FHFA Publishes Fannie Mae and Freddie Mac Three-Year “Duty To Serve” Plan For Manufactured Homes, Chattel Loans
(Photo: Michael Reynolds/Epa/Newscom) “Duty To Serve” manufactured homes was mandated, not made optional, by the U.S. Congress with passage of the Housing and Economic Recovery Act of 2008 (HERA). The most important requirement of HERA was that Fannie Mae and/or Freddie Mac develop a plan to serve the manufactured housing financing market, including endorsing the purchase of chattel loans for manufactured homes.
Nine years later on December 18, 2017, the Federal Housing Finance Agency (FHFA) released three-year plans submitted by Fannie Mae and Freddie Mac to serve underserved housing markets. These markets include manufactured homes financed as conventional loans (secured by real property) and those financed as personal property (through chattel loans).
According to FHFA research, 76% of manufactured homes in 2013 were titled as personal property, and generally eligible only for high interest chattel loans. About one-fourth of these homes were located in manufactured home communities (mobile home parks), with the majority located on private property in rural areas and not attached to the property where sited.
Manufactured Homes: The Only Quality, Affordable, Non-Subsidized Single Family Housing In The Country
The manufactured housing industry produces the only quality, affordable, non-subsidized single family homes in the country, with prices up to 50% less than a comparable site-built home — new or pre-owned. However, because of limited and expensive financing options as well as other regulations imposed by the federal government, millions of hardworking, low- to middle-income families have been denied the American dream of owning their own home.
The plan narratives by Fannie Mae and Freddie Mac acknowledge that research has shown modern manufactured homes should be considered worthy of financing equal and commensurate with traditional site-built homes. However, it would appear they are struggling to overcome mischaracterizations of the homes and those that live in them, most likely from site-built lenders they presently service.
“Duty To Serve” Plan: Sample Loan Purchases and Three More Years of “Kicking The Can Down The Road”
Nine years after the congressional duty to serve mandate, it would appear the underserved manufactured home market will not be adequately served for at least another three years. Many believe that the FHFA, Fannie Mae, and Freddie Mac will continue to “kick the can down the road” even further, regardless of their mandate.
Nonetheless, we’ve reviewed the schedule as it pertains to manufactured home chattel loans and have summarized the time frames prepared by Fannie Mae and Freddie Mac and submitted to the FHFA. The full text of the plan is loaded with intentions to continue the research, study, analysis, and justification of chattel loans over the next three years.
Year (1) 2018 – Criteria Outreach – Continue to study the issue, assess impact, meet with industry leaders, reach out to reticent lenders, secure internal approvals to purchase chattel loans, modify infrastructure, technology, and other discovery and preparation.
Year (2) 2019 – Criteria Outreach – First three quarters will be more study and analysis. By the end of the fourth quarter Fannie Mae and Freddie Mac will, for the purpose of analysis and research, purchase 1,200-1,500 chattel loans. Fannie Mae will purchase 1,000 of these loans, with Freddie Mac slated to purchase the remainder.
Year (3) 2020 – Criteria Outreach – Continue to study, analyze, accrue information and start developing a chattel pilot program. By the end of the fourth quarter Fannie Mae will purchase 1,000, and Freddie Mac 600 to 1,500, chattel loans to create a larger sample for further research and analysis towards developing a pilot program.
The plan’s authors have cited a lack of available data to help determine how well chattel loans have performed in the past. Hopefully, implementation of the pilot program will not be further delayed awaiting the performance of the sample purchases in 2019 and 2020.