Manufactured Home Mortgages Perform As Well As Other Mortgages

Posted by Andrea Levere on March 22, 2013

The foreclosure crisis. Homeowners “underwater.” Neighborhoods blighted with vacated homes. Tougher credit standards and new regulations making it harder for lower-income households to qualify for a mortgage.

These have been sadly familiar headlines for almost five years. Is there anything new—and positive—one can say about mortgages?

To find that bright spot, we can turn in a surprising direction: toward manufactured homes.

A groundbreaking I’M HOME report released this week by CFED in partnership with the Fair Mortgage Collaborative, titled Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes, analyzes $1.7 billion in loan performance data and finds that, contrary to common belief, mortgages on manufactured homes perform as well as comparable site-built home mortgages.

The study goes on to identify manufactured home mortgage products that actually outperform other loans.

Based on this evidence, more lenders and investors should be convinced to enter or expand their manufactured home mortgage offerings as good business. Home owners will then benefit by finding it easier to obtain affordable, long-term financing.

More than seventeen million Americans rely on manufactured homes for affordable housing. Manufactured homes utilize factory-built technology and cost up to 30 percent less on average than comparable site-built homes. Modern manufactured homes can be highly energy efficient, safe and attractive.

But while the price of the home is one essential ingredient in affordability, it is not the only factor. The cost of financing can be an equal or even greater factor; despite the challenges of the past several years, the U.S. tradition of a fixed-rate, 30-year mortgage has been at the heart of achieving the dream of homeownership.

Sadly, millions of owners of manufactured homes don’t have the mortgage option. For up to three quarters of all owners and buyers of manufactured homes, a chattel loan is what they get. They must spend hundreds of dollars more each month to service their chattel loan—dollars that they could otherwise spend on food, clothing, utilities, education and savings. The reason that these households can’t get a mortgage is two-fold: the majority of mortgage lenders don’t lend for manufactured homes, and many manufactured homes are titled under state law as “personal property” like automobiles, and as a result don’t qualify for mortgages.

The good news is that, as shown in the new I’M HOME report, there are a solid group of lenders and investors offering mortgages to owners and buyers of manufactured homes—and these mortgages are performing well.

More good news can be found in the passage of the Uniform Manufactured Housing Act, or UMHA, by the Uniform Law Commission. The UMHA creates a simple and consistent method for owners and buyers who choose to title their manufactured home as real property instead of personal property. In many states today, the process is too onerous or limited to give homeowners a real choice, and UMHA would change that. As personal property, these homes can only be financed with chattel loans; as real property, they may be financed by mortgages. In almost every state, the UMHA would represent an improvement on existing titling law, but each state must introduce and enact the act in order to make freedom of choice a reality for more homeowners. Advocates in several states are considering introducing the UMHA, and Vermont made the first such introduction in February.

So, take heart! There is indeed good news on the mortgage front. First, owners and buyers of manufactured homes may already be able to find an affordable, long-term mortgage (if your home is titled as real property). Some sources you may want to consider include:

Second, more lenders and investors are to be encouraged to initiate or expand their mortgage offerings for manufactured homes on the basis of the data analysis provided in the report, Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes.

We hope you will join us in realizing the potential of manufactured homes to play a vital role in establishing a stock of permanently affordable and energy efficient housing in the US.

About the author more »

Andrea Levere has led CFED as its president since 2004, bringing the organization to new heights in its efforts to expand economic opportunity for all Americans. She is responsible for overseeing the design and operation of major initiatives that expand matched savings for children and youth, bring self-employed entrepreneurs into the financial mainstream and turn manufactured housing into an affordable and attractive asset for low- and moderate-income families. Levere has been the driving force behind the significant growth of CFED over the past seven years, which has expanded to a staff of 50 with offices in Washington, DC; Durham, NC; and San Francisco, CA.


Steve Lockwood
26 Mar 13, 12:12 pm

I’m not sure that manufactured homes qualify as “permanently affordable”. Paying a 20 year mortgage on a building that is worn out after 25 years—much shorter than a stick-built home—does not build equity. Additionally, having paid a leasing fee for years, they don’t usually own the land that the home sits on.
Steve Lockwood
Frayser CDC
Memphis, TN

J. Rosie Tighe
1 Apr 13, 12:43 pm

What percentage of mobile homes are financed through chattel loans vs. the much more stable and better-performing loans you discuss here? What kinds of outreach efforts are being made to steer potential mobile home buyers away from chattel loans?

John B.
6 Apr 13, 4:34 pm

I would not be as pessimistic as other two people who commented here. I can see it as an opportunity for people who are struggling under current conditions. It can be wise to move to this type of housing rather than to rent a place that would cost the same, especially for the suburban and rural areas. I have seen some similar projects on paper for Vancouver and Toronto. These two cities are currently fighting against low housing affordability, which has great impact on their development.

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