Data Shows Lack of Federally Backed Manufactured Home Financing Shuts Out Many Prospective Buyers
Expansion of federal loan programs could boost access to this path to homeownership.
(Source: PEW Article by Linlin Liang, Richard Siegel & Adam Staveski) – Data report compares the differences between site-built mortgage financing and available manufactured home financing. The following contains excerpts from that report and other reports referencing government-backed manufactured housing financing availability.
Americans face significant challenges when it comes to securing housing. Record low supply has driven the ability to purchase a home out of reach for many, and lack of access to safe and affordable financing has made the pathway to homeownership more difficult for prospective homebuyers, especially for Black, Hispanic, and indigenous families.
Manufactured homes could be part of the solution. These homes are produced on a large scale in factories and cost about half per square foot compared with site-built homes. But Americans seeking to buy these homes often face higher credit standards and denial rates for loans compared with those buying site-built houses. Leading lenders for manufactured homes often keep the loans they make “in the portfolio,” as opposed to selling them, a standard practice for site-built mortgages. Such companies then retain all of the financial risk and reward for each loan they make, but they tend to have the highest denial rates compared with lenders that largely sell their loans or use a federally backed program to defray losses if borrowers default.
Analysis by the Pew Charitable Trust shows that mortgages through federal loan programs improve access to financing to purchase manufactured homes when the homes are owned as real estate – meaning the buyer also purchases or owns the land and owns them together, just like a site-built home. But more than 75% of newly manufactured homes are purchased as personal property for which there is no functioning federal loan program. As a result, buyers have few financing options – just a handful of lenders make the majority of what are known as personal property loans “chattel loans.”
Existing FHA Title 1 Manufactured Home Loan Program Seldom Used As loan Limits Not Increased Since 2008
Most manufactured home industry personnel and manufactured home buyers are unaware of FHA financing available for manufactured homes as personal property sited on land not owned by the home purchaser.
Yes, there is such a program that has been available since 2008. However, the FHA Title 1 program is seldom (rarely) used as the established loan limits are far below any reasonable opportunity to utilize.
That may be changing in the near future.
The Federal Housing Administration (FHA) announced on October 18, 2022, the publication of a proposed rule in the Federal Register to increase and index the loan limits for its Title 1 Manufactured Home Loan Program, which insures loans used to finance manufactured homes titled as personal property.
“Adjusting loan limits to current market conditions will make Title 1 a much more useful source of affordable loan financing for manufactured homes,” said Federal Housing Commissioner Julie Gordon. “This proposal is the next step in FHA’s ongoing work to support manufactured housing as an affordable and attractive option in a challenging housing market.”
No implementation date has been determined.
