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   ARTICLE   |   From Scotsman Guide Residential Edition   |   March 2016

Build and Grow Your Business

By knowing the basics of manufactured-home loans, originators can create a new pipeline of deals

Build and Grow Your Business

At a glance

The difference between manufactured and modular homes

Although manufactured and modular homes are both built at an offsite location, manufactured homes must be constructed according to the U.S. Department of Housing and Urban Development code, and must be on a permanent chassis. Modular homes must be constructed according to state, local or regional building codes.

Source: U.S. Department of Housing and Urban Development


About eight years ago, as the mortgage industry was changing, many originators had questions. They wanted to know how to thrive in a changing environment. They wanted to know what new programs would replace those that were lost, and what could keep their businesses headed in the right direction.

Some met the change head on and adjusted the way they conducted business and some folded. Others evolved, learned about lesser-used programs and added them to their lending library. Those specialty programs allowed these individuals to differentiate themselves in a new era of lending.

Many originators became proficient in one particular program. Others chose to learn as much as possible about as many programs as they could, thus achieving a wider reach by diversifying their program lines. One market that has remained underutilized and misunderstood, however, is manufactured housing.

Oddly enough, even as lesser-used programs started to take center stage, originators didn’t seem to want to take on manufactured-home loans. Because of that, they missed out on opportunities to maintain or build relationships with real estate professionals, developers, builders, retailers and, of course, past clients who could make referrals.

The good news is that originators can still take advantage of these loans to increase their business, and there are only a few basic things they need to know to become proficient and offer their borrowers solutions in the manufactured market.

Home basics

Manufactured homes are factory-built homes on a permanent steel frame or chassis that can be transported to a site. They consist of one or more sections and can be referred to as single-wide, multi-wide, double-wide or triple-wide properties. Once transported to the site, the axles and wheels are removed before the home is permanently attached to its foundation system.

To be eligible for Federal Housing Administration (FHA), Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA) and possibly conventional financing, a manufactured home must be:

  • Suitable for year-round living;
  • Built after June 15, 1976 (and in compliance with federal Manufactured Home Construction and Safety Standards);
  • Attached to a permanent foundation;
  • Held in fee-simple land ownership; and
  • Installed on a site, not to be moved from its original location.

Keep in mind, when considering any loan programs, to refer to specific agency guidelines.

Program specifics

For a manufactured home to be eligible for Title II FHA insurance, it has to be classified and taxed as real property, and a valid case number and appraisal log need to be assigned through FHA Connection. The home has to have a minimum of 400 square feet of living area, so single-wides are allowed. An engineer’s certification is required to ensure the foundation meets U.S. Department of Housing and Urban Development (HUD) requirements. This certification confirms that the manufactured home meets guidelines specified in the Permanent Foundation Guidelines for Manufactured Housing.

The VA loan program has many similarities to FHA for eligibility requirements. Single-wides, for example, also are allowed in this program, and the home must be taxed as real property before closing. An engineer’s certification may not be required, but if the appraiser has reasonable doubt as to the acceptability of the foundation system, then a statement from a registered professional engineer will be required. For the USDA program, it’s best to refer to program guidelines. Among the basic requirements is that the manufactured home must be less than 12 months old and not previously occupied.

A common misconception of manufactured homes is that if they
are located in a flood zone, they are automatically ineligible for financing.

Eligibility requirements for conventional loans through Fannie Mae and Freddie Mac differ slightly from government-loan offerings. To be eligible for conventional financing, the home must be at least 12 feet wide and have a minimum of 600 square feet of gross living area. The home must be a one-unit dwelling, classified as real property, and it must be permanently connected to a septic tank or sewage system and to other utilities in accordance with state and local requirements. An engineer’s certificate is not always required, but if there are alterations or additions from the original build, then an engineer’s certificate will be required to confirm the home’s structural integrity.

One other program to mention is the one-time close construction-to-permanent mortgage. For a new-construction manufactured home, this program allows financing a borrower’s final loan, ensuring funds for the construction loan. Borrowers will pay one set of closing costs and get their construction financing and final loan wrapped into one transaction.

HUD and flood compliance

All manufactured homes have a HUD data plate (also known as a compliance certificate), which is usually located in a utility closet or on an electrical panel, or another readily accessible and visible location within the home. Each section has a HUD certification label, also referred to as a HUD seal or tag, affixed to the exterior of the home. A double-wide manufactured home, for example, will have two HUD tags, one affixed to the exterior of each section.

An appraisal will confirm the existence of the HUD tags and data plate. Fannie and Freddie require the presence of these — and if any are missing, the loan is ineligible for delivery. Alternatively, a label-verification letter from the Institute for Building Technology and Safety is acceptable.

A common misconception of manufactured homes is that if they are located in a flood zone, they are automatically ineligible for financing. For an FHA mortgage, when a manufactured home is located in flood zones A or F, an elevation certificate is required. This certificate ensures the dwelling and related structures and equipment essential to the value of the property are above the base flood elevation.

For manufactured homes with basements, the grade beneath the basement must be at or above the 100-year flood elevation. For conventional financing, as long as you can obtain flood insurance, the home will be eligible for a loan. You are not allowed to waive the escrow for flood insurance. 

•  •  •

There are many facets to manufactured- home lending, and like any other program, it’s simply a matter of learning the specifications and guidelines. Once you as a loan originator have done that, you can supplement your lending library with more programs to offer and increase your business and referrals. 


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