The Fed­eral Hous­ing Fi­nance Agency’s Duty to Serve pro­gram must in­crease man­u­fac­tured hous­ing lend­ing in ru­ral com­mu­ni­ties.

National Mortgage News - - Contents - BY DAVID DAN­GLER

Un­der Duty to Serve, the GSEs have an op­por­tu­nity to ad­dress a fun­da­men­tal in­equity be­tween con­ven­tional real es­tate and chat­tel fi­nance.

man­u­fac­tured hous­ing can help solve Amer­ica’s af­ford­able hous­ing cri­sis. It is a vi­tal re­source for many el­derly and low-in­come home­own­ers. Par­tic­u­larly in ru­ral, low-in­come ar­eas, it may be the best hous­ing op­tion.

In­creas­ing the em­pha­sis on ru­ral and man­u­fac­tured hous­ing in the Fed­eral Hous­ing Fi­nance Agency’s Duty to Serve pro­gram could play a vi­tal role in help­ing non­prof­its en­sure more peo­ple live in safe, af­ford­able homes.

As Fan­nie Mae and Fred­die Mac gain con­fi­dence with man­u­fac­tured hous­ing loans, es­pe­cially those made to in­di­vid­u­als who have com­pleted ac­cred­ited home buyer ed­u­ca­tion cour­ses, dis­tinc­tions be­tween loans of­fered to site-built prop­er­ties and those to man­u­fac­tured homes should di­min­ish.

As with site-built hous­ing, the GSEs are en­cour­aged to mir­ror in­cen­tives for suc­cess­ful first-time home­own­er­ship built into their loan prod­ucts for MH, such as higher loan-to-value ra­tios (rais­ing the limit from 95% to 97%) and full 30-year amor­ti­za­tions.

Un­der Duty to Serve, the GSEs have an op­por­tu­nity to ad­dress a fun­da­men­tal in­equity be­tween con­ven­tional real es­tate and chat­tel fi­nance. An all too typ­i­cal sce­nario in ru­ral Amer­ica has a low-in­come house­hold been given a piece of fam­ily land. The home they can af­ford is pur­chased off a lot, fi­nanced as if it were a de­pre­ci­at­ing as­set, just like a car loan. The shorter-term, higher- cost chat­tel mort- gage places a fi­nan­cial bur­den on those who can least af­ford it.

In states that per­mit MH to be fi­nanced as real es­tate, the GSEs should in­tro­duce main­stream prod­ucts that offer a longer-term, lower-in­ter­est mort­gage prod­uct se­cured by both the man­u­fac­tured home and the land. Be­cause so many states have not yet ap­proved real es­tate fi­nanc­ing for MH, the GSEs could pi­lot an al­ter­na­tive, con­sumer-friendly chat­tel loan prod­uct at a rate closer to mar­ket for real es­tate mort­gages.

The GSEs are well po­si­tioned to ad­dress a cross-cut­ting chal­lenge in the man­u­fac­tured hous­ing space. A study by Matthew Fur­man, a Neigh­borWorks Amer­ica/Har­vard Joint Cen­ter on Hous­ing Stud­ies Gram­lich Fel­low in 2014, in­di­cated there are roughly 500,000 man­u­fac­tured homes con­structed be­fore 1994 that are con­sid­ered to be di­lap­i­dated, in­ef­fi­cient and in need of re­place­ment.

Too of­ten these homes are oc­cu­pied by res­i­dents with very lim­ited means who have very lit­tle if any­thing still owed on the home. Even if a high-qual­ity, En­ergy Star-rated man­u­fac­tured re­place­ment home would mea­sur­ably in­crease the qual­ity of life as mea­sured by healthy air and wa­ter, and would dra­mat­i­cally lower the home’s op­er­at­ing costs with an­nual en­ergy bills as much as 70% lower than in the older home, own­ers are re­luc­tant to go into debt.

Un­der Duty to Serve, the GSEs could de­sign and test mort­gage prod­ucts with a lower rate and/or longer term to en­cour­age greater en­ergy ef­fi­ciency and off­set the re­luc­tance of cur­rent own­ers to take on new debt. Any pi­lot re­place­ment pro­gram could lever­age the skills and ex­pe­ri­ence of Next Step, a na­tional so­cial en­ter­prise com­mit­ted to con­nect­ing lower in­come con­sumers to high-qual­ity MH homes at af­ford­able prices and fi­nance.

With the ma­jor­ity of ru­ral res­i­dents living in sin­gle-fam­ily homes, Neigh­borWorks Amer­ica rec­om­mends the GSEs in­crease their focus on pre­serv­ing this stock by pro­vid­ing liq­uid­ity for re­hab loans, per­haps be­gin­ning on a pi­lot ba­sis. Fan­nie and Fred­die might also con­sider ways they can part­ner with USDA to lever­age ex­ist­ing ru­ral hous­ing re­ha­bil­i­ta­tion pro­grams like Sec­tion 504 grants and loans.

David Dan­gler is the direc­tor of ru­ral ini­tia­tives at Neigh­borWorks Amer­ica.

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