| Manufactured
homes: Not tin cans on wheels | | |
| "Another thing that dictates
whether you're able to build wealth involves whether there's access to any kind
of decent financing for people on the resale market."
Financing can be tricky
West says Superior Homes
has a financing program in place that matches buyers with lenders, a practice
the Manufactured Housing Institute reports is widespread in the industry. Those
who prefer to go it alone should be aware that the mortgage community, and some
state laws, make distinctions that can have an impact on the kind of mortgage
you get and what you have to do to qualify. "The bottom line is if
you've got good credit, you can get it financed, and if not, you can't,"
says Steve Murray, principal of Aaron Financial Services in Memphis, which specializes
in financing manufactured homes. "In many cases they're not going to talk
to you unless you've got a credit score of 660, though with stick-built you can
get down into the 500s. They just don't want those with marginal credit anymore."
There's some history here, says Chuck Rumfola, Fannie Mae's vice president
for manufactured housing. "Up until the middle of 2003 we did not
differentiate between manufactured and site-built in underwriting loan plans,"
Rumfola says. "Then the industry experienced a lot of losses through fraud
and poor credit standards. When we saw all that going on, we knew we needed to
take a closer look at the mortgages we're backing." Fannie Mae looked
at loan performance results and ended up dividing manufactured housing financing
into two categories, he says -- land-home deals and chattel. "In a
land-home deal, the house is permanently attached to the land and one mortgage
is created for both, just like a site-built home," Rumfola says. "That
is the type that Fannie Mae is involved with. "Chattel is for manufactured
housing that is in a park or not permanently attached to land. It's treated as
personal property, the same as your car. We are not involved in that part of the
industry any longer." Fannie Mae's 2003 guidelines called for more
stringent credit scores for buyers of manufactured homes than for stick-built
housing. But Rumfola says better loan performance, since Fannie Mae ditched chattel-backed
loans, has led to some softening of those requirements. "If they continue
to perform better," he says, "we'll continue to make adjustments to
reflect that." Since Fannie Mae is the nation's largest provider of
funds to lenders, its guidelines have a huge impact on the entire industry. The
result has been huge variations, state to state, in regulating loans for manufactured
homes. In Florida, says Terry Claus Jr., president of Home Financing Center,
"there is only a very slight adjustment for a manufactured home," about
one-eighth of a percentage point, he says. On the other hand, McCarthy
says the Ford Foundation discovered that states such as Michigan require all manufactured
homes be treated as chattel. "We saw that there were opportunities
out there to intervene in the market structure that served the manufactured housing
market," he says, "so that folks who end up buying there would still
have a decent possibility of building wealth in their homes." Through
a fund started last year called Innovations in Manufactured Homes, the Ford Foundation
will pour millions of dollars into improving that picture. "We're
putting more than $10 million of grant money and capital into it," McCarthy
says, "and we're hoping to leverage more than twice that along with local
contributors, and other funders, to build up a four-point intervention plan and
improve the performance of the industry." Recently, the Federal Housing
Administration ruled that manufactured homes built to Energy Star specifications
are eligible for its energy-efficient mortgage program. Insurance rates
vary
Insurance is less of a problem, says Larry Staggs of California Southwestern
Insurance, which has been writing policies for mobile and manufactured homes for
more than 30 years. "If it's on an infill lot on a permanent foundation
in an area that is mainly site-built, some companies will write a regular homeowner
policy," he says. "But it can be as much as 50 percent or even 100 percent
more if it's a trailer out in the boonies." Some economists are predicting
that manufactured housing will be a major player in the reconstruction of areas
of the country devastated by Hurricane Katrina, perhaps repairing the industry's
lingering image problems as well. "What people need to realize,"
Hullibarger says, "is that manufactured housing is just a substitute method
of construction."
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