The foreclosure crisis. Homeowners “underwater.” Neighborhoods blighted with vacated homes. Tougher credit standards and new regulations making it harder for lower-income households to qualify for a mortgage.
These have been sadly familiar headlines for almost five years. Is there anything new—and positive—one can say about mortgages?
To find that bright spot, we can turn in a surprising direction: toward manufactured homes.
A groundbreaking I’M HOME report released this week by CFED in partnership with the Fair Mortgage Collaborative, titled Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes, analyzes $1.7 billion in loan performance data and finds that, contrary to common belief, mortgages on manufactured homes perform as well as comparable site-built home mortgages.
The study goes on to identify manufactured home mortgage products that actually outperform other loans.
Based on this evidence, more lenders and investors should be convinced to enter or expand their manufactured home mortgage offerings as good business. Home owners will then benefit by finding it easier to obtain affordable, long-term financing.
More than seventeen million Americans rely on manufactured homes for affordable housing. Manufactured homes utilize factory-built technology and cost up to 30 percent less on average than comparable site-built homes. Modern manufactured homes can be highly energy efficient, safe and attractive.
But while the price of the home is one essential ingredient in affordability, it is not the only factor. The cost of financing can be an equal or even greater factor; despite the challenges of the past several years, the U.S. tradition of a fixed-rate, 30-year mortgage has been at the heart of achieving the dream of homeownership.
Sadly, millions of owners of manufactured homes don’t have the mortgage option. For up to three quarters of all owners and buyers of manufactured homes, a chattel loan is what they get. They must spend hundreds of dollars more each month to service their chattel loan—dollars that they could otherwise spend on food, clothing, utilities, education and savings. The reason that these households can’t get a mortgage is two-fold: the majority of mortgage lenders don’t lend for manufactured homes, and many manufactured homes are titled under state law as “personal property” like automobiles, and as a result don’t qualify for mortgages.
The good news is that, as shown in the new I’M HOME report, there are a solid group of lenders and investors offering mortgages to owners and buyers of manufactured homes—and these mortgages are performing well.
More good news can be found in the passage of the Uniform Manufactured Housing Act, or UMHA, by the Uniform Law Commission. The UMHA creates a simple and consistent method for owners and buyers who choose to title their manufactured home as real property instead of personal property. In many states today, the process is too onerous or limited to give homeowners a real choice, and UMHA would change that. As personal property, these homes can only be financed with chattel loans; as real property, they may be financed by mortgages. In almost every state, the UMHA would represent an improvement on existing titling law, but each state must introduce and enact the act in order to make freedom of choice a reality for more homeowners. Advocates in several states are considering introducing the UMHA, and Vermont made the first such introduction in February.
So, take heart! There is indeed good news on the mortgage front. First, owners and buyers of manufactured homes may already be able to find an affordable, long-term mortgage (if your home is titled as real property). Some sources you may want to consider include:
Lenders doing business with your state Housing Finance Agency. Check the “HFA Directory” on the website of the National Council of State Housing Agencies (NCSHA) to find the HFA in your state, and ask for their approved lenders.
Local credit unions. Resources for local credit unions include Credit Union Locator of the National Credit Union Administration (NCUA) and the Member Directory of the National Federation of Community Development Credit Unions (NFCDCU).
USDA Rural Development 502 program (in qualified rural areas for eligible borrowers). Contact the USDA Rural Development office for your state to inquire about Direct or Guaranteed loans.
FHA Title II lenders. Check the Lender List on HUD’s website.
Community Development Financial Institutions. A helpful resource is the ‘Find a CDFI’ function of the Opportunity Finance Network.
Second, more lenders and investors are to be encouraged to initiate or expand their mortgage offerings for manufactured homes on the basis of the data analysis provided in the report, Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes.
We hope you will join us in realizing the potential of manufactured homes to play a vital role in establishing a stock of permanently affordable and energy efficient housing in the US.