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Freddie expands manufactured-housing footprint

Freddie Mac has rolled out a two-year pilot that it hopes will spur a surge in factory-built affordable houses of a type that more consumers will want to buy.

These manufactured homes, dubbed CHOICEhomes by Freddie, will tend to be more expensive than a traditional manufactured home. They also look more like a regular houses, including having a similar roof design, dry-wall interiors, tight insulation and energy efficiencies.

manuhome“Manufactured-home builders have said we can build a product that is very similar to site-built homes and can fall within a price point where there is a void in today’s marketplace,”  Freddie Mac Affordable Lending Manager Dennis Smith told Scotsman Guide News on Monday.

The pilot, which started last week, will only involve homes titled as real property, where the home is situated on the land owned by the borrower. Freddie already bankrolls a few thousand manufactured homes titled as real property each year. It is unclear how many more loans will be made through this program.

“I believe it is going to be kind of the snowball effect,” Smith said. “The manufacturers haven’t built a lot of these because financing hasn’t been available. Now that financing is available, they will be able to go out and market these homes to consumers that may not have traditionally bought manufactured housing as a housing choice for them.” 

Freddie's competitor, Fannie Mae, was the first to jump into this market, launching a program in June known as the MH Advantage mortgage tailored for factory-built homes that have the same features as a site-built home. These homes are manufactured to closely resemble a regular house, and are certified and labeled by a sticker as a qualified home under Fannie's program. The buyer can can then obtain the same financing terms as a site-built home through the MH Advantage program, such as a 3 percent downpayment option, a comparable mortgage rate and mortgage insurance that can eventually be canceled. 

Freddie’s new pilot differs from its traditional manufactured-housing program in how these properties are viewed. In the past, Freddie’s guidelines required appraisers to compare the manufactured home with other manufactured homes to determine the value.

During this pilot, Freddie will allow manufactured homes that are built to a certain standard to be compared with site-built homes. Smith said the industry has asked for more flexibility in its guidelines.

“With this being such a new product for the manufactured-home industry, if you compare something today that comes off the production line and try to compare that to something that was built 10 or 15 years ago, you are really not comparing apples to apples,” Smith said.

Excluding the property costs, the average standard manufactured homes costs about $72,000, Smith said. The manufactured homes in the pilot will likely range from around $115,000 to around $200,000, which is still far lower than a traditional site-built home that averages north of $300,000.  

Freddie will essentially bankroll a loan for a borrower that includes the value of the home and property.

Smith said the pilot also will allow Freddie to gather information on how these homes perform in the marketplace. He noted that a recent Urban Institute study found that manufactured homes titled as real property appreciate in value similar to site-built homes. Freddie also has an ongoing chattel-loan pilot, but that pilot is still in the development phase.

“We have been doing our due diligence over this last year on understanding the data and the analytics around the chattel program,” Smith said. 


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