However, in all states except New Hampshire, manufactured home buyers cannot qualify for mortgage financing if they do not own the land beneath their homes, pushing them into personal property loans. These are also called “chattel loans,” which according to the CFPB, averaged an interest rate of 6.79 percent in 2012 as opposed to 3.6 to 4.2 percent for a 30-year fixed rate conventional mortgage. Doug Ryan of the Corporation for Enterprise Development (CFED) says MH buyers with poor credit often end up paying ten percent interest.
Most lenders stay clear of MH loans because they are often smaller than site-built home loans, but the costs are relatively more, making them not as attractive a lending investment.
As a result, concentration of MH lending rests primarily with a handful of large companies including two that are part of Berkshire Hathaway: 21st Mortgage Corporation, and Vanderbilt Mortgage and Finance. Tim Williams, CEO of 21st Mortgage says the higher interest rates cover a higher proportionate servicing rate and higher cost of funds, according to The New York Times.
Ryan says his organization is calling for more involvement of Fannie Mae and Freddie Mac in the secondary market for manufactured housing which would attract more lenders. On this point, as MHProNews knows, the industry would largely agree.
For years, as long time MHProNews readers know, the industry has attempted to explain that the issues relating to lending rates are due in part to simple business math plus a lack of a secondary market, which the so-called Duty to Serve (DTS) in the Housing and Economic Recovery Act (HERA 2008) was supposed to address through mandates for the Government Sponsored Enterprises (GSEs).
In spite of the DTS in HERA 2008 requirements, when the GSEs went into receivership under the FHFA, access to the secondary market remainded ellusive, even though the economic meltdown was driven by problems in the conventional housing market, not manufactured housing.
What the CFPB report has failed to address are differences between how its facts where presented, versus those published by the Government Accounting Office (GAO) report last summer.
How this impacts consumers has been covered by Manufactured Home Living News, which pointed out recently that even with higher rates, lower MH prices still yields lower payments on manufactured homes, per the GAO study and an earlier report by Fannie Mae, see this link here.
The Manufactured Housing Institute (MHI) weighed in on these topics, for example, see this link here.##
(Image credit: Consumer Financial Protection Bureau logo)
