Mobile home lending standards

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Dear Steve,
Friends of mine are trying to buy the lot where their mobile home is located. Lenders are saying that’s not possible because the home was built before 1976. If it was built after 1976, or if there was no mobile home there at all, then there would be no problem, they are told. Why is the year such a problem?
— Tammy

Dear Tammy,
Safety is an issue on those pre-1976 models, which were built to significantly lower standards than those built from mid-1976 on. That’s when the U.S. Department of Housing and Urban Development, or HUD, mandated more strict construction procedures for mobile homes, which are now more commonly referred to as “manufactured homes.”

Pre-1976 mobile homes had less insulation in walls, ceilings and floors, uninsulated air ducts and no vapor barriers in their roof cavities, making them fire hazards. Most include windows that are too small for the average-size person to escape from and wood paneling situated too close to the furnace. Moreover, others have aluminum wiring, which can cause sparking inside the walls. Not good!

Hence, the Federal Housing Administration, or FHA, which provides mortgage insurance on loans made by most U.S. lenders, won’t insure mortgages on mobile homes built before June 15, 1976 or on property that will contain such a unit. That’s why your friends can’t get a loan. Other mortgage insurers, by the way, typically follow FHA’s lead.

Be a good friend and tell your pals they are living in a fire trap. As much as they’d like to avoid the hassle of relocating or replacing their mobile home, advise them to please move up to a newer model, both for their safety’s sake and for better energy efficiency. There is a hitch, however. In many jurisdictions, pre-1976 units may not be relocated or resold, so your friends may get little or nothing in trade other than scrap value. And as far as I can tell, it’s next to impossible to have a pre-1976 model retrofitted to qualify for an FHA loan.

If your friends do buy another unit, they will need to familiarize themselves with local manufactured-housing laws and set-back restrictions, because they will no longer be grandfathered in at their location. A local manufactured-home dealer can answer most of their questions.