In the wake of Taylor Bean Whitaker being disowned by HUD and shut down on August 4th, (they were the 3rd largest FHA lender in the nation prior to their closing) we are getting the inevitable announcements from other Government lenders about new restrictions.
Today several major FHA/VA lenders announced they have ceased funding Manufactured Housing. Considering these loans were largely funded by FHA and VA due to the guarantees that limited the lender's concerns about defaults it is hugely unlikely many investors will step up with decent financing options for manufactured housing, at least for the foreseeable future. Sure there are specialists and local banks who can fill the gap but the reason these properties are so risky is two fold: cheaper housing attracts a borrower who by definition are at higher risk to default. Banks are particularly wary of having foreclosed manufactured homes on their books because they can't sell them as easily and now...well, without financing who will buy?
News Update: 09/10/09: I was told today by a specialist manufactured lender they offer 12% interest rate to manufactured home loans. They are extremely busy picking up the pieces even at those interest rates (!) Since August, the government mortgage lenders were selling their FHA Manufactured Home Loans to Taylor Bean now have no place to sell them...so the question lingers: who will buy and service them in this market?
Expect a rash of foreclosures to accellerate among manufactured home owners. Now the owners of manufactured homes will have no easy refinance method such as the FHA streamline. With no loans, no sales. Prices will plummet! The only manufactured home at the present time that will benefit from USDA lending is a new manufactured home (that has never been lived in). So what will that home buyer do if they decide to move in a few years and the lenders have evaporated so their home can't be funded by a new buyer? Give them away?
Manufactured homes could actually be considered a liability to a property!
The manufactured housing industry could really be taking a hit The sheer domino effect of this drastic reluctance to fund manufactured housing could have some very big downsides to rural economies in particular where the majority of manufactured homes provide the predominant housing. What if you have a manufactured home plant in your area? Did anyone consider this when they pulled the plug on their own bank eliminating manufactured loans? Are we trying to control the quality of housing by eliminating this entire sector? One wonders what the entry level rural buyers in regions like ours will do. While I have always tried to steer folks toward higher quality housing there is no doubt the manufactured home has provided an important boon to home ownership. What next government lenders?