Fannie Mae Tests 30-Year Loans for Manufactured Homes in New Hampshire
Manufactured Housing Industry “Hopeful” This Will Be The Launching Pad To Government-Sponsored Chattel Home Financing Nationwide
Today’s manufactured home is undoubtedly the only quality affordable homeownership option available to millions of hardworking low to middle-income Americans. Manufactured housing is equal or superior in every measurable respect to a traditional site-built home—except equitable government sponsored financing. That could be changing, hopefully, in the near future.
Below is a follow-up to our recent report, Fannie Mae Rolls Out Model Manufactured Home Program In New Hampshire. Fannie Mae is a Government Sponsored Enterprise, or GSE. As such, it is required by law to facilitate a secondary market for mortgages in underserved housing markets. The manufactured housing market is first on their list, but their efforts in this area have been slow to start. Understandably, the industry has been vocal about their frustration with this lack of progress.
However, Fannie Mae now plans to test a program to offer 30-year financing for manufactured homes in New Hampshire. National Mortgage News reports the program could be a launching point for GSEs to offer similar loan terms nationwide.
Patrick McCarthy, Fannie Mae Vice President for Community Lending, shed further light on the subject. By New Hampshire state law, all manufactured homes are required to be titled as real property instead of chattel. This applies to homes located on owned land, in resident-owned communities (ROC), and investor-owned parks, McCarthy said.
Interest rates and fees are typically lower for conforming real estate-type financing than they are for chattel loans. Conforming loans are available at up to a 95% loan-to-value ratio with private mortgage insurance. Chattel loans are subject to appreciably higher interest rates, shorter terms, and larger down payment requirements.
The New Hampshire program is “similar to loans secured in a cooperative apartment,” McCarthy remarked. “The residents own a share of their park. A share of the land,” he said. “They pay for the upkeep in a co-op type structure.”
ROC Program Noteworthy, But Does Not Significantly Address “Duty To Serve”
The GSEs, Fannie Mae and Freddie Mac, have a Congressional “Duty to Serve” mandate. This means they are obligated to serve underserved housing markets—including, and specifically, the market for manufactured housing. The manufactured home financing in resident-owned communities is noteworthy in this market.
However, a preponderance of manufactured homes are not located in these communities, and are hence financed as chattel. Fannie and Freddie’s “duty to serve” this vast portion of the market remains unfulfilled, at least for now.
Manufactured home chattel loans are personal property-type financing. This means the loan is not secured by the real estate upon which the home sits. Such real estate may include rental parks, non-owned private property, or other placements not owned by the homeowner.
Leslie Gooch, Senior Vice President of Government and Chief Lobbyist for the Manufactured Housing Institute (MHI), further illustrated this predicament. Resident owned communities are just a tiny portion—5%—of the 37,624 manufactured home communities nationwide, Gooch said. MHI focuses on making financing available to all manufactured home buyers, regardless of a home’s titling or placement.
GSE’s Begin “Dipping Their Toes” Into Manufactured Housing Chattel Loan Market
“We have been encouraging Fannie Mae and Freddie Mac to focus on creating a secondary market for chattel loans through their duty to serve obligation,” Gooch explained.
Fannie Mae already makes loans secured by manufactured housing parks, and “the natural next step for them is to move into the chattel space.”
The GSEs are “dipping their toe a little bit in the water of looking at trying to understand chattel and we think that they need to move in that direction. Our hope would be is that this experience in New Hampshire would just move that process along,” remarked Gooch.
The New Hampshire program does not qualify for “duty to serve” credit because it started before 2018. However, it does help the GSE meet its affordable housing obligations, said McCarthy.
Do the GSEs intend to limit their perceived obligation only to financing manufactured homes in resident-owned communities? Or will they pursue remedies for chattel homes? If they do not, their “duty to serve” obligation will remain woefully inadequate in making affordable home ownership possible for well-deserving American citizens.