SACRAMENTO - On Monday, August 26, 2013, legislation authored by Assemblymember Cheryl R. Brown (D-San Bernardino) was signed into law by Governor Edmund G. Brown, Jr. The bill, AB 379, preserves manufactured home financing by allowing manufactured homes to be converted into real property.
Typically, mortgage lenders do not finance manufactured homes because they are considered personal property or “chattel” rather than “real property.” As a result, manufactured home buyers rely on other alternatives for financing their homes, including a growing number of lending institutions that provide conventional and government-insured financing plans for prospective owners.
AB 379 was inspired by a recent court case, Vieira Enterprises v. City of East Palo Alto (2012). Vieira Enterprises filed a lawsuit against its property owner for failing to pay fees associated with the delivery and installation of two manufactured homes on real property. The Court of Appeals ruled in opposition of Vieira Enterprises, citing that the company had no security interest in the homes because they were considered real property.
This ruling allowed the borrower to forgo paying the balance of the home. In addition, the ruling discouraged lending efforts to consumers interested in purchasing manufactured homes. AB 379 removes the legal ambiguity that resulted from the Vieira case and helps ensure that loans to consumers who purchase manufactured homes will continue.
“I am pleased that Governor Brown signed this important law for the manufactured home market,” stated Assemblymember Brown. “As a member of the Housing and Community Development Committee, I think it’s important to author legislation to protect a sector of the housing market that is at risk of losing its lending options. This bill is a good start in addressing California’s need for affordable housing.”