Fannie and Freddie might fund manufactured homes
WASHINGTON – May 16, 2017 – Fannie Mae and Freddie Mac may soon begin to provide financing for buyers of manufactured homes, according to draft plans released on Monday.
The move is part of an effort by the mortgage-finance giants to ease burdens on low-income borrowers, many of whom turn to factory-built housing as an inexpensive alternative to traditional residences. At the same time, it could also bring criticism from people concerned about the riskiness of lending for the mobile homes, which often sit on leased land and can depreciate quickly in value.
The proposals were outlined by Fannie and Freddie as part of broader plans to address affordable housing challenges. The U.S.-controlled companies need to get sign-off for the pilot programs from their regulator, the Federal Housing Finance Agency.
The 2008 law that authorized the bailouts of Fannie and Freddie also required them to develop plans to serve three target areas: manufactured housing, rural housing and affordable housing preservation. The FHFA didn't begin the extended process of implementing the requirement until 2015. The draft plans released Monday will be open to public comment and subject to review by the FHFA before taking effect in January.
Mobile-home builders and some affordable-housing advocates have long called on Fannie and Freddie to support the industry, arguing that such residences are a primary way some low-income borrowers get into the real estate market. According to the U.S. Census, about 12.3 million Americans owned a manufactured home in 2015, while another 5.4 million rented one.
Buyers of manufactured homes typically are ineligible for standard mortgages because they don't own the land where the home sits. Instead, they have to get a personal property or "chattel" loan that carries a higher interest rate and lasts 10 to 20 years, rather than the 30 years of a typical fixed-rate mortgage.
Fannie and Freddie already finance some loans for homes on land owned by the borrower and, through their multifamily businesses, to owners of entire mobile-home communities on which owners rent land.
The mobile-home industry crashed in the late 1990s and early 2000s, sending some lenders into bankruptcy.
Mike Dawson, a Freddie single-family vice president, said that lending and manufacturing practices are much different than they were at the time of that collapse.