Written By: Joel Palmer, Op-Ed Writer
Multiple efforts are underway that could make it easier to purchase and finance manufactured housing.
Last week, the U.S. Department of Housing and Urban Development (HUD) announced a “top-to-bottom review” of rules governing manufactured housing.
In its notice of request for public comment, HUD wrote: “Given the significant role that manufactured housing plays in providing affordable housing, HUD has determined that it should undertake a substantive review of all current and planned federal regulation of manufactured housing. This review is intended to ensure that HUD can more effectively meet its responsibilities to facilitate the availability of affordable manufactured homes and encourage innovation and cost-effective construction techniques for manufactured housing while continuing to protect consumers by ensuring quality, durable, safe and affordable manufactured homes.”
This review is part of a larger effort by the Trump Administration to identify or streamline regulations across all federal agencies.
At the same, manufactured housing is a major emphasis in the effort to make more affordable housing available to potential lower income homebuyers.
Manufactured housing is one of three areas identified in the Duty to Serve Underserved Markets plans released in December by Fannie Mae and Freddie Mac.
The plans, required by the Housing and Economic Recovery Act of 2008, are designed to increase liquidity and provide long-term stability in the threeunderserved markets. Objectives focus on research, product development and increasing loan purchases, as well as standardization and educational efforts.
For the manufactured housing market, the GSE plans addressed manufactured homes titled as real property and those titled as personal property (chattel). They also had to provide activities to address manufactured housing communities owned by government instrumentalities, non-profits, or their residents; as well as those with specified minimum tenant pad lease protections.
According to HUD, manufactured homes provide nearly 10 percent of the total single-family housing stock.
Yet even though they account for a considerable percentage, there exists a limited supply, according to Freddie Mac. In its Duty to Serve plan, Freddie stated that production of manufactured housing has significantly declined in the last 20 years. Existing units are difficult to resell because of financing issues on older units, title constraints and declining values on chattel-financed homes.
Other challenges Freddie Mac cited with the manufactured housing market include:
Limited number of lenders. Many mortgage lenders are reluctant to finance manufactured housing. The market hasn’t fully recovered from a collapse in the late 1990s caused by poor loan quality, which led to delinquencies and defaults. This led to a collapse in the secondary market for manufactured housing real property loans, which remains constrained.
Appraisals of manufactured housing. Freddie Mac cited a general lack of comparable data in manufactured housing. In addition, there are additional challenges when appraising manufactured housing titled as chattel.
There is also varying laws by state, a lack of mortgage financing products for manufactured housing, a lack of defined standards, and a lack of private mortgage insurance.
The Duty to Service plans for manufactured housing include the following initiatives over the next three years:
• Increase purchase volume of conventional manufactured housing secured by real estate
• Increase liquidity for manufactured housing titled as real property
• Develop an enhanced manufactured housing loan product
• Develop a chattel loan pilot program with market standards
• Secure approval from FHFA to purchase chattel loans
• Explore secularization structures that attract private capital to provide liquidity to the chattel market
• Increase homebuyer education for both real property manufactured housing and chattel financing
HUD is accepting public comments on its review of existing or planned manufactured housing regulations. The comment period was set for 30 days from the date of the announcement, which was January 25, 2018.
Mortgage underwriters and processors interested in commenting on these regulations can submit comments electronically through the Federal eRulemaking Portal at www.regulations.gov.
You can also write to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street, SW, Room 10276, Washington, DC 20410-0500.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.