Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, gave the following floor statement in opposition to H.R. 1699, a bill that would remove important protections for consumers of manufactured housing:
As Prepared for Delivery
Thank you Mr. Chairman. I rise today in opposition to H.R. 1699, which would undermine the Dodd-Frank Wall Street Reform and Consumer Protection Act, and eliminate consumer protections for some of the country’s most vulnerable borrowers.
Mr. Chairman, the title of this bill paints it as a measure that purports to preserve access to manufactured housing.
So, I want to be very clear about what this bill is and is not about, and who will win and who will be harmed if this bill is signed into law.
This isn’t about regulatory burdens reducing access to credit. The lending volume in the manufactured housing industry has gotten back to where it was before the Consumer Financial Protection Bureau put new regulations in place.
This isn’t about credit unions and community banks not being able to enter the manufactured housing market. Many credit unions already underwrite mortgage loans and chattel loans for manufactured homes.
What H.R. 1699 is about is one-stop shop mega-institutions like Clayton Homes, owned by billionaire Warren Buffett, which has almost half of the market share for manufactured housing lending. His manufactured housing empire profits in every way imaginable in this sector—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. This bill makes it easier for financial titans like billionaire Warren Buffett to earn even more profits, at the expense of some of the most vulnerable consumers in this country.
The reality is that this bill would harm manufactured housing consumers, who are typically more vulnerable than the average homeowner. They are low-income buyers, rural buyers, and minority buyers. Reports 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 at the expense of low-income and rural homeowners.
Even the industry itself asserts that it has been growing and highly profitable even in the years after Dodd-Frank and the Consumer Bureau’s mortgage protections have been in place.
Berkshire Hathaway Chairman Warren Buffett has also been touting the post-Dodd-Frank Act profitability of manufactured housing. Clayton Homes is Berkshire’s highly profitable manufacturing housing subsidiary, and it earned a total of $744 million dollars in 2016—a 33 percent increase over 2014. Yes, that’s a 33 percent increase, after the Dodd-Frank Act rules were in place.
Unfortunately, this is the same Clayton Homes that was the subject of a multi-part Seattle Times and Center for Public Integrity joint investigation.
Mr. Chairman, without objection, I would like to enter these articles into the record.
The investigation found that Clayton locked one disabled veteran in Tennessee, Ms. Dorothy Mansfield, into an expensive loan even though the required monthly payment would leave her with only $27 dollars a month to cover the rest of her living costs. Worse, it was a no-documentation loan, meaning that no one even bothered to verify Dorothy’s income.
The investigation also found that Clayton Homes’ in-house lender, Vanderbilt Mortgage, charged minority borrowers substantially higher rates, on average, than their white counterparts. Unfortunately, this appears not to have been an isolated incident, as federal data reveals that Vanderbilt Mortgage typically has charged African American borrowers who make more than $75,000 a year slightly more than white people who make only $35,000.
Other Clayton Homes 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 manufactured home.
Just like subprime mortgage loan borrowers who were preyed on before the financial crisis, many consumers who purchase manufactured housing were convinced to take out high cost loans based on false promises that they would be able to refinance to lower rates in the future.
Former Clayton Homes salespeople have confirmed 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. Under this bill, some of our most important consumer protection laws that prevent this kind of steering—like the Truth in Lending Act, the Secure and Fair Enforcement for Mortgage Licensing Act, and the Home Ownership and Equity Protection Act—would no longer apply to manufactured housing retailers and salespeople that offer credit to borrowers, even if those salespeople do the same things traditional loan originators do, like referring consumers to a creditor or assisting them in applying for credit.
If enacted, H.R. 1699 would allow abusive lenders to charge over 14 percent interest before consumer protections are triggered, more than four times what 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 also makes it legal for Clayton Homes sales personnel to steer borrowers towards high-cost loans—loans from other parts of the Clayton conglomerate that are not in their best interest—a practice that Congress 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. Nevertheless, the House is considering a bill that rolls back key protections for these already financially vulnerable consumers. It would do away with a number of protections current law attaches 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 that borrowers know what they are getting into—and even the ability for borrowers to have their loan rescinded if lenders don’t follow the law.
As the Consumer Bureau noted in its study of the manufactured housing industry, individuals who apply for manufactured housing loans “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 Consumer Bureau’s report, investigative reporting has provided names and stories of individuals who have fallen victim to the market practices and policies described by the Consumer Bureau.
Finally, when a nearly identical measure was considered by the House last term, as H.R. 650, the Obama Administration issued a veto threat and said that they “strongly opposed” the bill because it would “put low 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.”
This bill rolls back consumer protections amidst evidence that the manufactured housing industry needs more oversight, and is at its heart a dangerous giveaway to a sector that already profits handsomely at the expense of vulnerable borrowers. I urge my colleagues to oppose this bill and I reserve the balance of my time.