CU rejects industry's claims on new manufactured home law (Oct. 2002).

The lobby arm of the manufactured home industry in Texas is waging an all out war on a new law passed in 2001 — HB 1869 — designed to protect mobile home buyers in Texas. Basically, the law moves these purchasers to the more traditional route of financing offered to other homebuyers, in lieu of the high-cost retail installment contracts ("chattel loans") commonly used to finance manufactured homes.

Consumers Union isn't buying the industry's arguments that the new law limits the purchasing ability of first-time homebuyers and has contributed to a deep slump in the industry. The Manufactured Housing Association held a news conference September 18 in Weslaco to announce they will seek repeal of HB 1869, sponsored by Rep. Arlene Wohlgemuth, R-Burleson.

"They're barking up the wrong tree and they know it," says Kevin Jewell, a policy associate and manufactured home expert with CU's Southwest Regional Office. "Nationwide, the whole manufactured housing business has been slammed over the past two years due to the old ways of financing. Financiers were writing paper on virtually anybody. Now it's coming back to haunt them, and repossessions have flooded the market."

Over 80 manufactured housing plants and almost 4,000 retailers across the country have closed since the peak of the boom in 1999. The irony in the industry's argument, Jewell noted, is that changes in lending practices brought about by the new law will reduce the high level of repossessions and stabilize the market.

"Eighty to ninety thousand manufactured homes nationally will be repossessed this year," he said. "Each unit houses a family that will not only lose their home, but impair their credit as well. This high repossession rate is the result of poor lender and dealer discipline in the chattel loan market."

In the end, repossessions disrupt communities and hurt other consumers by driving up interest rates for all borrowers. Some protections and benefits of HB 1869 result from the conversion of manufactured homes on non-leased land to real property. In addition to making consumers eligible to traditionally lower interest rate mortgage loans, the conversion to real property has the following benefits:

• RESPA (Real Estate Settlement and Procedures Act) applies to real property loans. RESPA protects consumers by: - Requiring lenders to provide a Good Faith Estimate of costs within 3 days of the loan application - Prohibiting kickbacks and unearned fees to brokers and dealers.

• Manufactured homeowners get the same foreclosure protections as every other homeowner.

• Appraisal process assures the price of a home is reasonable that consumers do not start off their loan "underwater" (i.e. with negative equity).

• Shopping for "chattel" loans may negatively impact a consumers credit score. However, scoring models permit a shopping period for mortgage loans.