On May 24, President Trump signed into law S. 2155 – the Economic Growth, Regulatory Relief, and Consumer Protection Act. Stated simply, this is a big deal. Passing anything at the federal level is no easy feat. The credit and congratulations is MHI’s, in particular, Dr. Leslie Gooch who is MHI’s Executive Vice President for Government Affairs and Chief Lobbyist and her lobby team.
MHI’s relentless efforts to advance our federal legislative goals took many forms before finding a successful vehicle in S. 2155. Prior to attaching the language to S. 2155, MHI was able to secure the language to several other legislative vehicles, and even passed the language out of the House as a stand-alone bill. The numerous previous efforts advanced the cause, but were never able to cross the goal line. But S. 2155 did.
What does S. 2155 do?
The quick answer is that it now excludes MH retailers and employees of retailers, i.e. salespersons, from tripping into being considered a “mortgage loan originator” if they sell a home and in that process take a loan application, or assist a consumer in obtaining or applying to obtain a loan, so long as they do not receive any additional compensation in excess of what they would have received in a comparable cash transaction. Or, stated another way, a retailer does not need to fear that they will accidentally say something wrong trying to answer a consumer’s questions about the availability or the process of acquiring financing.
If the same as a, “comparable cash transaction,” language sounds familiar, it is probably because that is similar to the language in Texas’ law providing the bright line exception to the SAFE Act. This language is also found, and was used by TMHA in 2009 to amend Texas’s SAFE Act, in the federal Truth in Lending Act in the definition of a finance charge. “The finance charge does not include charges of a type payable in a comparable cash transaction.”
Since Dodd-Frank became law, retailers had to exercise extreme caution when trying to help customers who naturally had questions about how they could get a loan to buy a house. The concern was that a retailer would accidentally say something that would cause them to cross the line into being considered a mortgage loan originator. These unduly burdensome limits left both retailers and their customers frustrated with the home buying process because customers could not receive answers to their questions.
Under the new law, retailers still cannot directly negotiate loan terms such as rates and fees, but they have been given new freedoms that will allow retailers to help consumers as they try to understand the financing process.
The language from Section 107
(C) does not include any person who is—
- not otherwise described in subparagraph (A) or (B) and who performs purely administrative or clerical tasks on behalf of a person who is described in any such subparagraph; or
- a retailer of manufactured or modular homes or an employee of the retailer if the retailer or employee, as applicable—
- does not receive compensation or gain for engaging in activities described in subparagraph (A) that is in excess of any compensation or gain received in a comparable cash transaction;
- discloses to the consumer—
- in writing any corporate affiliation with any creditor; and
- if the retailer has a corporate affiliation with any creditor, at least 1 unaffiliated creditor; and
- does not directly negotiate with the consumer or lender on loan terms (including rates, fees, and other costs).
There is a new affiliated relationship disclosure requirement added with the new law. Any retailer with an affiliated finance company needs to be aware of the new disclosure requirement and comply accordingly.
Other Ancillary MH Benefits in S. 2155
Several of the sections in the 73-page bill provide relief to smaller community banks and credit unions. Some of these changes could provide the flexibility needed so that more community banks consider participating in the MH lending space.
Specifically, the bill grants “qualified mortgage” status to loans originated and held in portfolio for banks and credit unions with assets under $10 billion. Interest only, negative amortizing loans and prepayment penalties are excluded from the new QM provisions for smaller banks. But the new law gives new latitude and allows smaller banks to develop their own loan underwriting process with fewer constraints.
The new law also waives the appraisal requirement for real estate loans under $400,000 in rural areas when an appraisal is deemed unfeasible.
There is also a new HMDA reporting exception for smaller banks who originate fewer than 500 mortgage loans per year.
The new provisions in S. 2155 both directly and indirectly help the manufactured housing industry. The legislation provides critical relief and flexibility so that the industry can better serve our customers, and opens new pathways to obtain financing for our homes.