One in five manufactured home borrowers are using risky contract financing and fewer than half are obtaining a traditional mortgage, The Pew Charitable Trusts reported this week.
A scarcity of safe and affordable loans for manufacturing housing “leave thousands of families vulnerable to eviction and financial losses,” the nonprofit public policy organization concluded in a recent report.
“Modern manufactured homes can help ease the nation’s housing shortage, but only if buyers can access safe and affordable financing,” said Rachel Siegel, senior officer with The Pew Charitable Trusts’ housing policy initiative.
Around three quarters of the 18 million Americans who live in manufactured homes own their land, and could be candidates for a federally guaranteed mortgage, according to Pew. But many are turning to higher-interest, higher risk, home-only loans or contract financing.
Pew’s report drew on government data and its own 2022 survey of 1,252 adults who live in a manufactured home as their primary residence. The data on borrowing was based on 373 responses.
Contract financing is particularly problematic. A fifth of all manufactured homeowners, representing 500,000 people, use some form of contract financing, according to Pew.
Contract buyers do not hold the deed to their manufactured homes until they make their final payment, and can be evicted like a renter, despite often improving their property and sometimes paying property taxes, Pew wrote.
State rules on titling manufactured homes encourage contract financing and make it harder to obtain safer loans, according to Pew.
“Outdated policies are preventing lenders from offering loans in what could be a competitive market,” Siegel said. “Updating those policies could help many American families with good credit become homeowners.”
Every state, except New Hampshire, automatically titles a manufactured home like a car, as “personal property.” The owner must comply with varying state regulations to get the title status changed to “real estate,” which would qualify for a mortgage.
Only roughly half of the owners ultimately title their manufactured home as real estate, however. A third of the people who do own their land still title the manufactured home as personal property, Pew reported.
Pew released its report the same week that the Consumer Financial Protection Bureau (CFPB) announced it was suing manufactured home lender Vanderbilt Mortgage & Finance, alleging the lender sets up borrowers to fail.
Vanderbilt, a division of the nation’s largest manufactured home builder Clayton Homes, “knowingly traps people in risky loans in order to close the deal on selling a manufactured home,” CFPB Director Rohit Chopra said in announcing the lawsuit. Vanderbilt called the lawsuit “unfounded and untrue” and that the CFPB’s action was regulatory overreach and politically motivated.
