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Manufactured Homes: The Hits GO ON!

By Susan Templeton

Mortgage and Lending

September 11, 2009 09:08 AM

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!

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April Solomon

Keller Williams Professionals - Swannanoa, NC

Broker/Realtor/GRI

Thank you for all this wonderful info?? I am in an area of lots of older mobile homes and we are doing a lot of owner financing these days.

Sep 11, 2009 09:20 AM

Jean Hanley

Coldwell Banker Kivett Teeters - Hemet, CA

Specializing in Folks Who Want To Buy/Sell Homes

Gee, there are quite a few mobile homes in the surrounding areas where I live and work, and although I have not listed or sold any, I thought there was a bit more leniency on them. 1994 or older is pretty much out, eh? Wow, that hurts a lot of folks both buyers and sellers.

Sep 11, 2009 09:59 AM

Susan Templeton

Bellingham, WA

Hi April, This is not the kind of news we like to share!

Owner financing is the ticket alright. If folks have sufficient equity and can afford that it will become the standard way to sell your manufactured home. That's currently the case with any home in a leased park lot....unless of course you have cash. Wonder if they take gold coins at closing?

Sep 11, 2009 12:57 PM

Susan Templeton

Bellingham, WA

Hi Jean, The situation has been getting worse for the last few years.

Lenders willing to fund homes older than 15 years would have to realize that in a few years, that 15 year old home is now twenty and woops...un fundable!

I demonstrated the difference in price for one borrower between the 'ideal VA' home and an FHA Manufactured home and it was about 40% higher payment per month. No kidding. That's attributable to higher interest rate and mortgage insurance.

Not to mentnion the fact that MI companies hate Manufactured Housing because they get to step in and pick up the slack. This means most conventioanal lenders funding Manufactured are limiting loans to 80% LTV and sellers may be allowed to carry back a second. Borrowers must come in with more.

Sep 11, 2009 01:02 PM

Paul McFadden

Responsive Pest Control - Seattle, WA

Pest Control, Seattle, WA.

Susan: Thanks for the update. I appreciate it! It sounds like if you've had 11 no's, that may be the end of the line. Perhaps a portfolio lender would bite. Have you tried a credit union, for example? Good luck!

Sep 12, 2009 02:33 AM

Gerry Suarez Jr.

New American Funding NMLS 6606 - Orlando, FL

FL Mortgage Guru

Susan, great work staying on top of this and getting the word out. I too have been seeing the changes but must say I note a scary undercurrent going on...

US Bank is continuing to handle Manufactured Homes on government loan programs, but only via their retail channels. It's my understanding some of the others bigger banks may be doing the same (haven't confirmed though). You might want to check it out in your local market and see what you find.

Gerry Suarez, Jr.

Your FHA Loan Pro!

Sep 12, 2009 07:50 AM

Susan Templeton

Bellingham, WA

Thanks, Paul! Our local credit unions are pretty taxed right now with the local need and have offered shorter terms (20 years) and higher interest rates on the table.

A couple of portfolio FHA lenders will fund the purchases but the rates are at least 1% higher or added points which makes them pretty hard to compare. As always thanks for the encouragement!

Sep 12, 2009 09:35 AM

Susan Templeton

Bellingham, WA

Hi Gerry, Yes we have a few portfolio lenders offering not great terms as I said above. Some of our FHA lenders want 15% down!

Sep 12, 2009 09:39 AM

Brooke Villano

The Legacy Group - Puyallup, WA

Hi Susan,

I am local in the State of WA and my husband owns a company called Mad Dog Foundation Systems, LLC. He specializes in compliance work on manufactured homes in order to bring the properties up to HUD standards. He has been very busy lately with purchase transactions and refinances. Although there is definitely a lag time on closing them. Also, I used to be a Mortgage Loan Officer at Wells Fargo Home Mortgage-Retail, and my understanding is they are still lending on these properties, same LTV's on FHA/VA loan programs. But I think you're right that credit guidelines have become more restrictive...although they have for all loan types. I'll double check with my sources here but I also heard like Gerry said that US Bank and BOFA Retail will close these deals!! Hope that helps everyone!!

Oct 28, 2009 10:36 AM

Susan Templeton

Bellingham, WA

Hi Brooke,

Thanks for your perspective. Glad to hear some are going through. It's true that NEW manufactured home lenders, including USDA and some local banks may choose to offer programs others deem too risky. They are offering these loans to better credit clients on better properties.

Bank of America, US Bank and other major wholesalers who recently funded manufactured housing don't 'admit' they fund them. Some will fund manufactured via FHA on a case by case basis for higher prices (plus higher rates) and lower LTV's. It's been quite a shock since this news came out.

I hope this news doesn't kill the manufactured housing industry. It seems designed to push people toward higher standards like modular and pre-fabricated systems. Foundations have always been the bugaboo of the manufactured home because so many were build on substandard pilings-- so if refinance lenders are requiring better foundations...all the better for consumers!

Oct 28, 2009 11:50 AM

Margaret C. Taylor

Century 21 New Millennium MD - Mechanicsville, MD

St Marys/Calvert/Charles MD Real Estate Agent

Thank you for this information. I just read the reblog. We have both Manufactured and Modular Homes in St Mary's MD this is important information to share with a Buyer and Seller. Margaret C.

Jun 29, 2010 02:11 AM

Susan Templeton

Bellingham, WA

Hi Margaret, Good to share information on this. The few banks lending on Manufactured home now really want stellar credit and income verification due to the high default rates in this category. Modular is well understood now as a superiour product. Most are built to ISO standards and clear local building inspections to stick built category.

Jun 29, 2010 07:03 PM

John DL Arendsen

CREST "BACKYARD' HOMES, ON THE LEVEL General & Manufactured Home Contractor, TAG Real Estate Sales & Investments - Leucadia, CA

Crest Backyard Homes "ADU" dealer & RE Developer

Hi Susan, I know I'm way late to this party but I've been surfing the AR blog looking for members who post about the MH Industry. We're a Nationwide service company that specializes in engineered certifications, affidavits of affixture and foundation retrofitting, repair and installation.

We'd love to have you join our AR group and feel free to contribute anything you wish regarding the Factory Built Housing Industry be it HUD Manufactured or Modular. We will be happy to repost any good information to our sphere of influence.

http://activerain.com/groups/manufacturedhomes

Feb 04, 2014 12:05 PM