Written By: Joan Ewing, Op-Ed Writer
I initially titled this article, “HUD Sues Lenders over Omission of Manufactured Housing Engineering Certificates,” but I decided that it might be a little over the top. But, the facts are this. A letter issued by the HUD Inspector General (MEMORANDUM NO: 2007-KC-0801) dated September 2007 recommended just that.
The report summarized an audit of over 200 manufactured home loans that had defaulted. Among other things, they were looking for the engineering certification. From the letter . . . “As part of this audit, we reviewed 205 FHA loan files for the required engineer’s certification of the property foundation. FHA rules require lenders to provide the certification confirming that the foundation complies with FHA requirements. . . We recommend that HUD seek indemnifications and recovery of losses incurred from the responsible lenders, unless the lenders can provide the required certifications.”
All FHA loans on manufactured homes, whether new construction or existing, new loan or refinance, require an engineer’s certification that the foundation meets the requirements of a very specific document, The Permanent Foundation Guide to Manufactured Housing dated September 1996 (PFGMH). The report must be stamped by a licensed engineer (or architect). Certifications by appraisers, home inspectors or HUD fee inspectors are not acceptable. Many lenders are not aware of the requirement to use engineers. Many are also not aware that compliance with state and/or local requirements is insufficient reason to certify compliance with the HUD manual.
Complicating the matter is the commonly used Manufactured Home Appraisal Report. On page 2 is a very specific question: “Is the manufactured home attached to a permanent foundation system?” Most appraisers will answer this question without giving it much thought. However, when they answer this question, they are accepting a huge liability without being paid an extra dollar to do so.
I know of appraisers who have been sued over a careless “yes” answer on that question. A “yes” answer means that the appraiser is certifying that the home has reinforced concrete footings with frost depth protection under the support piers and lateral/vertical anchorage designed to withstand expected wind and seismic events. A knowledgeable appraiser will not answer the question with either a “yes” or a “no.” They will add a requirement for an engineer’s certification and put the monkey on the engineer’s back.
It’s not easy to know whether a foundation complies with the PFGMH. Even by engineering standards, the manual is vague, contradictory and very unclear on exactly what is required and what is not permitted. Is vinyl skirting permitted? Is a perimeter frost protected ribbon footing required? Is frost protection required everywhere in the United States? Are dry stacked piers permissible? Is the skirting part of the foundation? You won’t find consistent answers because there are none. Consider the PFGMH’s requirement for existing construction. “Upgrade of existing anchorages and footings shall meet the intent of the definition of permanent foundation stated herein.” Who decides what constitutes “intent?” The engineer does, and that is why you will not find two engineers who will give the same requirements for existing foundations. A knowledgeable engineer can save a borrower a significant amount of money. Lenders can protect themselves by ensuring they have the required engineering certification. They can leave the specifics to the engineer.
About The Author
Joan Ewing - As an op-ed writer and active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base.