With many major cities throughout the country falling short of having enough housing to meet demand, developers and government officials are looking for ways to solve the problem. One possible solution that is gaining a great deal of attention involves using manufactured housing to meet the demand.
Manufactured Vs. Prefab Homes
Also referred to as mobile homes, manufactured homes are homes that are built in a factory and then transported to the site for installation. This is different from a prefab home, which is still mostly constructed on-site despite having parts made in a factory. Manufactured homes cost a fraction of what it costs to build a single-family site-built home, with the median price of a manufactured home being $45,000 compared to over $300,000 for a site-built home.
Financing a Manufactured Home
Financing a manufactured home can be tricky. A few decades ago, the manufactured home financing market was dominated by a company called Green Tree. The company originated loans for manufactured homes and securitized them. Unfortunately, a number of factors ultimately led to a collapse of manufactured home financing. This included loose lending standards, defaults on loans and the difficulty of repossessing a manufactured home. As a result, Green Tree was bought under distress by Conseco in 1998 and many other lenders went bankrupt.
The manufactured housing market never really recovered from this fall. Today, manufactured homes are considered to be either real estate property or personal property, with the majority of buyers choosing to finance as personal property with a chattel loan rather than as real estate with a mortgage loan. While chattel loans are typically easier to obtain, they generally come with higher rates and shorter terms.
Unlike site-built homes, manufactured homes tend to depreciate in value over time. As such, it can be quite difficult to sell a used manufactured home. Furthermore, Fannie Mae and Freddie Mac have had little interest in purchasing loans for manufactured homes. Earlier this year, however, the two government-sponsored mortgage facilitators announced plans to make the manufactured housing market more activity by purchasing more of these loans over the next three years. This was partially in response to a Federal Housing Finance Agency guideline issued in December of last year calling for the agencies to take steps to address the affordable housing issue, including looking into boosting the manufactured housing industry.
To meet these guidelines, Fannie Mae plans to purchase around 30,000 manufactured housing loans over the next three years. The agency has also announced plans to develop a pilot program for purchasing chattel loans to support manufactured housing communities.
To help to increase demand for manufactured housing, the Manufactured Housing Institute is pushing for HUD to revise its building codes in order to allow manufactures to include popular amenities in their homes. Among those changes that lobbyists are pushing is an approval process for homes that come attached with carports. Another change calls for creating an approval process for adding certain amenities on-site, such as French doors, in order to prevent them from being damaged during transit.