MANUFACTURED HOME NEWS AND VIEWS: FHFA PLAN COULD POSITIVELY AND SIGNIFICANTLY CHANGE HOW MANUFACTURED HOMES ARE SOLD, SITED, AND FINANCED
FHFA, the Federal Housing Finance Agency, issued a news release on December 15th regarding a plan that could significantly reform the manufactured housing market. A study will be conducted to put manufactured home financing on par with real estate mortgage financing, utilizing the US-sponsored Fannie Mae and Freddie Mac enterprises.
The FHFA is an independent regulatory agency responsible for the oversight of vital components of government-sponsored secondary mortgage market enterprises.
The National Mortgage News reports that the FHFA plan will address various aspects of manufactured home financing, including land-lease communities, homes on private land financed as chattel loans, and a willingness to experiment with financing manufactured homes that are not secured by real estate.
The agency plan would provide incentives for owners of manufactured housing communities to reform their practices if they want to tap financing by Fannie Mae and Freddie Mac. One of these common practices is a park owner requiring a seller to move their home outside of the park. The proposal would also require the landlord to give tenants a minimum lease of one year and the rights to post “for sale” signs and sell their home on its current pad.
The FHFA plan would also require the landlord to give tenants advance notice if they plan to sell the park. Such notice would give tenants the chance to form a cooperative or association to purchase the community.
The FHFA proposal would require the government-sponsored enterprises to facilitate financing for small manufactured housing communities with fewer than 150 home sites. They could earn “duty to service” credit from the FHFA if they make blanket loans that are secured by the land and pad site for those communities.
Another element of the FHFA plan would open the door to create a secondary market for manufactured home loans that are secured by real estate.
A Consumer Finance Protection Bureau white paper estimates that 65% of manufactured housing borrowers put their homes on land they own, but finance their homes as personal or chattel loans. “A growing number of manufactured home buyers are opting to place their homes on land they are purchasing or already own. These land home loans perform better and have lower default rates than chattel loans,” an FHFA official said in a briefing with reporters recently.
The agency is also willing to experiment with financing manufactured home loans that are not secured by real estate. FHFA is allowing the two enterprises to conduct a pilot program to determine what improvements could be made in originating and servicing that could make chattel loans safer for purchase by the enterprises.
Implementation of the elements of the FHFA proposals would have a huge positive impact on manufactured homes; America’s only unsubsidized affordable quality housing would become even more affordable and accessible to many more middle and lower income homebuyers who have been priced out of the market.
The details of the complete FHFA pilot program will be detailed upon its publication in the Federal Register via FHFA.gov.
In the below video, FHFA’s Principal Economist Andy Leventis drills down on the fluctuating housing costs that occurred during the third quarter of 2015.