A Major Breakthrough Looms for Owners of Manufactured Homes
By Ignatius MacLellan, Guest Contributor on 05/24/2012 @ 11:00 AM
A two-year long effort is about to reach a climax in July, when the Uniform Law Commission (ULC) will consider passage of a Uniform Act on Manufactured Homes. The Uniform Act to be presented by the drafting committee to the full commission will improve the ability of most owners of manufactured homes to title their homes as real property – like site-built homes – and to access long-term, fixed rate residential mortgages – also like site-built homes.
Why is this a big deal? First of all, you need to appreciate that manufactured homes (MH) constitute the largest source of affordable housing in the United States. The median sale price for new MH in a recent year was one-fourth the price of a site-built, detached house. Modern MH is safe, factory-built to a national building code, and more energy-efficient than most homes and apartments.
Only my state of New Hampshire automatically gives MH owners the same legal rights as other homeowners, by titling MH as real property. Outside New Hampshire, most MH is titled as personal property – like an automobile – rather than as real property like a house. The ULC’s action in July will make a giant step forward by publishing a Uniform Act for states to adopt that will rectify this situation by allowing owners to choose to title their manufactured homes as real property in a simple and consistent manner.
From my vantage point, I can unequivocally state that improving the ability of manufactured homes to be titled as real estate will improve the access of homeowners to a greater range of affordable home finance options.
Real estate mortgages, including those purchased by both Fannie Mae and Freddie Mac, are already available to manufactured homes titled as real estate. While Fannie Mae and Freddie Mac are significant investors in home mortgages, they are not the only ones. They are joined by the Federal Housing Administration (FHA), State Housing Finance Agencies, USDA, Veterans Administration and many other capital sources and investors that support millions of dollars of real estate mortgage lending for manufactured homes.
The Uniform Act which will emerge from the Uniform Law Commission’s efforts has the potential to make it possible for more manufactured home owners to title their homes as real property. Real property titling can and should benefit homeowners who own the land beneath their home (fee simple) as well as those who lease the land in a community such as a resident-owned community (ROC) or other types of community. Real estate mortgages offer borrowers many advantages compared to chattel loans or personal property loans, including longer loan terms up to 30 years, the option of fixed or variable interest rates and typically lower interest rates compared to chattel/personal loans. The lower costs and lower monthly payments of real estate mortgages are especially important to low- and moderate-income households.
Titling manufactured housing as real estate is an essential step to ensure fair access to credit for low- to moderate-income people who happen to live in manufactured housing. While titling manufactured housing as real estate will not solve all of the issues related to manufactured housing finance, such a step will solve a major initial barrier. If MH is more generally titled as real estate, existing financial institutions such as Fannie Mae and Freddie Mac, mortgage lenders and housing finance agencies would collectively work to improve the manufactured housing finance system.
The ULC’s action in July will not be the end of the road. States will to adopt the Model Act in order to benefit their residents. But it will be a major milestone that will eventually improve access of millions of households to affordable, long-term financing.
Ignatius MacLellan is Managing Director of Homeownership for New Hampshire Housing Finance Authority, the state’s housing finance agency, which helps finance home loans including loans on manufactured homes. Previously, he was Director of Fannie Mae’s Northern New England Community Business Center where, as part of his mandate, he helped advance manufactured home finance and designed a program of real estate lending for manufactured homes on leased land in resident-owned communities in New Hampshire.