Six Major Recent Changes in MH Chattel Finance Guidelines that You Need to Know

by Dave Shanklin

Stunning drops, disallowances, requirements and considerations are Good News-Bad News!

Our major lender based in Seattle is now offering a seven-year loan @ 5.99%, with 10% down; 1977 & newer single or multi-section homes, in MHC's, with 700+ Fico. This is by far the best pricing for an MH chattel loan product that we've ever seen in this industry. Other lenders are cutting rates as well.

2. MH CHATTEL LENDERS NO LONGER ALLOWING "GROSSING-UP" OF SOCIAL SECURITY INCOME

It has long been a Fannie Mae guideline to allow non-taxable income to be "grossed-up" an extra 25%. Our MH chattel lenders, in the past, have allowed originators to gross-up SS income, child support, and other forms of non-taxable income. However, our major lender out of Florida a few months ago announced that they would no longer allow that practice. Soon thereafter, our other major lender out of San Diego followed suit making the same announcement. This could be a trend throughout the entire mortgage industry, to disallow grossing-up of retirement income. This will make it harder for retirees to qualify for home loans.

3. MANDATORY 72-HOUR RESCISSION PERIOD NOW REQUIRED FOR MH CHATTEL PURCHASES

Our major lender out of Seattle announced recently that all PURCHASE loans will be subject to a 72-hour rescission period. It's long been a guideline to have rescission periods for refinancing, but not for purchase transactions. This seems unprecedented.

4. IMPOUNDS NOW MANDATORY WITH ONE MH CHATTEL LENDER

Again, our major lender out of Seattle made another stunning announcement: impounds for taxes and insurance are now mandatory, including initial escrow statements and annual escrow statements.

Items #3 and #4 are RESPA procedures. ARE WE NO LONGER GOING TO BE EXEMPT FROM RESPA?

5. MANDATORY FINANCING OF BUYERS' CLOSING COSTS NOW REQUIRED, AND SELLER CREDITS NO LONGER ALLOWED

This new policy baffles me. If anyone has any idea why our major lender out of San Diego now requires this, please let me know.

If a buyer wishes to pay loan fees without financing them, then the originator will have to steer the buyer to a different lender. If a seller offers a seller's credit for closing costs, then this lender will require a "seller concession" in lieu of a seller credit.

It's my theory that this lender, which is a market leader in this niche, feels that seller credits artificially inflate the price of the home. The lender wants the contract sales price to accurately reflect the true amount of proceeds that the seller is receiving (not counting for agent fees).

In other words, if the home is being sold for $50,000, and the seller is offering a credit toward closing costs of $5,000, then the price will have to be reduced to $45,000, and the lender will finance most of the buyer's closing costs. I appreciate having a lender willing to finance closing costs, but I don't understand their policy of REQUIRING that the buyer's closing costs be financed into the loan.

6. APPLICANTS WITH THREE-YEAR OLD MORTGAGE DEFAULTS OR BANKRUPTCIES NOW BEING CONSIDERED

Perhaps this item should be at the top of the list. The same lender mentioned in item #5 has announced that they will be "considering" applicants with foreclosures, short sales, or bankruptcies that are at least three years old. This appears to be a new underwriting guideline. No other lender even comes close to this. Our other underwriters practically "hang up the phone in my ear" when I mention that the applicant has a short sale or foreclosure in their background.

It's a good sign that MH chattel lenders are becoming less "hard-nosed" when it comes to mortgage defaults. The foreclosure tidal wave has really wreaked havoc on our industry, making it almost impossible to get loan approvals without going to "private money."

Our industry has new lenders entering the field. We are seeing record low rates and an easing up on qualifying criteria. This is definitely a breath of fresh air.

Stay tuned for further updates in the fast-changing world of MH chattel finance…. ##

Dave Shanklin is a loan originator with Mobile Brokers Acceptance, Fair Oaks, CA. NMLS ID #314463. He primarily handles MH chattel loans in LLC's. Call 1-800-401-3372 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it ; read Dave's blog on www.MobileHomeLoanNews.Blogspot.com.