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Reframing Manufactured Home Lending LO Comp Debates – Inside MH Video -Triad Financial's Don Glisson Jr.

  • Written by Kovach, L. A. 'Tony'

by L. A. 'Tony' Kovach

tony-kovach-2-75In an exclusive video interview that could help reframe the discussions about MH Lending in Washington, DC - as well as with consumer advocacy groups nationally – Triad Financial Services Chairman and CEO, Don Glisson Jr. shared with MHProNews the following exclusive video interview.

Don Glisson Jr. addresses the following hot-button topics:

  • The interest rates charged on MH Loans - and the often overlooked facts which explain why they are fair and competitive.

  • Why CFPB and other federal rules are negatively impacting consumers and thus the retailers, communities and other MH operations that serve them.

  • Why the CFPB's LO Comp rule is harming consumers and needs to be changed.

  • Why there is some rate spread between MH loans and conventional housing mortgages, among other topics of wide interest.

This video report brings to light in clear terms facts useful with and for:

> consumer groups, such as NMHOA, CFED or others,

> the media, in their reporting or commentary on the MH Personal Property (aka home only, chattel) Lending issue - (as you watch this, think how different the PBS NewsHour or Seattle Times reports might be in the light of these facts),

> elected officials and their staffs, as they consider S 682/HR 650 Passage (Preserving Access to Manufactured Housing Act),

> CFPB in revising their LO Comp Rule,

> GSEs, FHFA, 

> other lending regulators, quality affordable housing policy advocates or MH focused interested parties...

can all grasp. The result could be greater reality-based consensus in finding the solutions.

As CNBC's Diana Olick stated, people don't buy housing price or rates per se, instead they buy based upon monthly payments.  The two charts below reflect the fact that 

FannieMae2011PaymentComparisonChartForManufacturedHousingOtherHouses-PostedManufacturedHomeLivingNews-com-

Manufactured Home loans may have a higher rate, for reasons that Don Glisson Jr. explains,

but they still have the lowest monthly payment of any form of permanent housing.

2014gao-report-comparing-manufactured-housing-vs-apartments-posted-manufacturedhomelivingnews-com-575x311

A recent MHLivingNews report and video on MHLending are linked here.

For the full context of these finance-focused interviews, we're providing the two prior episodes of this video, below.

Part 2 of this in depth video interview with Don Glisson Jr on MH lending topics for industry professionals, is below.

Part 1 of this Inside MH video interview with Triad Financial Service's Chairman and CEO, from a lender that closed some $400 million dollars in business in 2015.

Programming Note: Please watch for the fourth and final installment in this Inside MH video on manufactured home lending with Don Glisson Jr. in the weeks ahead. ##


latonykovach-louisiville2015-mhpronews-business-building-seminars-1L. A. "Tony" Kovach

Connect - https://www.linkedin.com/in/latonykovach

Free Twice Weekly emailed news, tips updates (Newsletters look like this) sign up free in seconds at MHProNews.com/Subscribe 

Office 863-213-4090.

MHC-MD.com and LATonyKovach.com 



Manufactured Housing Connected Stocks in 2015 – Comparing Value and Performance from Jan 1 to December 31, 2015

  • Written by Matthew Silver

It is common for media to do a look back at the year that was. In the publicly traded markets, MHProNews, decided to apply that concept to the stocks connected with Manufactured Housing.

Each stock below is one that tracked by the ever-popular Daily Business News and its market report.

In alphabetical order, we showed the MH-related stocks we cover daily, with the first quoted number reflecting that stock's value on Jan. 1. 2015. The second quoted number represents that stock's value on Dec. 31, 2015.

StockMarket-ImagecreditCNNMonePpostedMHProNewsCom

Keep in mind that the stock markets overall reported their worst year in 2015, since 2008, per CNN Money and other sources. We note if that stock is down or up for the year in parenthesis.

Affiliated Managers Group, Inc. (NYSE: AMG) $210.43 - $159.76 (down).

Berkshire Hathaway Inc. (NYSE:BRK.A) $223,600.00 – $197,800.00 (down).

Carlyle Group(NASDAQ:CG) $28.18 – $15.62 (down).

Cavco Industries, Inc. (NASDAQ:CVCO) $77.75 – $83.31 (up).

Deer Valley Corporation (OTCMKTS:DVLY) $0.600 — $0.69 (up).

Drew Industries, Inc. (NYSE:DW) $49.97 – $60.89 (up).

Equity LifeStyle Properties, Inc. (NYSE:ELS) $52.36 – $66.67 (up).

Killam Properties Inc. (TSE:KMP) $10.31–$10.51 9 (up).

Liberty Homes, Inc. (OTCMKTS:LIBHA) $0.0100 – $0.02 (up).

Louisiana-Pacific Corporation (NYSE:LPX) $16.54–$18.01 (up).

Nobility Homes Inc. (OTCMKTS:NOBH) $10.00 – $12.01 (up).

Patrick Industries, Inc. (NASDAQ:PATK) $43.79–$43.50 (down).

Skyline Corporation (NYSEMKT:SKY) $3.82 – $3.56 (down).

Sun Communities Inc. (NYSE:SUI) $61.51–$68.53 (up).

Third Avenue Value Instl (OTCMKTS:TAVFX) $56.68 – $48.05 (down).

UMH Properties, Inc. (NYSE:UMH) $9.60–$10.12 (up).

Universal Forest Products, Inc. (NASDAQ:UFPI) $52.37 – $68.37 (up).

The most notable changes are the increases in value of Drew, Equity LifeStyle Properties, and Universal Forest Products.

Drop in value notables include Affiliated Managers Group, Berkshire Hathaway, Carlyle Group, and Third Avenue Value Instl. 

Three of the U.S. based MHC REITs ELS, SUN and UMH – were up.

We also track the Yahoo! Finance Manufactured Housing Composite Value (MHCV), which stood at Manufactured Housing Composite Value (MHCV): 584.5 on January 2, 2015, and fell on Thursday, December 31st, 2015 by -3.13 percent to end the year at $1130.

Given the overall drop of the broader markets, it seems that manufactured housing is fairing well. ##

(Image credit: CNNMoney)

matthew-silver-70-70by Matthew Silver

Doug Ryan, CFED, Manufactured Housing and Financing - What's Wrong, What's Right

  • Written by L. A. 'Tony' Kovach

"What is wrong," said the brilliant G.K. Chesterton, "is that we don't ask what is right." Let's apply this principle to Doug Ryan, the Corporation for Enterprise Development (CFED) and the utter need for the quality affordable living millions could find in today's modern manufactured housing.

DougRyan-credit-cltnetwork-posted-IndustryInFocus-ManufacturedHomeLendingRegulations-MHProNews-com 

Doug Ryan, CFED point man on MH,

photo credit – CLTNetwork.

What's wrong is that millions of Americans are being denied their fair piece of the dream of home ownership.  They are being denied at times due to NIMBYites. We will define them as those who say they want affordable housing for people, only "Not In My Back Yard" (NIMBY).

whats-wrong-is-that-we-dont-ask-whats-right-g-k-chesterton-posted-inspiration-blog-mhpronews-com-

Others are being denied their piece of the American Dream due to what some say are the good intentions gone awry of regulators, such as the Consumer Financial Protection Bureau (CFPB). As Marty Lavin wisely points out in the video posted below, regulations alone are causing otherwise able people from owning a home of their own.  That's clearly wrong.

The CFPB's Richard Corday said to Senator Bob Corker, that it was not optimal for artificial regulatory thresholds to keep people in rental housing.JessMaxcyPresidentCMHI-sourceHillBlog-postedMastheadMHProNews-com--214x430  Director Cordray's admission is right, but what's wrong is that he's not changed polices the Dodd-Frank Act permits him to do to fix it with the stroke of a pen.

Doug Ryan and CFED are right to extol the virtues of manufactured homes.  I'd say that it's tactically wrong to suggest or stress that MH has value only for those who are the lower income or working class; we've done numerous video interviews with successful professionals who love manufactured home living.   The NIMBYites might be more persuaded by those successful folks who love their manufactured homes, than they are about the needs of the less financially able they claim to care about, but currently deny in practice.

Doug Ryan et al are wrong on the finance issues about MH too.  I'll refer again to finance expert Marty Lavin in the video interview on this page.

Doug Ryan, et al are right to promote that the FHFA via the GSEs implement the Duty to Serve (DTS) "home only" lending to manufactured homes.  But they are wrong to suggest a Hobson's Choice of supporting Duty to Serve only if MH lenders and businesses give up on passage of The Preserving Access to Manufactured Housing Act (HR 650), which passed the House by a wide margin with bi-partisan support; and the companion S 682, which looks like it may be part of an Omnibus appropriations bill in the Senate. 

hobson-choice-cerditWikipedia

What's right is that DTS has its own value to MH, but so does HR 650/S 682. The bill does nothing more than what Congressman Barney Frank and those who voted for the Dodd-Frank Act gave the CFPB authority to do on its own.  See the Frank letter, which was read into the congressional record, can be found on the page linked here and was first published on MHProNews.com.

What's wrong is that Ryan and some so-called non-profit consumer groups have mischaracterized the realities and goals of HR 650/S682 and manufactured home lending. What's right is that there ought to be a clear recognition that what Jan Hollingsworth's pro-consumer report revealed is the true reality of the impact of CFPB’s regulations.

What's wrong is that we're told by the federal government that the recently released HMDA data proves MH lending has been restricted by 5%, while driving up costs unnecessarily for MH lenders in a fashion that U.S. Bank and others cited as factors that drove them out of the MH loan space.  What's right is attorney and financing expert Lavin's point that bureaucrats are taking away the path previously used by millions to achieve home ownership.

LizRomanchek-ManufacturedHomeOwner-TheHillBlogcredit-postedMastheadMHProNews-com-What's right is that Ryan, CFED and all people of good will should stand together to get Richard Cordray to relent on his harmful regulations, and/or support the Senate passage of S 682, so that The Preserving Access to Manufactured Housing Act becomes law.  The next right thing to do is to educate those NIMBYites that they’re part of the problem when they block access to quality affordable MH at the local level.

What's wrong is that enough people don't ask - and then do - what's right.

We outlined what’s wrong and cross referenced in depth on The Hill's Congress Blog, linked here,  what's wrong and what's right on these MH personal property lending issues. Doug Ryan has not tried to refute a single word of that analysis online anywhere we’ve seen.  Nor did Doug Ryan deny a single word in Jan Hollingsworth's original in depth report on this MH lending topic. On those two failures to deny or refute, Ryan's right.

CongressBlog-creditTheHill-OpEd-LATonyKovach-postedMastheadBlog-MHProNews--575x322

What's right is that Doug Ryan et al shift gears and start to do what's consistent with the rest of their stated values about MH, by providing quality affordable living potentially for millions now stuck in the Renters' Nation.  MH is unsubsidized, so it's the right and smart policy to get the regulations out of the way that are keeping the MH Industry from serving more people, as Marty Lavin explains and underscores.

When Ryan and his peers get on board with fixing what's wrong with the current CFPB regulations and NIMBY, no one will applaud louder than this scribe, because that would be what's right. ##

LATonyKovach-Louisville-2015-mhpronews-com-275x156_2By L. A. 'Tony' Kovach.

Manufactured Home Personal Property Loans – Are They Predatory? Are CFPB Regulations Helping or Harming Consumers and Home Owners?

  • Written by L. A. 'Tony' Kovach

Beyond confusion on finance related issues, there are many myths and misunderstandings about modern manufactured housing.  Among these are:

> that MH is somehow more vulnerable to wind storms (that’s not true, as the first video below features a preview that will blow that false impression away).

> That manufactured home’s lower prices are achieved by cutting corners on the quality of materials.  That’s false.  Its economies of scale, less waste, time and labor savings plus strict federal oversight that combine to yield improved quality, with savings that the U.S. Census Bureau states make contemporary manufactured homes about ½ the cost of a similar sized conventional, on-site built house.  The facts are demonstrated in the video interview with an expert that’s linked here.  This consumer-based report, demonstrates that the satisfaction level of today’s MH buyers is very high.

> That manufactured homes are less energy savings than conventional on-site built housing. That's false.  Because manufactured homes (MH) are built on jigs in a controlled environment, they are tighter and thus more energy saving size-for-size with identical insulation levels and features - apples-to-apples – in conventional single family housing.  The article linked here on that topic is helpful.

> The National Fire Prevention Association (NFPA) study should extinguish the now outdated myth that manufactured homes are more fire-prone than site built homes. Modern MH is safer vs. fire than conventional homes today.  Older pre-HUD Code "mobile homes" - of which no more mobile homes have been built since June 15, 1976 - were more vulnerable to the flames, but today's MH are safer by design.  See the report and key highlights, linked here.

We could go step-by-step through a host of old myths replaced by contemporary MH realities. Dispelling errors is what MHLivingNews.com has focused on for some years, while MHProNews challenged errors in media reports like The Daily Yonder story on financing or OZY Media's low blow, agenda laced 'reporting' on MH.   

But our focus today is on manufactured home chattel financing.  We’ll take an in depth look at the impact of CFPB regulations on:

  • consumers seeking to buy,
  • and MH home owners that may want to sell. 

That and more are covered in the video below, with a widely respected MH lending expert.

Growing Need for Affordable Housing & Critical Need for Manufactured Home Financing

The above facts are comparatively easy to outline.  By far the single most difficult issue for many to properly understand is MH lending. 

With the video below, we resume a planned, periodic series of video interviews with MH hopme owners, professionals and lending experts.  This Inside MH video report will feature award winning Marty Lavin, JD.

As you will see, Marty is passionate about consumer safeguards.  He is equally focused on making sure that the facts about MH personal property - aka chattel or ‘home only’ lending, vs. land home or mortgage loans – by the MH finance industry are accurately reflected and understood.

The video that follows is an in depth discussion. It’s intended for a more accurate understanding of the facts and issues about MH lending and related regulatory policies.  We anticipate that:

  • Congressional and Senate staffs,
  • public policy advocates,
  • regulators at the CFPB or other federal and state agencies,
  • industry professionals,
  • investors,
  • the mainstream media,
  • educators and non-profits

are among those who will find this video interview compelling, timely and relevant.

While a lot of ground is covered in under 25 minutes, this video - nor any other of this length - is going to be exhaustive.  For the serious researchers on these MH finance issues, additional insights on this topic are found in the articles linked after the four numbered bullets that follow.

We’ve studied these issues from four key perspectives.  Please note that the following 4 bullets are not necessarily in any order of importance:

  • 1. Impact of current CFPB regulations on MH Home Owners, notably those with homes priced under $20,000.
  • 2. The impact of current regulations on MH Home shoppers, not only those priced under $20,000, because all are impacted by the MLO rule discussed in the video.
  • 3. Impact of CFPB regulations on current MH businesses; lenders, sellers, communities, builders, suppliers – all are directly or indirectly impacted by these regulations.
  • 4. Policy advocates, public officials and the media.  There are widespread misunderstandings and outright demonstrable errors that are addressed in the video shown and in the articles that follow.

Additional Resources and References in understanding MH Lending and Related Regulatory issues

For those who seek a comprehensive understanding of this issue, the following articles are provided for additional depth on this issue; which is vital to supporting improved access to America’s most quality and affordable housing option.

thehill.com/blogs/congress-blog/economy-budget/248665-regulations-for-manufactured-home-loans – the article linked above has extensive cross links to additional sources that document the various statements.

http://manufacturedhomelivingnews.com/renters-nation-the-dark-side-of-dodd-frank-and-its-impact-on-affordable-housing/  The headline summarizes it well, and the narrative is compelling, provided by an award-winning journalist.

http://manufacturedhomelivingnews.com/dodd-frank-and-manufactured-home-financing-the-place-where-good-intentions-and-unintended-consequences-collide/  This was the first article by award-winning, “depth consumer affairs” journalist Jan Hollingsworth on the topic of MH lending. The facts, charts and a home buyer’s stunning odyssey presented by Hollingsworth broke new ground in media coverage, aiding a better understanding of MH lending.

http://manufacturedhomelivingnews.com/she-black-hes-white-theyre-in-different-parties-why-congressional-representatives-terri-sewell-and-andy-barr-support-preserving-access-to-manufactured-housing/  MH lending reforms has bi-partisan support, as the article demonstrates.

http://manufacturedhomelivingnews.com/cfed-and-cfpb-confused-conflicted-friends-of-manufactured-home-owners-and-prospective-buyers/   Part of the resistance to MH lending comes from a source that has a clear conflict of interest on this issue.

http://manufacturedhomelivingnews.com/congressman-stephen-fincher-is-demanding-fairness-for-rural-americans-in-manufactured-homes-the-hill-oped/ Congressman Fincher’s reason for sponsoring HR 650, the House bill that has already passed; pending the upcoming vote on S 682, the companion bill to HR 650 that is pending a vote in the U.S. Senate.

http://manufacturedhomelivingnews.com/sam-landy-umh-ceo-on-dodd-frank-and-the-preserving-access-to-manufactured-housing-act-s-682hr-650/ - This video interview and the related article confirms many of the assertions that finance expert and attorney Marty Lavin has made in the video above.

http://manufacturedhomelivingnews.com/impact-of-cfpb-loan-regulations-on-the-lowest-cost-manufactured-and-mobile-home-owners/ - this is the first video interview with an MH home owner, who wants to see her home’s values protected from the harmful impact of current CFPB regulations.##

latonyKovach-Louisville-2015-mhpronews-com-275x156-11By L. A. “Tony” Kovach.

Solution for compliance with the new HPML Appraisal Rule: NADAguides New Manufactured Home Price Tool

  • Written by NADAguides

NADAguides-logo-postedon-posted-manufactured-housing-MHProNews

 

National Appraisal Guides, Inc. is thrilled to introduce the NADAguides New Manufactured Home Price Tool. This new product assists lenders and retailers in complying with the new Higher-Priced Mortgage Loans (HPML) Appraisal Rule, and it was designed with efficiency and affordability in mind.

The HPML Appraisal Rule goes into effect on July 18, 2015.

What is the new HPML Appraisal Rule?

As a lender, the new HPML Appraisal Rule will require you to provide your borrowers with an independent third party evaluation on all loans that meet specific criteria.  The borrower must receive this evaluation at least three days prior to the close of escrow. The NADAguides' New Manufactured Home Price Tool will generate such an evaluation in real time, and at a highly competitive price.

Solution for compliance with the new HPML Appraisal Rule: NADAguides New Manufactured Home Price Tool

For new home sales, a valuation method was needed that treats the home being valued as if it were located on a retailer’s lot.  The valuation needed to address individual floor plans offered by manufacturers, while applying a geographically-specific markup.  To satisfy this need, National Appraisal Guides, Inc. developed a user-friendly, 24/7 online access tool: the NADAguides New Manufactured Home Price Tool.

This new tool will provide users with average retail prices based on the individual models offered by each manufacturing plant.  Users will have the ability to search using a variety of parameters including model year, manufacturer name, division/plant of manufacturer, series/trade name, floor plan number/model name, width, and length.

NADAguidesNewManufacturedHousingPrice_Tool_SearchParameters-posted-manufactured-housing-MHProNews

Based on the search parameters entered above, a list of selectable floor plans will populate below.

NADAguidesNewManufacturedHousingPrice_Tool_FloorPlanSearch-posted-manufactured-housing-MHProNews

The NADAguides New Manufactured Home Price Tool will allow users to select from an extensive list of factory-added options, and once satisfied with the selections, detailed price reports can be instantly printed. The price reports include home specifications, a floor plan image (when available), a list of standard features, and an itemized list of factory-added options.

NADAguides-New-Manufactured-Home-Price_ReportCollection-posted-manufactured-housing-MHProNews

Users will benefit from an instant turn-around time on all price reports at affordable volume-based price points.  Buying price reports in bulk can be a great way to save money, as reducing the cost per unit can result in significant reductions to your company’s overhead.  Click here to view pricing.  

NADAguides_New_Pricing_Report_NMHPT_Sample_Report_v2-page-001

About National Appraisal Guides, Inc. and NADAguides.com

NADAguides.com  is the largest publisher of the most market-reflective vehicle pricing and information available for automotive, classic cars, motorcycles, boats, RVs, and manufactured homes. We offer in-depth shopping and research tools, including a broad range of data, products and services. National Appraisal Guides, Inc. also produces software, mobile applications, raw data, web services, web-syndicated products and print guidebooks. National Appraisal Guides, Inc. is a strategic ally of NADA Services Corporation.

Solution for compliance with the new HPML Appraisal Rule: NADAguides New Manufactured Home Price Tool PDF

The New Appraisal Rule for HPML on Manufactured Homes - Finding the “Good” In Regulation and Change

  • Written by John Walters

by John Walters

It is conference season for those of us in the manufactured housing industry. Attendance and participation has demonstrated an overall growing economy and the increased activity that comes with it. However, there still is an overhang of the next wave of regulations. Their potential impact looms on the horizon.   Much time was and is still being spent in conversations that range from education to speculation to trepidation. What seems to be lacking most are discussions that lead to inspiration.

On the front line of these regulations and changes, lenders find challenges in how to respond. 

Market forces often push in a direction to keep “business as usual,” despite potential consequences with regulators. Other regulatory concerns, whether real or perceived, may prompt a move too far the other way. Some may even consider exiting from the business altogether. None of those responses speaks to sustainability as a lender or other manufactured housing stakeholders.

Fortunately, these are not the only options from which to choose. 

We can chose to accept and embrace regulation and change to enhance the experience of our business partners and consumers, or as we refer to them in the credit union world, members. 

For example, here at CU Factory Built Lending (CUFBL), we have accepted changes and leveraged them to improve the quality of interactions with our business partners and members.  For our retailer business partners, we offer regionally assigned, well trained Business Development Executives who are able to assist them on their business needs and help them navigate the regulatory climate we live in.

Used in conjunction with our dedicated MLO’s, we have created a process that not only meets regulatory guidelines but improves upon communication with both the retailer and the member. It offers a more efficient and streamlined transaction for all involved.

We are also developing and launching tools and platforms exclusively for our loan brokers who serve manufactured housing customers. There they will find “inspiration” in the form of additional tools and resources regarding marketing, rates, programs, compliance and a myriad of topics that will assist them in many aspects of their business. 

These are just two examples of improvements born out of the changes required in the regulatory environment we operate under today.

Regulation and change, especially that appear to be forced upon us, may lead to anxiety or frustration.  It also can be the spark to re-evaluate our respective roles in serving our customers.

How do we bring value to each other as industry partners?  Perhaps most importantly, how do we best serve the consumer (member)?  That re-examination of our business practices, our value to our customer and our core values themselves is where the “good” can spring from regulation and change. ##

JohnWaltersCUFactoryBuiltLendingSanAntonioCreditUnion-ManufacturedHomeFinancing-postedMHProNews-75x75-John Walters is the West Region Sales and Marketing Manager for CU Factory Built Lending  (CUFBL). CUFBL has won numerous awards for their manufactured housing loan programs. CUFBL is a division of San Antonio Credit Union (SACU).

Do De Minimis Exemptions Provide Relief to the Manufactured Housing Industry?

  • Written by Marc J. Lifset, J.D.& Jeffrey P. Barringer, J.D.

The SAFE Mortgage Licensing Act of 2008 (the “SAFE Act”), which requires states to license loan originators, substantially restricts the ability of a small retailer or community operator to sell manufactured homes to purchasers/residents that do not qualify for financing from traditional third-party lending sources.  These problems are exacerbated by the Dodd-Frank Act’s changes to the Truth in Lending Act.  Nonetheless, appropriately drafted licensing de minimis exemptions may provide some relief to small retailers and community operators.

Background

After implementing the SAFE Act, each state now requires mortgage loan originators to be licensed or registered.  While the licensing requirements may vary across states, most states define a “mortgage loan originator” as an individual who, for compensation or gain or in the expectation of compensation or gain, takes a residential mortgage loan application or offers or negotiates the terms of a residential mortgage loan, which is defined to include a loan secured by a manufactured home.  Without some relief, a small retailer or community operator will need at least one licensed mortgage loan originator to offer financing. 

In addition to individual licensing, entity level licensing may also be required.  As a result of the manner in which several states implemented the SAFE Act, entity level licensing may include a mortgage banker or mortgage lender license, as opposed to, or in addition to, the installment sales/sales finance and consumer loan licenses that historically applied to manufactured housing finance transactions.  The licensing and compliance burdens imposed on a mortgage banker or mortgage lender are generally greater than those that would have previously applied to a lender making a home-only loan.

Without de minimis exemptions or other relief, these licensing burdens, as well as the associated cost, may prohibit small retailers and community operators from providing in-house financing to potential purchasers/residents.  For a de minimis exemption to provide the necessary relief to the manufactured housing industry, it must provide relief for transactions that are not secured by real estate.  In addition, exemptions must provide relief for the individual engaged in mortgage loan originator activity and the entity that is providing financing. 

State De Minimis Exemptions

 By our count to date, twenty-five states have adopted thirty mortgage loan originator de minimis exemptions.  These states include: Alabama, Arizona, Colorado, Connecticut, Idaho, Indiana, Kentucky, Louisiana, Maine, Mississippi, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Vermont, West Virginia, Wisconsin, and Wyoming. 

While there are several states with de minimis exemptions, only six provide full relief to the manufactured housing industry.  These states include: Arizona, Indiana, Maine, Montana, Pennsylvania, and Wisconsin.  New Jersey also recently adopted a de minimis exemption that provides full relief, but the exemption only extends to transactions involving manufactured homes that are located in communities. 

In these states, an individual is exempt from mortgage loan originator licensing even if he or she does not own the home that is the subject of the transaction and the individual is not the source of financing.  In addition, these states either have entity level de minimis exemptions for the individual or entity that is providing financing or do not have entity level licensing for home-only transactions. 

Indiana has good examples of de minimis exemptions that provide full relief to the manufactured housing industry.  In Indiana, mortgage loan originator and entity level licensing are required for those that regularly engage in a regulated activity.  With respect to mortgage loan originator licensing, “regularly engaged” is defined to mean: (a) engaged in the business of a mortgage loan originator on more than five mortgage transactions in the previous calendar year, or who expects to engage in the business of a mortgage loan originator on more than five mortgage transactions in the current calendar year; or (b) served as the prospective source of financing on more than five mortgage transactions in the previous calendar year, or who expects to serve as the prospective source of financing, or perform other phases of originations, on more than five mortgage transactions in the current calendar year.  Similarly, with respect to entity level licensing, “regularly engaged” is defined to mean: (a) extended or originated more than five first lien mortgage transactions in the preceding calendar year; or (b) extends or originates, or will extend or originate, more than five first lien mortgage transactions in the current calendar year if the person did not extend or originate more than five first lien mortgage transactions in the preceding calendar year. 

Other States

Eight of the de minimis exemptions provide limited relief because either the individual level or entity level licensing de minimis exemptions apply only to transactions involving real property. 

Nine of the de minimis exemptions provide limited relief because they require the individual that is engaged in mortgage loan originator activities to actually be the source of financing. Seven of these exemptions also require the individual that is providing financing to also own the subject home.  In addition, there are three de minimis exemptions that are not conditioned on the individual engaged in mortgage loan originator activity providing financing, but do require that the individual own the subject home.  

The de minimis exemptions described in the preceding paragraph are problematic from the standpoint of a small retailer or community operator because individual employees engaged in mortgage loan originator activities will not be the ones providing financing and will not own the subject manufactured homes. 

Authority for a State to Adopt a De Minimis Exemption

The SAFE Act required individuals engaged in the business as loan originators to either be federally registered as loan originators or licensed as state-licensed loan originators.  The SAFE Act directed the Federal Banking Agencies to establish a federal registration requirement for loan originators employed by depository institutions and their subsidiaries.  The SAFE Act also sets forth minimum standards that states are required to have in place with respect to mortgage loan originator licensing.  If a state failed to adopt or fails to maintain those minimum standards, HUD (now the Consumer Financial Protection Bureau (“CFPB”)) will administer licensing in the state. 

In their rules, the Federal Banking Agencies and HUD took different approaches when they interpreted the meaning of “engaged in the business,” as the term is used in the SAFE Act.  The Federal Banking Agencies adopted a de minimis exemption for an individual that has never been registered or licensed as a mortgage loan originator and that acts as a mortgage loan originator for five or fewer loans during the prior twelve months.  

On the other hand, HUD’s rule provides that an individual engages in the business of a loan originator if he or she engages in a commercial context “habitually and repeatedly,” which may be met “either if the individual who acts as a loan originator does so with a degree of habitualness or repetition, or if the source of prospective financing provides mortgage financing or performs other origination activities with a degree of habitualness or repetition.”

This divergence in interpreting the meaning of “engaged in the business” likely resulted from the different roles that the Federal Banking Agencies and HUD were to play in connection with the SAFE Act.  Nonetheless, the Dodd-Frank Act transferred rulemaking authority under the SAFE Act, both for federal registration and state licensing standards, to the CFPB.  As a result, if a state were to adopt a de minimis exemption that is consistent with the rule adopted by the Federal Banking Agencies and the rule adopted by HUD, the CFPB cannot object.  If the CFPB objected to such a de minimis exemption, it would be taking a position contrary to its own regulations that interpret the meaning of “engaged in the business.” 

The de minimis exemption adopted by the Federal Banking Agencies (now a CFPB regulation) and the fact that the CFPB has not taken over licensing of mortgage loan originators in any state that has adopted a de minimis exemption should provide the necessary support to show a state legislator or a state regulator that a de minimis exemption is authorized by the SAFE Act.##

McGlincheyStafford-logo-posted-on-mhpronews-comBy:   

Marc J. Lifset, J.D.

Jeffrey P. Barringer, J.D.

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