GSEs Weigh Financing Manufactured Homes

Mortgage financing giants Fannie Mae and Freddie Mac are reportedly considering providing financing to buyers of manufactured homes soon in a pilot program.

The government-sponsored enterprises say they want to look at easing the burdens of low-income borrowers who may turn to factory-built homes to curb housing costs, according to a draft report released Monday where Fannie and Freddie addressed affordable housing challenges. Fannie and Freddie still need to get the pilot program approved by their regulator, the Federal Housing Finance Agency, before they can start.

In 2015, about 12.3 million Americans owned a manufactured home; another 5.4 million rented one, according to U.S. Census data.

Purchasers of manufactured homes usually are not eligible for standard mortgages since they don’t own the land where the home is. As such, they often must turn to a personal property or “chattel” loan, which tends to carry higher interest rates and span a 10- to 20-year time period rather than the common 30-year fixed-rate mortgage for a home loan.

“We want to look at it from a long-term sustainable lens,” says Mike Dawson, Freddie’s single-family vice president. “If we participate, we want to make sure that there are responsible lending guidelines associated with it.”

The mobile-home industry faced a crash in the late 1990s and early 2000s that prompted some lenders to go bankrupt.

“Rural and manufactured housing are inextricably linked,” says Jeffery Hayward, Fannie’s head of multifamily. “The most affordable housing you can find is often a manufactured house in a rural area.”

Hayward says the quality of manufactured homes has improved over the years, making the homes better collateral than in the past for lenders.

Source: “Fannie-Freddie Look to Providing Financing for Manufactured Housing,” Bloomberg (May 8, 2017)