(Elkhart, IN)  -  Today, Congressman Joe Donnelly held a press conference at Patriot Homes in Elkhart with leaders in the manufactured housing industry to discuss legislation he introduced in the U.S. House of Representatives this week. The FHA Manufactured Housing Loan Modernization Act of 2007 would raise manufactured housing Title I loan limits and improve underwriting standards to make sure the program is actuarially sound.

“We have a strong tradition in Elkhart and other Indiana communities of delivering first class housing to Americans, and providing quality jobs for Hoosiers,” Donnelly said. “However, despite the great work of our local companies, this industry is in the midst of a nine-year downturn in housing production levels. I have been working very closely with the manufactured housing industry to learn what Congress can do to reverse this trend and I believe that this legislation would help revitalize the industry.”

The Federal Housing Administration (FHA) Title I mortgage insurance program insures loans made by private lenders to finance the purchase of manufactured homes that will be placed in land-lease communities or otherwise not classified as real property. 

Title I loan limits have not been adjusted for inflation since 1992 and the manufactured housing industry has experienced a major decline since.  In 1992, in the midst of the last downturn, FHA insured 30,000 Title I loans.  In 2006, that number went to less than 1,500.  In Indiana, that number went from 377 loans in 1992 to just four loans in 2006.

Ginnie Mae, which securitizes FHA loans, maintains that its decline in Title I activity is due to “structural problems” with the program.  They argue that it is very difficult for them to recoup losses when lenders go out of business.  This does not occur with Title II (real property), because insurance under that program is set on a loan-by-loan basis as opposed to a bundle of loans. 

“The manufactured housing industry has a strong presence in my district and historically, the FHA Title I program has played an important role in providing mortgage financing for such homes,” Donnelly said. “The drastic reduction in FHA Title I loans not only keeps low- and moderate-income families from achieving the dream of homeownership, but the manufactured housing industry has suffered significantly as a result of the decreased demand.”

Ginnie Mae officials have indicated that if the insurance issue can be addressed, they would certify new lenders and securitize more Title I loans.  The FHA Manufactured Housing Loan Modernization Act of 2007 would give HUD the authority to increase insurance premiums and improve underwriting standards to make sure the program is actuarially sound. This aspect of Donnelly’s bill would address the current structural programs, resulting in a stronger Title I program.

Donnelly’s bill also includes provisions that would raise the manufactured housing Title I loan limits and annually index them for inflation. 

“My legislation would fix the problems with the current FHA Title I loan program and increase the number of loans available to buy manufactured housing,” Donnelly said. “If we increase the number of people who are able to buy manufactured housing from companies like Patriot Homes, economic development would occur here in Elkhart, the manufactured housing capital of the world, and in other parts of Indiana. Additionally, my bill would allow more Americans to achieve the dream of homeownership by providing them with options for affordable housing.”

Last Congress, a similar version of this bill was introduced by Chairman of the Financial Services Committee, Barney Frank, and passed the House on July 25, 2006 by a vote of 412 to 4. The legislation was also introduced in the Senate by Senator Evan Bayh but was not brought before the Banking Committee for a vote.

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