Mortgaging a Manufactured Home

This is a subject I admittedly know very little (really nothing) about. Mainly because I am a licensed mortgage loan officer in Washington DC and simply put, we don’t have much space for manufactured homes. I see drips and drabs about “chattel” loans in our annual training, or in the various underwriting guidelines. However the nature of my market doesn’t glean opportunities to dive deep into it.

So, you may ask, “what are you doing writing a blog post on a part of the mortgage market you admittedly know nothing about?” Well, the primary purpose of this site is first time homebuyer education, and manufactured homes are among the front runners in affordable housing available to first time homebuyers, so why not learn together?

First, a definition. A manufactured home is generally know as a mobile home. They are usually prefabricated in factories and transported to their build site and assembled. Their construction and definition is heavily regulated by federal law in the Code of Federal Regulations, 24 CFR 3280. The federal regulation outlines details about minimum square footage, body and frame requirements, thermal protection, plumbing, electrical, fire safety, and other aspects of the home.

I read an article in this weekends Wall Street Journal about the mobile home business. Two Berkshire Hathaway companies are the dominant players in manufactured home financing (Hyasha, Yuka: “Bill Favors Mobile-Home Business” Wall Street Journal, March 10-11, 2018: B10 Print). I am personally interested in anything Warren Buffett, but here we will focus on financing manufactured homes. I’ll leave the deep dive on the Berkshire Hathaway position in the industry to another financial blogger.

How it’s done today:

If you are interested in purchasing a manufactured home today, you have to determine what type of manufactured home it is: Real property or personal property. Real property is anything affixed to the ground.  If you have a manufactured home that is secured to the ground, and classified as real property, you can use a traditional mortgage. However, you may note from the definition above, this type of manufactured home dose not fit into the tight federal description. Traditionally, these homes have been classified as personal property, not real estate, meaning you could get a traditional mortgage on them.

For a manufactured home, not classified as real estate, you would have to get a personal loan. The challenge here is there are strict guidelines about property condition and age when secured . Also, it is fairly challenging to get an unsecured personal loan for a depreciable asset. This makes the current financing of a true manufactured home more akin to that of an auto loan.

Currently, if you were interested

Enter Berkshire Hathaway:

Berkshire is the parent company for two of the titans in the manufactured home financing space; 21st Mortgage and Vanderbilt Mortgage. Together, they accounted for 38% of manufactured housing financing in 2016 (Hyasha, Yuka: “Bill Favors Mobile-Home Business” Wall Street Journal, March 10-11, 2018: B10 Print). The next closest player was Wells Fargo with 3.5% of the market.

The Changing Landscape:

Legislation introduced in January 2018 stands to change the way manufactured housing has traditionally been financed. As a part of the Trump administrations commitment to reduce the footprint of government, they are reviewing how manufactured housing is regulated. “Given the significant role that manufactured housing plays in providing affordable housing, HUD has determined that it should undertake a substantive review of all current and planned federal regulation of manufactured housing,” HUD said in its notice in the Federal Register. One of the oft overlooked benefits of manufactured housing is it fills a housing gap for those that are in need of lower cost options for home ownership. According to the Manufactured Housing Institute, more than 22 Million Americans live in manufactured housing and in some rural areas, manufactured housing accounts for 16.2% of the housing offered (HUD 24 CFR Parts 3280, 3282, and 3285). The proposed rule changes were open for comment for 30 days from posting (the comment period seemingly ended in February 2018).

If the changes go into affect, mobile home manufactures could build and finance the purchase of those homes. Today, manufactured home builders are only allowed to share a list of potential lenders with buyers, they can have no influence or discussions with potential buyers. If proposed legislation is enacted,  the builders could also be the lenders.

Definitely lots to keep an eye on here.

If you or anyone you know is in the market for a new home loan, please don’t hesitate to reach out to me.


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