevent most
institutions from offering these loans to hard-working
Arkansas families.
You also know that manufactured home loans tend to be lower
balance loans. And, while the cost of origination for a
$50,000 manufactured home loan may be the same as the cost of
origination for a $250,000 `site-built' home loan in `real
dollars'--that origination cost (when considered against the
lower-balance loan total) will more readily cause that lower-
balance loan to fall outside the parameters of a `qualified
mortgage'.
The loss of mortgage options for paycheck-to-paycheck wage
earners seeking to attain `The American Dream of Home
Ownership'--particularly in a state where the median annual
household income is around $40,000--will keep many Arkansas
families living in rental units or dependent upon government
assistance programs for their housing needs.
The manufactured home industry is asking for your immediate
assistance with industry-specific legislation to amend the
provisions of Dodd-Frank which are restricting the
availability of credit needed by those seeking to purchase
manufactured housing. H.R. 650--The Preserving Access to
Manufactured Housing Act--would revise the high-cost mortgage
triggers for manufactured home loans and make clarifications
to the loan originator definition as it applies to
manufactured home retailers and their salespeople.
On behalf of the members of the Arkansas Manufactured
Housing Association (AMHA) and the customers that we serve, I
would respectfully request that you become a co-sponsor of
H.R. 650.
Thank you for your consideration of this issue of great
importance to the manufactured housing industry and our
customers--the low-to-moderate income families of Arkansas.
Feel free to contact me if you have questions about this
request.
Sincerely,
J.D. Harper,
Executive Director,
Arkansas Manufactured Housing Association.
Mr. HILL. Regarding consumer protection, I agree with my colleagues
that this bill does not weaken any current laws. It protects consumer
access to affordable credit; it preserves the consumer's choice; it
helps Americans achieve financial independence; and it prevents the
CFPB rules from overprotecting low-income consumers out of the option
of a manufactured home.
H.R. 650 is about protecting the American Dream of homeownership. I
am proud to support this bipartisan bill. I think it is common sense.
Mr. FINCHER. Mr. Speaker, may I inquire as to how much time is left
on both sides?
The SPEAKER pro tempore. The gentleman from Tennessee has 10\1/2\
minutes remaining, and the gentlewoman from California has 13 minutes
remaining.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
Members, I reiterate that H.R. 650 would remove consumer protections
afforded to borrowers of high-priced mortgage loans under the Home
Ownership and Equity Protection Act, as enhanced by Dodd-Frank, for
manufactured housing loans that currently receive such protections, and
I read off some of those protections.
I further want to share that these lenders want to be able to
originate these high-priced loans at 14 percent and even more when the
interest rates change, but they want this bill to change the definition
of a ``mortgage originator'' so that the licensing and antisteering
requirements of Dodd-Frank would not apply to manufactured housing.
Not only are they going for protection for higher priced loans and
higher fees, they want to change the definition so they don't look like
they are originating loans, and they don't want to come under the law
in terms of what we require for protection for higher priced loans.
Mr. Speaker, I yield 3 minutes to the gentleman from Texas (Mr. Al
Green).
Mr. AL GREEN of Texas. I thank the Honorable Maxine Waters for
continuing to be a champion for people who have been taken advantage
of. She has a rich history of fighting for those who are not in a
position to fight for themselves.
Mr. Speaker, I guess there will be a question of ``Who are you going
to believe?'' Will it be Maxine Waters, who has for decades been
fighting for the least, the last, and the lost? Maxine Waters, who is
known across the length and breadth of this country as a champion for
poor people, for people who purchase manufactured homes?
Maxine Waters has said--and I concur with her--that this bill will
create an opportunity for people to take advantage of those who are
living at a level of life wherein what they pay for a home must be what
they can afford, and they cannot afford to lose that home.
{time} 1545
This is why she is so concerned, and I join her in this notion, that
there is predatory lending taking place if this bill passes. If this
bill passes, people will be allowed to steer people into homes that
will have higher interest rates. If this bill passes, there will be
people who will need counseling but will not get the counseling that
they need to help them maintain home ownership. If this bill passes, we
will go back to prepayment penalties. If this bill passes, we will not
be able to bring back these protections and safeguards that have been
instated under Dodd-Frank. We will eliminate them, and they will be
gone forever.
We need to think before we act and before we vote. This is an
important vote for those who are not going to be able to stand up and
fight for themselves, but I thank God that we have got the Honorable
Maxine Waters on the floor of the U.S. House of Representatives
standing here today to stand up for them.
So who are you going to believe? There seems to be a difference of
opinion. When you have differences in opinions, you look to see who has
been doing what and for how long. She has been fighting for these kinds
of rights that we are talking about today since she has been in the
Congress of the United States of America. I am proud to stand with the
Honorable Maxine Waters.
I think that if we pass this bill, we will continue to do what many
want to do, but in an incremental salami way. We will continue to slice
away at Dodd-Frank. We will continue to do what those who can't repeal
it in full would do in part, and that is eliminate the protections for
consumers.
Mr. FINCHER. I reserve the balance of my time.
Ms. MAXINE WATERS of California. Mr. Speaker and Members, before the
next Members rise to speak on this bill, I would just like to remind
everybody that this amount of interest rate that they will be getting
on these loans, should this bill pass, is 10 percent above the prime
rate; and from 14 percent it could go up to maybe 18 percent. There is
no Member of Congress who would pay that kind of interest rate on a
home loan or manufactured housing or anything else, but we are asking
the most vulnerable in our society that are targeted to pay this kind
of entry rate in the interest of getting credit.
I yield 3 minutes to the gentleman from Maryland (Mr. Sarbanes).
Mr. SARBANES. Mr. Speaker, I thank the gentlelady for yielding. I
want to congratulate her as well on her amazing advocacy on behalf of
consumers across this country and her leadership on the Committee on
Financial Services.
Mr. Speaker, here we are again forced to ask the question: Who calls
the shots here in Washington and in Congress and on Capitol Hill? We
shouldn't have to ask that question. It should be the people that call
the shots. It should be everyday Americans that call the shots here,
but unfortunately it is big money on Wall Street that continues to call
the shots. It is big money that is leaning on Congress to water down,
once again, the Dodd-Frank rules in ways that will harm consumers. With
the mortgage crisis barely in our rearview mirror, the hidden hand of
Wall Street is intent on rolling back critical consumer protections and
stripping away important reforms that have been made to our mortgage
market.
Exhibit A for today--and I say ``for today'' because there has
actually been dozens of exhibits of this kind of legislation that have
come forth over the last few months authored by Wall Street interests.
But Exhibit A for today is called Preserving Access to Manufactured
Housing Act, H.R. 650. Preserving access; it sounds good, but
[[Page H2186]]
it is a wolf in sheep's clothing. That is how they title these things
around here.
This legislation would roll back critical consumer protections for
our Nation's most vulnerable families, undermining a simple proposition
that the owners of manufactured homes deserve the same protections as
traditional homeowners; specifically, the legislation would cause
interest rates to spike and would reintroduce conflict of interest into
the manufactured home market.
By the way, Mr. Speaker, later on today we will see Exhibit B for
today. That is called the Mortgage Choice Act, H.R. 685. That is
legislation that would scrap vital consumer protections put in place by
Dodd-Frank to prevent unscrupulous lenders from steering consumers into
higher fee mortgages. That is what is going on around here.
Of all the areas in need of Congress' attention, the Republican
majority has chosen to once again focus on giveaways to the Wall Street
crowd. American consumers deserve better than that, and I urge my
colleagues to vote against H.R. 650 and later against H.R. 685.
Mr. FINCHER. Mr. Speaker, I yield 4 minutes to the gentleman from
Texas (Mr. Hensarling), the chairman of our committee, and I again want
to thank him for his leadership on this issue.
Mr. HENSARLING. Mr. Speaker, I thank the gentleman for yielding, but
more importantly, I thank him for his leadership, and I thank him for
standing up for so many of the downtrodden, the low- and moderate-
income Americans from sea to shining sea who want to realize some piece
of the American Dream--they want to own a home.
Now, maybe it is not going to be quite as nice as a home that some
Member of Congress might live in, you know, but it is going to be their
home. In this case, it is going to be a manufactured home. I can say
for many of the people who live, Mr. Speaker, in the Fifth District of
Texas, if it weren't for manufactured housing, they wouldn't have a
house.
As the gentleman from Tennessee so eloquently said as this
legislation was being marked up in our committee, there are so many on
the left and the far left who want to protect consumers right out of
their homes. That is shameful, Mr. Speaker. It is absolutely shameful.
They should have the same equal opportunity to own a home as any Member
of this body, and yet my friends on the other side of the aisle would
take it away from them. No, they have got a bumper sticker slogan here.
You know, they have got Dodd-Frank; we are going to aim at Wall Street.
But when they aim at Wall Street, they are hitting Main Street. They
are hitting Main Street, and low- and moderate-income Americans are
suffering.
We have bank after bank after bank after credit union after credit
union, we are talking community financial institutions who are saying,
without the legislation of the gentleman from Tennessee, they have got
to get out of the business. You know what that means, Mr. Speaker? It
means people lose their opportunity to own that first home, which might
just be a manufactured house.
First Arkansas Bank and Trust, we heard from them:
Our bank has a long history of helping consumers,
especially those who, for some reason, cannot qualify for
secondary market financing at the time. Due to the fact that
this type of financing is now overly burdened by the
qualified mortgage standards, we have ceased this type of
financing.
I heard from the Central Maine Credit Union. And, by the way, we
haven't mentioned Goldman Sachs and J.P. Morgan. No, these are
community financial institutions, Mr. Speaker.
I am sorry. This comes from Five County Credit Union:
Since October of 2010, Five County has no longer been
offering mobile home loans to its members due to the Federal
legislation.
First National Bank of Milaca. I hope I am pronouncing this right,
but given that it isn't a money center bank on Wall Street, we are a
little less familiar with its name. This is in Minnesota.
The high price mortgage rules have caused my bank to reduce
the number of real estate mortgages we make on certain type
houses, specifically mobile homes.
I could go on and on. I have got a stack of these, Mr. Speaker. That
is why the gentleman from Tennessee, with his able leadership, has
brought forth legislation--bipartisan legislation, I might add;
bipartisan, almost half of the Democrats on our committee supported it.
The ranking member supported it before she was against it. I don't
quite understand the change of mind. The need is still as great. People
are still suffering. The low- and moderate-income Americans have been
falling behind. Here is a chance to let them have an opportunity to get
into a mobile home. But, no, no, no, no, no, we have got a Wall Street
bumper sticker slogan here, and it doesn't matter who is going to get
hurt.
Well, it does matter. It matters a lot, Mr. Speaker. We need to
ensure that every American, regardless of their income, in a
competitive, transparent, innovative capital market, that they have the
opportunity to finance that mobile home. Every American should have
that opportunity.
The SPEAKER pro tempore. The time of the gentleman has expired.
Mr. FINCHER. I yield the gentleman an additional 1 minute.
Mr. HENSARLING. Every single American should have that opportunity,
and it is the gentleman from Tennessee who is hearing their voices and
is representing their voices on the House floor today.
Again, I want to thank him for his leadership and thank him for the
thousands and thousands across the Fifth District of Texas that I have
the privilege and honor of representing that, just because they are low
income, he knows--he knows--they still deserve that chance for the
American Dream. He is fighting for their American Dream.
This was compromise language, Mr. Speaker. This is not the bill I
wanted; it is not the bill he wanted. It was compromise language. In
fact, the ranking member supported even a broader provision in the
previous Congress. But what has happened is, yet again, the left hand
doesn't always know what the far left hand is doing; and the far left
hand has decided that all of a sudden we are going to aim at Wall
Street banks, and it doesn't matter if any person working at a Walmart
or working at a Whataburger loses their chance at the American Dream.
That has to stop. We need to support the legislation of the gentleman
from Tennessee. I urge the House to adopt it.
Ms. MAXINE WATERS of California. I yield 2 minutes to the gentlelady
from Illinois (Ms. Schakowsky).
Ms. SCHAKOWSKY. Mr. Speaker, it is interesting that the gentleman
just described this as a consumer protection bill for people who live
in manufactured housing. We are talking about trailer homes. But yet
the National Manufactured Home Owners Association is opposing this
bill, along with the Alliance for a Just Society, Americans for
Financial Reform, the Center for American Progress, the Center for
Responsible Lending, Consumer Action, Corporation for Enterprise
Development, Empire Justice, Financial Protection Law Center, the
Housing Assistance Council, the Leadership Conference on Civil and
Human Rights, the National Consumer Law Center, National Council of La
Raza, National Fair Housing Alliance, North Carolina Justice Center,
U.S. Public Interest Research Group. Are these the far left that he is
talking about, the people who actually represent folks that live in the
kind of housing that he is saying that he wants to protect?
Nearly 7 years ago, our housing collapse resulted in more than 5
million foreclosures and 10 million jobs lost, and so we enacted Dodd-
Frank to reform Wall Street, to improve consumer protections against
crippling loans and the creation of the Consumer Financial Protection
Bureau. The two bills, H.R. 650 and H.R. 685, would strip many of these
consumer protections, would allow higher fees and reduce consumer
protections and permit some of the most abusive and deceptive practices
that trapped borrowers into unaffordable loans. Those protections were
hard earned, and they were clearly justified. Eliminating them would
put us back in the same situation that led to the worst recession since
1929.
This bill, H.R. 650, would weaken consumer protections for
manufactured home loans. This is a bad bill, and I urge my colleagues
to vote ``no.''
Mr. FINCHER. I reserve the balance of my time.
[[Page H2187]]
Ms. MAXINE WATERS of California. Mr. Speaker, could you tell me how
much time we have left?
The SPEAKER pro tempore. The gentlewoman from California has 4
minutes remaining. The gentleman from Tennessee has 5\1/2\ minutes
remaining.
Ms. MAXINE WATERS of California. I yield 2 minutes to the gentleman
from Washington (Mr. Heck).
{time} 1600
Mr. HECK of Washington. Mr. Speaker, I cannot tell you how thrilled I
am to hear that the chair of the committee has seen the light and will
follow the lead of the gentleman from Tennessee, and I am looking
forward to him signing on to Congressman Fincher's Export-Import Bank
reauthorization bill.
In fact, I wish I could stand here and support this in the name of
consumer protection, but it isn't. When we had this hearing, the most
common thread was that we needed more information about what is
happening out here.
Well, unfortunately, since that hearing, we have received more
information. Indeed, The Seattle Times ran an unbelievably in-depth
article detailing some of the worst practices among manufactured home
lenders, some of those practices which contributed to the subprime
bubble and meltdown: not verifying borrowers' income, pushing borrowers
into unaffordable loans, aggressive debt collection, driving up costs
through hidden add-ons, overappraising homes, all of these things.
If you do nothing else, read this essay, which I flat predict today--
write it down--is going to win a Pulitzer Prize. Write it down.
It has been suggested that lenders could not make a living were they
held to 8 points over prime, but that doesn't square with reality. What
is reality? Take out the largest lender, who averages 7 points over
prime, average all the rest, and it is 3.8 percent over prime.
Don't tell me lenders can't make a living in the manufactured home
market unless they are given 10 points over prime. They are making a
living. In fact, they could double it and still be approximately what
the single largest does.
This bill is about relaxing an awful lot of consumer protections
among our most vulnerable population, requirements to do housing
counseling, a ban on teaser rates, early provision of disclosures,
large font statement of the consumers' rights.
This bill would go backwards on those measures and would expose the
most vulnerable among us to exploitation. As a consequence, I would
urge my colleagues to vote ``no'' on H.R. 650 in the name of consumer
protection.
Mr. FINCHER. Mr. Speaker, I continue to reserve the balance of my
time.
Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such
time as I may consume.
My colleagues on the opposite side of the aisle keep telling us how
everybody who would make money on the most vulnerable population is
somehow suffering. They are suffering because somehow they are not able
to make these loans because they cannot be guaranteed the profits that
they want to get.
Let me again just share some information with you. Clayton Homes, the
largest U.S. mobile home manufacturer, as well as the two biggest
mobile home lenders, 21st Mortgage Corporation and Vanderbilt Mortgage
and Finance, are owned by Berkshire Hathaway, an amazingly profitable
company whose shares trade for $215,000 each.
Berkshire Hathaway profited to the tune of $19.87 billion, or 12,092
per share, in 2014. The CEO of Berkshire Hathaway is Mr. Warren
Buffett, the third richest man in the world.
Even though the CFPB's rule on manufactured housing was effective in
January 2014, again, Clayton Homes profited to the tune of $558 million
in 2014, up from $416 million in 2013 and $255 million in 2012. Why do
we need to provide this industry with more regulatory relief when they
are already thriving?
Note that these profits come on the backs of some of America's lowest
income households. In fact, 84 percent of the industry's customers make
less than the U.S. median household income.
Clayton, again, is a large conglomerate of companies operating under
at least 18 names, constructing nearly half of the industry's new homes
and selling them through its own retailers. Many consumers think they
are shopping around, not realizing that it is just different dealers
with different names, all operating under the Clayton umbrella.
Let me just wrap this up by saying that this bill is absolutely a
giveaway. It is my friends on the opposite side of the aisle deciding
that it is more important to allow this industry to charge exorbitant
interest rates and fees to this vulnerable population than it is to try
and do something about reform.
We went through a recession--almost a depression--in this country
because of the way loan initiators came up with these exotic products.
You want to take us right back to that kind of situation.
I would ask my colleagues to vote ``no'' on this bill. It is not
needed, and it is absolutely predatory.
I yield back the balance of my time.
Mr. FINCHER. Mr. Speaker, I yield myself such time as I may consume.
I am going to finish up and just hit on several accusations that have
been made by my friends on the other side of the aisle. Before I do, I
will read a statement from the ranking member last Congress--this was
back in May 2014--on H.R. 1779, which was the bill before the
compromise, which had interest rates at 14 percent, not capped at 10
above prime.
But I'm going to support the bill, and I'm supporting the
bill because I have been embracing opportunities to support
rural communities.
In the same vein, I'm going to support this bill, even
though I have some questions about it, because, again, I want
my legislators here, my friends, my colleagues, rather, who
are from rural areas that are trying hard to make sure that
they provide opportunities and they realize the problems of
their constituents, I want them to know that we can work
together on rural and urban problems, without always being
opposed simply because it's urban or simply because it's
rural.
Now, that is before the compromised language, Mr. Speaker. Now, that
language is significantly less. Once again, we are not doing away with
the protections that Dodd-Frank makes sure that apply to folks all over
districts all over our country.
Think about this. I go home every weekend. I live in a little place
called Frog Jump. It is a real place in west Tennessee. My county is
Crockett County, a very rural county that doesn't have a stoplight in
our county, not a red light in our county. We are that small, 12,000,
13,000 people.
I go home to my constituents, the folks in my district, and they tell
me: Fincher--a lot of them call me by my last name--Fincher, we are
trying to buy a mobile home--a manufactured home--and we are happy with
the price, we have been happy with all of the terms of the conditions
of the manufactured home that we are trying to buy; but, Fincher, we
can't buy one because Washington has gotten in the way. We are happy
with the price; we are happy with the terms; we are happy with the
product, but bureaucrats and politicians in Washington seem to think
they know more than we know here in Crockett County.
Now, Mr. Speaker, my colleagues on the other side of the aisle, it is
almost like, Do as we say, but don't do as we do. It is almost like
they are totally against Americans having the right to choose for
themselves and make the decisions for themselves, so Members of
Congress should sit high on their horse, know nothing about the
industry, nothing about how this is going to impact not the people at
the top, Mr. Speaker.
If my colleagues are so opposed to making an income and making wealth
and growing our businesses and making a profit--this doesn't hurt
Warren Buffett. It hurts the people in Frog Jump and Dyersburg and
Knoxville, all around this country. We somehow must get back to working
for the people back home and not listening to the special interest
groups.
They have been citing a story in a newspaper somewhere--I don't know
where--that put all of these accusations out. We are not lessening the
role of Dodd-Frank when it comes to consumer protections with this
bill. All we are doing is making sure that Americans, Mr. Speaker, can
have access to credit and they can own a home for themselves and not be
told what to do by Washington politicians.
[[Page H2188]]
I urge my colleagues on both sides of the aisle--this is a bipartisan
bill--please, please don't be scared by the President's veto threat
yesterday and try to vote for the constituents back home in our
districts that desperately need this legislation to pass.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Duncan of Tennessee). All time for
debate has expired.
Pursuant to House Resolution 189, the previous question is ordered on
the bill.
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. Pursuant to clause 1(c) of rule XIX, further
consideration of H.R. 650 is postponed.
____________________