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Manufactured homes: Not tin cans on wheels
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"Another thing that dictates whether you're able to build wealth involves whether there's access to any kind of decent financing for people on the resale market."

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Financing can be tricky
West says Superior Homes has a financing program in place that matches buyers with lenders, a practice the Manufactured Housing Institute reports is widespread in the industry.

Those who prefer to go it alone should be aware that the mortgage community, and some state laws, make distinctions that can have an impact on the kind of mortgage you get and what you have to do to qualify.

"The bottom line is if you've got good credit, you can get it financed, and if not, you can't," says Steve Murray, principal of Aaron Financial Services in Memphis, which specializes in financing manufactured homes. "In many cases they're not going to talk to you unless you've got a credit score of 660, though with stick-built you can get down into the 500s. They just don't want those with marginal credit anymore."

There's some history here, says Chuck Rumfola, Fannie Mae's vice president for manufactured housing.

"Up until the middle of 2003 we did not differentiate between manufactured and site-built in underwriting loan plans," Rumfola says. "Then the industry experienced a lot of losses through fraud and poor credit standards. When we saw all that going on, we knew we needed to take a closer look at the mortgages we're backing."

Fannie Mae looked at loan performance results and ended up dividing manufactured housing financing into two categories, he says -- land-home deals and chattel.

"In a land-home deal, the house is permanently attached to the land and one mortgage is created for both, just like a site-built home," Rumfola says. "That is the type that Fannie Mae is involved with.

"Chattel is for manufactured housing that is in a park or not permanently attached to land. It's treated as personal property, the same as your car. We are not involved in that part of the industry any longer."

Fannie Mae's 2003 guidelines called for more stringent credit scores for buyers of manufactured homes than for stick-built housing. But Rumfola says better loan performance, since Fannie Mae ditched chattel-backed loans, has led to some softening of those requirements.

"If they continue to perform better," he says, "we'll continue to make adjustments to reflect that."

Since Fannie Mae is the nation's largest provider of funds to lenders, its guidelines have a huge impact on the entire industry. The result has been huge variations, state to state, in regulating loans for manufactured homes.

In Florida, says Terry Claus Jr., president of Home Financing Center, "there is only a very slight adjustment for a manufactured home," about one-eighth of a percentage point, he says.

On the other hand, McCarthy says the Ford Foundation discovered that states such as Michigan require all manufactured homes be treated as chattel.

"We saw that there were opportunities out there to intervene in the market structure that served the manufactured housing market," he says, "so that folks who end up buying there would still have a decent possibility of building wealth in their homes."

Through a fund started last year called Innovations in Manufactured Homes, the Ford Foundation will pour millions of dollars into improving that picture.

"We're putting more than $10 million of grant money and capital into it," McCarthy says, "and we're hoping to leverage more than twice that along with local contributors, and other funders, to build up a four-point intervention plan and improve the performance of the industry."

Recently, the Federal Housing Administration ruled that manufactured homes built to Energy Star specifications are eligible for its energy-efficient mortgage program.

Insurance rates vary
Insurance is less of a problem, says Larry Staggs of California Southwestern Insurance, which has been writing policies for mobile and manufactured homes for more than 30 years.

"If it's on an infill lot on a permanent foundation in an area that is mainly site-built, some companies will write a regular homeowner policy," he says. "But it can be as much as 50 percent or even 100 percent more if it's a trailer out in the boonies."

Some economists are predicting that manufactured housing will be a major player in the reconstruction of areas of the country devastated by Hurricane Katrina, perhaps repairing the industry's lingering image problems as well.

"What people need to realize," Hullibarger says, "is that manufactured housing is just a substitute method of construction."

Bankrate.com's corrections policy-- Posted: Sept. 29, 2005
 
 
More stories by Marilyn Bowden
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