This news is not going away fast. In the wake of FHA and VA lenders closing the window for funding Manufactured Home Loans (August 09) I am canvassing our network for solutions, conventional, portfolio, you name it. Here's the skinny:
The FEW lenders still funding Manufactured home purchases require:
1. Higher credit standards for both borrowers
2. Higher down payments than stick built homes
3. Higher interest rates and closing points
4. Newer age limitations on the home (which creeps up every year, 1994 is typical)
My August post on this: http://activerain.com/blogsview/1202931/manufactured-homes-take-a-hit-
What's the Big Deal? Manufactured homes represent significant risk to the investor because defaults in this housing sector are extremely high. My portfolio lenders won't fund anything older than 1994 . The list of no gos gets longer by the day.
What's a Seller to Do? While this is not my area or expertise, it appears the loss of good lending terms will seriously affect resale value of all manufactured housing. Higher insurance fees (and fewer insurers) are an ongoing factor.
MFD Specialist Lenders: A Manufactured Home Lender I spoke with today offers 12% interest rates on higher LTV's. They cherry pick the properties and rates depend on age of home, credit factors, etc. They are extremely busy picking up the pieces even at those interest rates (!) Since August, the government mortgage lenders who 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 these loans in this market? Portfolio specialists charging high enough interest rates to cover their behinds, that's who.
Foreclosures high in Manufactured Home category. I was told today that banks are so overloaded with defaults in this category they are reselling them for pennies on the dollar. Just look at any FHA or VA repossession site. 99% are Manufactured Homes.
MFD Industry Implications I understand Warren Buffet owns a Manufactured Home Company. Wonder if he's taking his lumps on that? A community dependent on a Manufactured Home plant, the suppliers to that plant, the distribution chain, and everyone who cuts hair or feeds the workers of that plant will be in for an unpleasant surprise unless they can quick retool and up-skill to the next level.
Enter Modular:The Modular Housing Industry (factory built in sections on timber sub-floors) will likely benefit from this news. Modular homes are classified 'stick built' construction and are more affordable than most conventional homes due to economies and efficiencies of scale and under-cover building. This category is worth watching!
Here's my blog on that: http://buildnet.blogspot.com/2007/12/gliding-toward-green.html
RECAP: Because Fannie and Freddie will only fund 80% loan to value on newer homes with perfect credit, this defeats the purpose of entry level housing since very few borrowers have 20% to put down. VA lenders are scarce as hen's teeth.
I know Realtors are reluctant to give this news to their clients for whom they may be listing or negotiating a Manufactured Home transaction. I've heard Realtors trying to steer borrowers to 'their lender' who 'just funded' a manufactured home a few weeks ago. Sure, that lender funded a home they had locked a loan 30-45 days ago. They can no longer originate that same loan unless they are willing to hold it. Most smaller banks are so distressed by local conditions that underwriters are being told to flatly deny a manufactured home purchase or refinance.
REQUEST: I am seeking a VA lender for a Manufactured Home Purchase for a well qualified borrower. I have 14 "no's" in my inbox today. My poor borrower even called the Veteran's Adminstration and was told it's not the VA. This confuses everyone. Lenders are simply not happy about funding manufactured homes. Their investors, you and me, their depositors are not happy about it. We need better answers for our buyers! (yes would be nice?)
IF YOU KNOW ANYONE FUNDING VA MFD HOME 100% PURCHASES TODAY PLEASE TELL THEM TO CALL ME NOW!!! ....and --hey hey hey...be careful out there!