Preserving Access to Manufactured Housing Act of 2015
Floor Speech
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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.
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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.
Mr. Speaker and Members, I would urge my colleagues to oppose this legislation.
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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.
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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.
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.
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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.
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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.
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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.
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