Fan­nie Taps N.H. Law to Test 30-Year Loans for Man­u­fac­tured Hous­ing

National Mortgage News - - Secondary - By brad finkel­stein

a fan­nie mae pro­gram to offer 30-year fi­nanc­ing for man­u­fac­tured homes in New Hamp­shire could be a launch­ing point for the gov­ern­ment- spon­sored en­ter­prises to offer sim­i­lar con­form­ing loan terms nationwide.

The GSE is work­ing with the New Hamp­shire Hous­ing Fi­nance Author­ity on the pro­gram and is avail­able for man­u­fac­tured hous­ing lo­cated in a res­i­dent-owned com­mu­nity, or ROC.

The pro­gram takes ad­van­tage of a New Hamp­shire law that re­quires all man­u­fac­tured homes, whether lo­cated on owned land, in an ROC or in­vestor-owned park, to be ti­tled as real prop­erty in­stead of chat­tel, said Pa­trick McCarthy, Fan­nie Mae vice pres­i­dent for com­mu­nity lend­ing.

In­ter­est rates and fees are typ­i­cally lower for con­form­ing loans than on chat­tel loans. Loans are avail­able up to a 95% loan-to-value ra­tio with pri­vate mort­gage in­sur­ance.

This pro­gram is sim­i­lar to loans se­cured by an apart­ment in a co-op­er­a­tive, he said.

“The res­i­dents own a share of their park, a share of their land,” said McCarthy. “They pay for the up­keep in a co-op-type struc­ture.”

Since homes el­i­gi­ble for the fi­nanc­ing are lo­cated in ROCs, Fan­nie Mae has a bit more com­fort from a risk-man­age­ment per­spec­tive, as the bor­rower is less likely to walk away if there is a prob­lem.

“This mort­gage cap­tures all of that so that the lenders are will­ing to, and Fan­nie Mae is will­ing to, lend for 30 years on these man­u­fac­tured homes,” said Ig­natius MacLel­lan, man­ag­ing direc­tor of the New Hamp­shire Hous­ing Fi­nance Author­ity’s home­own­er­ship di­vi­sion.

There is some unique doc­u­men­ta­tion with these loans, MacLel­lan said. It in­cludes “an agree­ment with the ROC that says they re­spect the mort­gage and they’ll al­low the lender to con­vey the prop­erty and con­vey the shares to the next owner if there hap­pens to be a fore­clo­sure,” he said. “We’re not look­ing for­ward to fore­clo­sure, but when you think about risks, you want to make sure you get all those right.”

From a be­hav­ior per­spec­tive, the home­owner is more likely to plant a $50 shrub be­cause they know they are go­ing to be there for the long term.

“The peo­ple know, ‘If I add a deck, if I pave my drive­way, if I do a car­port, if I im­prove it, it’s still mine and no land­lord is go­ing to tell me you’re out of here,’” MacLel­lan said.

The par­tic­i­pat­ing lenders can close and sell the loan to the New Hamp­shire HFA. Or they can bro­ker the loan to the agency which has its own ware­house lines and can close in its own name. In ei­ther case, the agency then sells the loans to Fan­nie Mae.

There are 123 ROCs in New Hamp­shire, with 10 al­ready ap­proved by Fan­nie Mae and six to eight more ex­pected to be ap­proved in the near fu­ture. The New Hamp­shire HFA made a grant to the state’s Com­mu­nity Loan Fund to go out and help other ROCs get Fan­nie Mae ap­proval.

The pro­gram can be adopted by other HFAs, but state laws might need to be changed for that to hap­pen, McCarthy said.

But ROCs are just a tiny por­tion, 5%, of the 37,624 man­u­fac­tured home com­mu­ni­ties nationwide, said Lesli Gooch, se­nior vice pres­i­dent of gov­ern­ment and chief lob­by­ist for the Man­u­fac­tured Hous­ing In­sti­tute. So the or­ga­ni­za­tion is fo­cused on mak­ing fi­nanc­ing avail­able to all in­di­vid­u­als seek­ing to pur­chase a man­u­fac­tured home, no mat­ter how they are ti­tled or where they are sit­u­ated.

“We have been en­cour­ag­ing Fan­nie Mae and Fred­die Mac to focus on cre­at­ing a sec­ondary mar­ket for chat­tel loans through their duty to serve obli­ga­tion.”

Fan­nie Mae al­ready makes loans se­cured by man­u­fac­tured hous­ing parks and “the nat­u­ral next step for them is to move into the chat­tel space,” she said.

The New Hamp­shire pro­gram does not qual­ify for duty to serve credit be­cause it started be­fore 2018 but it does help Fan­nie Mae meet its af­ford­able hous­ing obli­ga­tions, said McCarthy.

The GSEs are “dip­ping their toe a lit­tle bit in the wa­ter of look­ing at try­ing to un­der­stand chat­tel and we think that they need to move in that di­rec­tion. Our hope would be is that this ex­pe­ri­ence in New Hamp­shire would just move that process along,” said Gooch.

There are three MIs par­tic­i­pat­ing in the pro­gram: Gen­worth, Na­tional MI and MGIC.

Gen­worth al­ready in­sures loans se­cur­ing man­u­fac­tured homes ti­tled as real prop­erty up to 95% loan-to-value prior to this pro­gram with the New Hamp­shire HFA, said Sharon Net­ter, its risk cus­tomer re­la­tions man­ager.

“From that per­spec­tive we have been com­fort­able in­sur­ing man­u­fac­tured homes,” she said.

And the com­pany has long- stand­ing part­ner­ships with many HFAs, in­clud­ing New Hamp­shire, added Erika Martin, the direc­tor of cus­tomer ex­pe­ri­ence and seg­ment mar­ket­ing.

The in­vestor sets the in­sur­ance cov­er­age level. Be­cause these loans are be­ing done through an HFA, there is 16% cov­er­age of the losses if the mort­gage is fore­closed upon, which means a lower pre­mium for the bor­rower, Martin said. Stan­dard cov­er­age on a man­u­fac­tured home is 30%, al­though it is 25% for loans orig­i­nated through Fred­die Mac Home Pos­si­ble or Fan­nie Mae’s HomeReady pro­grams.

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