Even in markets where there is available land and financing, labor shortages and other factors make it challenging to build affordable, traditional homes fast enough to meet consumer demand or build mortgage volume.

To address this challenge, some lenders are financing construction in the manufactured housing or modular home markets, where a confluence of improved structural quality, lower mortgage rates and the inventory speed are fueling growth.

A testament to construction lending importance is this context is a recent round of debt and equity financing private equity firm LL Funds recently provided to Tammac Holdings, a modular housing lender in Pennsylvania. See our recent post: “Tammac Secures $60 Million in New Financing to Revitalize Traditional Manufactured Home Business”

“We haven’t had the ability to offer construction financing and that’s very important in our business,” said Tammac President Jeff Path.

“It’s Incumbent On the Industry To Help Buyers Understand Their Affordable Options”

Because some borrowers tend to view construction financing as suggesting a higher price point, they may overlook the possibility of getting an affordable factory-built home installed on land titled as real property with construction financing.

“It’s incumbent on the industry to help buyers understand that there are affordable options in this category of new home,” said Laura Brandao, President of American Financial Resources (AFR).

Speaking on a recent web seminar hosted by National Mortgage News, Brandao said. “ People always think, ‘Wow, I’m going to have to put down 30% or I’m going to have to actually write a check to builder with a very large down payment in order for me to even hold that spot.’ There’s a lot of education that needs to happen.”

While construction lending in the factory-built market is specialized, traditional lenders willing to dedicate themselves to long term can use it to build more small-loan volume, Jed Lowman, new home construction division manager at mortgage brokerage ManufacturedHome.Loan, said during the same webinar.

“The flow for both LO, the loan originator, and the builder/retailer, is very, very similar,” Lowman said. “There are just a couple extra requirements for manufactured homes that you don’t have for site built. You need a structural engineer to sign off on it –  just those kinds of little things, but it’s not apples and oranges. The process is very similar.”

For others who want to get involved on a more experimental basis, a partnership approach is best, he said.

“There are really no half measures with manufactured home loans. You’re either an expert or you aren’t and you’re either doing a lot of them, or it’s going to go very poorly.” Lowman said.


SOURCE: National Mortgage News

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