Further HUD Action is Needed to Increase Available Loan Products For Manufactured Housing As Per GAO Recommendations
Manufactured housing, prefabricated factory-built homes – can be an affordable option for lower-income homebuyers. But some borrowers may not qualify for mortgages and might have to turn to other kinds of financing with less favorable rates and terms.
Several federal agencies, Fannie Mae, and Freddie Mac have created new or modified existing loan programs to help manufactured home borrowers. But while the Department of Housing and Urban Development has planned program improvements,it does’t have a timeline for putting them in place. We (U.S. Government Accountability Office, GAO) recommended it do so.
What GAO Found
Manufactured housing, prefabricated factory-built homes, can be financed with personal property or mortgage loans. The Departments of Housing and Urban Development (HUD), Veterans Affairs, and Agriculture administer loan guarantee programs for manufactured housing. Federal entities also participate in the secondary market to provide housing finance options. Ginnie Mae guarantees securities backed by federally insured mortgages, and Fannie Mae and Freddie Mac (enterprises) purchase mortgages that are not federally guaranteed and secularize them (package them into securities and sell them to investors).
Federal agency financing of manufactured homes increased for mortgages but not for personal property loans in recent years. Few personal property loans were made because these loans are capped at an amount lower than the average purchase price of a manufactured home. This limited secondary market for personal property loans also may deter lenders from making them.
Several federal entities have supported increasing financing options for manufactured housing. For instance, VA and USDA developed new or modified existing loan programs to assist borrowers. The enterprises expanded eligibility requirements and increased purchase targets to help increase the availability of financing. HUD also has taken some steps to address long-standing requirements to improve the financing and secularization of manufactured housing, but has not fully implemented several proposed changes. Implementing these changes and establishing time frames and milestones for its actions would better assure that HUD could promote the availability and affordability of manufactured homes.
Why GAO Did This Study
The U.S. has a shortage of affordable housing, particularly for low-and medium-income households. Manufactured housing is a source of affordable housing. However, some stakeholders have raised questions about the limited options for financing manufactured housing.
GAO was asked to review the federal role in supporting the financing of manufactured housing. Among its objectives, this report examines (1) trends in the use of federal financing for manufactured housing and (2) federal efforts to assess and improve financing options.
GAO examined federal housing data, reviewed regulations, analyzed information on federal financing products, conducted a literature review, and interviewed federal entity officials and lenders, industry groups, and other stakeholders.
GAO is making two recommendations–one each to the Federal Housing Administration and Ginnie Mae (entities in HUD–to implement planned changes to increase financing options for manufactured homes, including identifying options for greater secularization of mortgage and personal property loans, and establishing time frames and milestones for actions. FHA and Ginnie Mae agreed with these recommendations.