I cannot tell you how many people find out from me that their "great idea" was really a huge mistake. I am talking about moving a manufactured home. People find a nice piece of land and put a used manufactured home on it and think they made a great decision when in fact, it was not.
You see, once a manufactured home has been moved (other than the first time when it is set up on the property) it is no longer eligible for Fannie Mae, Freddie Mac or FHA financing. Those 3 make up the majority of manufactured home lending. Only VA (and not all lenders) will accept a home that has been moved (with the exception of some lenders like Wash Fed that keep their loans in their own portfolio).
What is wrong with moving a manufactured home and why are the lenders not lending on them? To answer the first question, if done properly, there is nothing wrong with moving a manufactured home. It will not affect the structural integrity of the home. You can move a stick built home and it is still eligible for financing. The real questions is, why will lenders not lend on them. The answer is, they were all sold (except the VA who did not go along with it) on the fact that moving them not only affects the structural integrity but will lower the value of the home. Fannie, Freddie and FHA bought it and now, no longer will they accept a home that has been moved.
But who would sell them on this and why? It wouldn't be an engineering group, they know better. There is only one group it could be and when I was told who it was (by someone who was part of the lobby), it made perfect sense...manufactured home dealers. Think about it for a minute. If your choice was to move a used home on to your lot but in doing so, reduces your buyers to only people paying cash it essentially makes your home unsaleable. So do you move on a used, unsaleable home or do you just put a new home on your lot that you can sell with financing down the road. You are going to put the new home on the lot and who benefits from that? The manufactured home dealer.
Now that hasn't stopped the market for used manufactured homes. They are often purchased and moved into a park where the financing is a Chattel loan and not conventional real estate mortgages. For those of you who have always wondered why you cannot finance a manufactured home that has been moved more than once, now you know and most importantly, now you know why.
Tuesday, May 18, 2010
Friday, May 7, 2010
Why did so many lenders drop manufactured homes?
Once upon a time, a manufactured home loan was available from just about every mortgage company out there. VA, FHA, conventional loans, you name it. It wasn't that long ago that most companies didn't even add to the rate or price for the home...same rates as stick built.
But not long ago, something happened. First, lenders dropped things like, investment home purchases or refinances for manufactured homes. Then fees would pop up to make the loan a bit more costly. Some lenders added rate hits for a manufactured home.
And then it happened. One by one, lenders were dropping manufactured homes from their list of eligible loan products. It seemed like I went from having 20 sources for manufactured home loans one day and the next I had 2. And then none.
Now I can tell you that as someone who specializes in manufactured home lending, having no lenders offering loans for your clients is not the best position to be in. Fortunately, I have aligned with some of the best products and lowest rates I have ever had and I am back in business but that is a story for another day.
I get asked quite a bit...why are lenders dropping manufactured homes? Most manufactured homeowners feel discriminated against, and to a point, rightly so. They are no different from any other homeowner. They go to work each day, pay their taxes, raise their families, mow their grass and have the same pride of ownership as a stick built homeowner. Why do they have to pay higher fees, higher rates (and now shop until they are blue in the face finding a lender) ? Just because they made the choice to buy a manufactured home (which in a lot of cases is better built than some stick built)?
Do the lenders still think that today's manufactured home is like an old trailer, with hitch and wheels that these folks could just back their truck up and haul their "house" away?
Well, the simple answer is no. The lenders are not discriminating against the style of home, they don't think the house will be towed away and they recognize that a manufactured home owner is really no different than a stick built homeowner. The bottom line is money...or more specifically, profit. And loss.
The first thing you need to remember is that the investor buying the loan is a bank. Bankers see profit and loss. They like profit (as do their shareholders) and dislike loss. If a certain type of loan is seeing more loss than others, they will either change the criteria for the loan (higher credit scores, better equity, higher fees,rate etc) or if that still doesn't work, they drop the product. Why keep a loan product that loses money? For a lot of lenders, manufactured home loans were losing money. Why were they losing money when we already acknowledged that a manufactured home owner is no different than a stick built homeowner? The answer to that question is one of the biggest selling points of a manufactured home...cost.
Manufactured homes are a true "affordable housing" alternative. The lower cost of a manufactured home makes it so a low to moderate income family can afford home ownership. This lower cost of home and lower loan amounts also make it less profitable for the bank.
Now I don't know if the foreclosure rate for a manufactured home is higher or lower than a stick built, but even if it's the exact same, the cost to the lender for a foreclosure is no different for a manufactured home and a stick built. So if your profit is lower on the loan due to lower loan amount but your loss is the same, the bank sees that the loss ratio is higher on a manufactured home and they are going to take action. Some lenders are tying to add some costs to the loan to make up the difference but most lenders dropped them all together.
And that is why most lenders have dropped their manufactured home programs. It isn't any type of discrimination...right or wrong...it all comes down to profit.
But not long ago, something happened. First, lenders dropped things like, investment home purchases or refinances for manufactured homes. Then fees would pop up to make the loan a bit more costly. Some lenders added rate hits for a manufactured home.
And then it happened. One by one, lenders were dropping manufactured homes from their list of eligible loan products. It seemed like I went from having 20 sources for manufactured home loans one day and the next I had 2. And then none.
Now I can tell you that as someone who specializes in manufactured home lending, having no lenders offering loans for your clients is not the best position to be in. Fortunately, I have aligned with some of the best products and lowest rates I have ever had and I am back in business but that is a story for another day.
I get asked quite a bit...why are lenders dropping manufactured homes? Most manufactured homeowners feel discriminated against, and to a point, rightly so. They are no different from any other homeowner. They go to work each day, pay their taxes, raise their families, mow their grass and have the same pride of ownership as a stick built homeowner. Why do they have to pay higher fees, higher rates (and now shop until they are blue in the face finding a lender) ? Just because they made the choice to buy a manufactured home (which in a lot of cases is better built than some stick built)?
Do the lenders still think that today's manufactured home is like an old trailer, with hitch and wheels that these folks could just back their truck up and haul their "house" away?
Well, the simple answer is no. The lenders are not discriminating against the style of home, they don't think the house will be towed away and they recognize that a manufactured home owner is really no different than a stick built homeowner. The bottom line is money...or more specifically, profit. And loss.
The first thing you need to remember is that the investor buying the loan is a bank. Bankers see profit and loss. They like profit (as do their shareholders) and dislike loss. If a certain type of loan is seeing more loss than others, they will either change the criteria for the loan (higher credit scores, better equity, higher fees,rate etc) or if that still doesn't work, they drop the product. Why keep a loan product that loses money? For a lot of lenders, manufactured home loans were losing money. Why were they losing money when we already acknowledged that a manufactured home owner is no different than a stick built homeowner? The answer to that question is one of the biggest selling points of a manufactured home...cost.
Manufactured homes are a true "affordable housing" alternative. The lower cost of a manufactured home makes it so a low to moderate income family can afford home ownership. This lower cost of home and lower loan amounts also make it less profitable for the bank.
Now I don't know if the foreclosure rate for a manufactured home is higher or lower than a stick built, but even if it's the exact same, the cost to the lender for a foreclosure is no different for a manufactured home and a stick built. So if your profit is lower on the loan due to lower loan amount but your loss is the same, the bank sees that the loss ratio is higher on a manufactured home and they are going to take action. Some lenders are tying to add some costs to the loan to make up the difference but most lenders dropped them all together.
And that is why most lenders have dropped their manufactured home programs. It isn't any type of discrimination...right or wrong...it all comes down to profit.
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