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Residential Department: BackSpace: August 2018



Financing options are expanding for manufactured homes

 Many affordable-housing advocates are hopeful that increased participation by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac in manufactured-housing financing could boost options for renters looking for less expensive housing alternatives and homeownership perks.

Fannie and Freddie announced late last year that they would begin pilot programs to buy chattel loans over a two-year period, starting in 2019. Chattel loans are home-only, personal-property loans that are not secured by the underlying real estate, unlike typical home mortgages.

A chattel loan must be used if a homeowner does not own the land upon which the manufactured home sits, as in mobile-home parks or land-lease communities. More than 17 million Americans live in manufactured homes, according to 2016 data from the U.S. Census Bureau. And 80 percent of new manufactured homes in 2015 were titled as chattel, the Federal Housing Finance Agency says.

“I think it’s important that fair and equitable financing be available for this type of housing, because the cost of the present chattel loans and the difficulty for people to get them has made a very affordable product, in many cases, unaffordable to those who most need it,” says Donna M. Blaze, chief executive officer of the Affordable Housing Alliance, which works on housing-development efforts in New Jersey.

Increased competition for manufactured-housing lenders “can be beneficial to consumers across the country,” says Doug Ryan, senior director of affordable homeownership at Prosperity Now, a Washington, D.C.-based organization that works on numerous consumer-financial issues.

Ryan notes that 21st Mortgage Corp. and Vanderbilt Mortgage Finance Inc. — both of which are affiliates of Warren Buffett’s Berkshire Hathaway — originate about one-third of all manufactured-home loans. There are a handful of specialty lenders, credit unions, and savings and loan associations that offer chattel loans, but they’re not on every street corner. Being able to securitize these loans on the secondary market could encourage more lenders to enter the fray.

“By Fannie and Freddie getting involved, even in a small way, I think their current seller/servicers will get interested perhaps — certainly in some markets — and they’ll realize that they don’t have to hold these [loans] in portfolio. Nobody wants to do that,” Ryan says.

The secondary market for chattel loans virtually dried up after Fannie and Freddie stopped purchasing them when many loans defaulted in the early 2000s. Several challenges must be considered during the GSEs’ pilot-program stages, Ryan says.

Loan performance might be the most important factor. The GSEs plan to collect performance data on chattel loans, mostly from smaller lenders, before purchasing them and potentially expanding their market reach in the future. The GSEs plan to buy about $200 million in chattel loans in 2019 and 2020. That’s a modest figure compared to the $1.8 billion in non-chattel manufactured-home loans, which are secured by real estate, that Fannie Mae alone purchased in 2017.

Fannie and Freddie would step into some markets if the laws were changed.

Ryan also says the GSEs should study the characteristics of chattel-loan borrowers and compare them to single-family home mortgage borrowers.

“I think there are some differences,” Ryan says. “Obviously, they’re typically lower income. You might be in a more rural circumstance. You’ve got to get your arms around appraisals. … This is a different market than it was 20 years ago, and it’s a lot different than the site-built market.”

Paul Bradley, president of ROC USA, a nonprofit organization dedicated to promoting resident-owned communities, also believes the GSEs will be cautious in their approach to chattel loans.

“There’s some recovery to be done,” Bradley says. “They did this once before and they had a very substantial chattel portfolio blow up on them.”

Excluding land costs, the average sales price of a manufactured home in 2016 was $70,600, compared to nearly $287,000 for a site-built home, according to census figures. Although they are less expensive to build, Blaze says potential buyers should know that today’s manufactured homes are of higher quality than the mobile homes of prior decades in terms of both construction and amenities.

“The quality of the housing and per-square-foot cost of the interior space is a much better deal than any rental units that you can find in our marketplace,” Blaze says.

Manufactured homes within resident-owned communities (ROCs), which can contain dozens or even hundreds of homes, differ from those placed in land-lease communities because they do not require chattel financing. ROC homeowners purchase a stake in a nonprofit cooperative, or co-op, and share equally in the community’s land ownership.

In New Hampshire, state law allows ROCs to be titled as real estate instead of chattel, which prompted Fannie Mae last year to begin offering 30-year fixed-rate mortgages with down-payments as low as 5 percent to the state’s ROC residents. New Hampshire could serve as a financing model for other states, but only a small fraction of manufactured-home communities are resident-owned, ROC USA says.

The Uniform Manufactured Housing Act (UMHA) of 2012 allows manufactured-home owners to title their homes as real estate or personal property. Individual states must adopt the law, however, and the vast majority of states still do not allow homes on leased land to be classified as real property, the National Consumer Law Center reports.

Advocates think widespread adoption of the UMHA would open the doors for Fannie Mae and Freddie Mac to invest in more manufactured homes because their “Duty to Serve” rule — which directs the GSEs to take a leadership role in affordable housing for low- and moderate-income populations — only applies to real property.

“Fannie and Freddie would step into some markets if the laws were changed — I absolutely do believe that,” Ryan says.

Bradley is a bit more cautious, but still thinks that change is coming sooner rather than later.

“I just don’t frankly believe the GSEs are ultimately going to move the meter significantly on manufactured-housing finance or development … until everybody moves toward a home-only residential mortgage market,” Bradley says. “It’s just not that far away. It’s literally at people’s fingertips.” 


Neil Pierson is editor in chief of Scotsman Guide Media. Reach him at or (800) 297-6061.

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