MBA warns FHFA about changing manufactured home definition in Duty to Serve rule

The Mortgage Bankers Association (MBA) is urging the Federal Housing Finance Agency (FHFA) to move carefully as it finalizes changes to its Duty to Serve (DTS) rule.

The trade group backs the shift toward more flexible “eligible actions” while warning about potential unintended consequences for manufactured housing and lender operations, according to a comment letter sent Friday to FHFA Director Bill Pulte.

The FHFA in June proposed an outcome-based framework that would change how Fannie Mae and Freddie Mac support manufactured housing, affordable housing preservation and rural housing. It would emphasize chattel loans, broaden how Low-Income Housing Tax Credit (LIHTC) activities are treated and expand “high-needs” coverage.

Operational hurdles

A key issue for the trade group is FHFA’s request for input on whether to change the definition of a manufactured home to better account for factory-built housing beyond units covered under the U.S. Department of Housing and Urban Development (HUD) code — including modular homes.

“As innovation in factory-built housing continues, financing and collateral policy should evolve alongside product innovation,” the MBA stated. “Maximizing the effectiveness of the Duty to Serve program will also require continued attention to valuation practices, secondary-market execution, and operational considerations that affect lender participation.”

The group cautioned that some emerging factory-built products use ownership or titling structures that do not fit current purchase standards from the government-sponsored enterprises (GSEs). It also pointed out varying state titling laws and affixation rules that pose operational hurdles.

MBA also urged FHFA to coordinate any updated manufactured housing definition with other federal initiatives — including efforts by Congress, HUD and the enterprises themselves — to expand factory-built housing.

Restoration of 60-day comment period?

FHFA’s draft rule revises how performance is evaluated, while also shortening public input and plan changes. The proposal would shorten the public input window on DTS plans from 60 to 45 days, but the MBA urged the agency to keep the 60-day period to ensure adequate time for industry feedback.

The draft rule would sharply limit the GSEs’ ability to revise their three-year DTS plans, allowing changes mainly in cases of “extraordinary and significant market disruptions.” The group recommended including specific market changes outside certain tolerances, with any requested update supported by data and documented justification.

MBA urged FHFA to adopt a “do no harm” approach as it finalizes the rule, noting that the underlying mandate for the enterprises is not expected to change. Rather, the proposal is “a focused reworking of the form of the DTS regulations,” MBA wrote, which the group generally supports if implemented appropriately.

MBA said that, if managed correctly, FHFA’s revisions could maintain and improve support for manufactured housing, rural housing and affordable housing preservation while giving the GSEs and the regulator “improved administrative and oversight processes.”

This article was written by Flávia Furlan Nunes and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.