For manufactured home customers and lenders, it was financially painful irony. While others purchased site-built homes for hundreds of thousands of dollars for no money down, those looking for a manufactured home with a 30-year mortgage had to produce a 10 percent down payment after Fannie Mae tightened its lending policies last summer.
The decision was another blow to the manufactured housing industry, which has lost major lenders in the past few years. In 2003, shipments fell to 130,900.
In February, though, Fannie reopened its wallet just a crack. Working with nine selected lenders, Fannie agreed to accept manufactured housing loans requiring only 5 percent down, undeniably good news. “It clearly adds liquidity to the industry,” says James Clifton, senior vice president of economics and housing finance at the Manufactured Housing Institute.
It will also create some new relationships. Fannie Mae selected the lenders based on their best practices and lending history, subjecting them to fairly rigorous reviews of their processes and past performance. But they are not a uniform bunch. Some, such as Origen Financial, are specialty manufactured housing lenders. Others, such as Washington Mutual, are primarily traditional home-finance companies.
For both groups, the program provides new business opportunities. With manufactured homes selling for an average of $56,300 in November, traditional home-finance lenders (and Fannie) will get the chance to bolster their financial support for affordable housing. Meanwhile, manufactured housing lenders will have a new financing option for their buyers: a conventional conforming loan with competitive interest rates. “Land/home loans are becoming a more and more significant piece of the industry,” says Dave Rand, senior vice president at Origen, which has originated more than $2 billion in manufactured housing loans since 1996. “This provides an incremental product to our dealers.” (The bulk of manufactured housing loans remain property-only “chattel” loans, with significantly higher interest rates than traditional home-mortgage loans.)
Nobody is willing to offer any estimates on how much business this new program will generate, although participating lenders do expect to see more volume as a result. As for Fannie, it's willing to do as much “good business” as can be done, says a spokeswoman. But Clifton says numbers are only part of the potential. “Regardless of how much loan volume this generates,” he says, “this will provide an anchor in reviving retail lending.”