Manufactured housing does have traditional mortgage lending through the VA, FHA, USDA and other sources. These loans perform about as well as other mortgage loans, a fact that many MH naysayers do not know.
The other form of lending for manufactured homes is personal property loans, often called “chattel loans,” unique to MH, and that is a core issue of H. R. 650. One of the reasons manufactured home loans carry a higher interest rate than a car or boat is because moving a 20 to 50+ ton home once installed is expensive and requires expertise, if repossession becomes necessary. They are no longer “mobile homes,” a term that expired when the federal government began enforcing production standards on June 15, 1976. Modern MH cannot be hooked up to a trailer hitch by a pick up truck or car and get pulled away.
“Contemporary manufactured housing is stronger, safer, more energy-efficient, greener and less costly than conventional housing,” says Kovach. Models run from entry level styles of 400 square feet up to custom-made two-story residential styles, but all are durable, made to HUD Code standards, and often exceed the quality of conventional houses, per a video interview with prior federal MH program director, Bill Matchneer, JD.
Just like any other business in the U. S. economy, lenders must be paid for their service and need a profit. However, even with somewhat higher interest rates on chattel loans, monthly payments on MH are lower than site-built homes. The U. S. Census Bureau states a manufactured home costs half as much as an on-site built home. As noted and linked above, former head of HUD Code for the MH construction and safety program, Bill Matchneer, says new MH is as well-or better- built than moderately priced site built homes.
Large banks and small community banks that once made profitable loans on MH have stopped due to current federal regulations under the Consumer Financial Protection Bureau (CFPB). MH retailer Alan Amy said his business has been curtailed by 30 to 40 percent due to the regulations.
Kovach cites estimates from MHI that each new MH home built would create one additional job, so changes brought about by HR 650 could yield about 22,400 new jobs.
One of the inadvertent effects of the Dodd-Frank Act, as later pointed out by co-author and now former U. S. Representative Barney Frank, is its limiting of MH sales. As Kovach says, “Due to regulations and processing expenses, the cost to ‘originate’ or make a $50,000 loan on a factory-built home is about the same as making a loan on a $250,000 site-built house. There are little or no closing costs on an MH home-only loan. When you factor in the tax, and other money-saving factors, MH personal property lending is more competitive to land-home than a mere interest rate makes it look.”
Additionally, the SAFE ACT prevents MH retailers from even suggesting the possibilities of lending options, where to turn for lending. “Consumer protection” in this case is a misnomer. Most people who own older, low-cost MH likely do not know they cannot obtain a loan for $20,000 to $25,000 because of CFPB regulations. These are the most affordable homes, and, in many cases the most vulnerable citizens. The same “consumer protection” likewise forces lenders out of a market they want to serve.
The National Association of Realtors, the Mortgage Bankers Association and the National Association of Credit Unions have all signed on to H. R. 650. This measure will help millions, create jobs and provide for more quality, affordable housing. Don’t be misled by the misguided mainstream media. For Kovach’s full report, see this link here. ##
(Photo credit: archerland 2005/flickr–manufactured home)
