The United States Department of Agriculture (USDA) Rural Housing Service (RHS) announced it would begin a pilot project that would open up lending for manufactured home loans on existing (pre-owned, used) manufactured homes, per a report by Brian Collins on National Mortgage News.
Doug Ryan, director of affordable homeownership with the Center for Economic Development (CFED) in Washington cheered the move.
“Now the 502 program can be used to finance existing homes that were
not previously financed through USDA,” he said. “We do think that will open up the market in these states. This could be very positive.”
The 2-year pilot is being offered in Colorado, Illinois, Louisiana, New York, Ohio, Texas, Vermont, New Hampshire and Wyoming.
“The pilot program is an important first step. We look forward to working with USDA to take this important change nationwide,” said Lesli Gooch, a senior vice president at the Manufactured Housing Institute (MHI).
One of the bigger changes in this announcement is that previously, RHS loans on existing manufactured homes were more limited.
“If you have a 1,000-square-foot manufactured home that is a couple years old that is titled as real estate on a permanent foundation and lot, now you have more potential buyers,” Ryan said.
But with some 80% of manufactured home loans currently being made via chattel (personal property, home only) lending, how much of a difference this might make in the marketplace short term appears to be limited.
Center for American Progress
In a post dated September 13, 2016 on American Progress, co-authors Shiv Rawal, Sarah Edelman, and Gerado Sanz said the following about manufactured homes and the need for more rural lending options.
Manufactured housing, which refers to houses built in factories that are transported to their sites and that meet certain federal safety standards, remains an important source of affordable housing for rural communities.
Many manufactured housing loans are titled as personal property or so-called chattel loans instead of as real estate loans, the way other mortgages are titled. While in some cases chattel loans may have certain cost savings for consumers, real estate loans tend to have many more consumer protections and lower interest rates.
Participants in the roundtable noted that manufactured housing lending tends to be concentrated among a handful of lenders. Additionally, according to a 2013 report by the Fair Mortgage Collaborative, borrowers with FICO scores under 650 may face difficulties in obtaining a mortgage-titled manufactured home.”
University of Georgia, USDA Published Report
“As the cost of housing rises, manufactured housing remains an affordable option to help more Americans realize their dream of homeownership,” says the Non-Technical Summary of a USDA reported, dated in 2008.
The summary continues, “However, obstacles stand in the way of increasing the prevalence of manufactured housing. Negative perceptions of manufactured housing and zoning barriers prevent people from owning manufactured housing. The aim of this study is not just to learn more about the state of manufactured housing, but also to prepare a foundation for action plans to make the dream of homeownership come true for more Georgians and to help policy makers understand the issues for their community in a broader context.”
The project was terminated. The post on the USDA website is linked as a download, click here.
Progress is progress. But approaching a decade later, how much has changed from University of Georgia’s description?
Given that the affordable housing crisis has only grown since that date, the need to educate and quicken the pace of such efforts needs to be enhanced dramatically. ##
(Image credits are as shown above.)
Submitted by Soheyla Kovach to the Daily Business News on MHProNews.