Leading opposition to final passage of the “Preserving Access to Manufactured Housing Act” on the House Floor, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, criticized the measure for rolling back critical borrower protections put in place by the Consumer Financial Protection Bureau, undercutting the Dodd-Frank Wall Street Reform Act and encouraging the kind of predatory lending practices that previously brought the American economy to the brink of collapse.
Citing recent reports of record growth in the manufactured housing industry, Waters provided examples of the sorts of practices frequently used to entice low-income buyers into predatory loans – instances uncovered in a recent scathing investigative report by the Seattle Times and Center for Public Integrity.
The report follows a recent study on the manufactured housing by the Consumer Financial Protection Bureau, which found that individuals who typically purchase these homes housing industry “include consumers that may be considered more financially vulnerable and, thus, may particularly stand to benefit from strong consumer protections.”
Waters’ remarks in opposition to H.R. 650 are below:
“Thank you Mr. Chairman.
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. Chairman, 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 doesn’t 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 highly profitable even with the Dodd-Frank mortgage protections in place.
In fact, according to its trade association, the manufacturing housing industry recorded shipment increases in every month of 2014. And 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 most respected 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 dollars in 2014 -- an increase of 34 percent over 2013. Yes, that’s a 34 percent increase, even after the Dodd-Frank rules were in place.
Unfortunately, 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 way imaginable – from producing the housing, to selling the housing, to originating loans that take advantage of vulnerable consumers and leave them with virtually no way to refinance.
Mr. Chairman, without objection, I would like to enter this article into the record.
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 with only $27 dollars 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 non-refundable 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, and attested that they pressured customers 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 nearly 14 percent interest before consumer protections are triggered, more than four times the average borrower is paying on a home loan. In the coming years, this number could very well grow – to 16, 17 and likely 18 percent as interest rates rise back to normal. And even worse, the bill would also make it legal for Clayton sales personnel to steer borrowers towards 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. Chairman, 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.
It 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 that purchase high cost mortgages, mandatory counseling so borrowers know what they are getting into – and even the ability of borrowers to have their loan rescinded if lenders don’t follow the law.
As the Consumer Financial Protection Bureau noted in their study of the manufactured housing industry, the individuals that 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.
I urge my colleagues to oppose this legislation and I yield back the balance of my time.”
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