NEW YORK -(Dow Jones)- Fannie Mae (FNM) is expanding its mobile home-lending
program, allowing more borrowers to purchase a manufactured home with a down
payment of just 5% on a 30-year mortgage.
In the past, borrowers who wanted to purchase manufactured housing, or mobile
homes, with a 30-year mortgage had to come up with a downpayment of at least
10% . But in February, Fannie Mae began a pilot program with 10 lenders
allowing would-be borrowers to finance up to 95% of the value of a mobile home
with a 30- year mortgage. The program is now being expanded to allow all of
the lenders with whom Fannie Mae does business to offer the lower-cost financing.
The new standards apply only to mortgages on manufactured homes used as a
primary residence.
The eligibility changes for mobile home mortgages apply to all loans delivered
to Fannie Mae on or after Dec. 1.
Lenders have traditionally imposed more stringent requirements on the purchase
of manufactured housing, and even under the new program, financing of mobile
home purchases will still be more costly than that for conventional housing. A
95% loan-to-value ratio is pretty common for conventional 30-year mortgages,
but it's possible in some cases to finance 100% of the cost of a house with a
30- year mortgage.
Fannie Mae said the changes, disclosed late Tuesday in a Lender Announcement,
are part of its overall effort to improve lending practices in the manufactured
housing market. "Today's changes will allow us to broaden the availability of
financing for this affordable housing type," Chuck Rumfola, Fannie Mae's
vice president for manufactured housing said in a press release.
While giving a green light to easier credit for mobile home buyers might seem
like a risky move, Fannie Mae hopes to entice more lenders to enter this
segment of the market, in the process encouraging better lending practices.
Lending for manufactured housing used to be dominated by companies including
GreenPoint, Conseco Finance, a unit of Conseco Inc. (CNO),
Vanderbilt, Oakwood Homes and Bombardier Inc. (BBD.A.T.),
although business has dried up after a number of these lenders failed or exited
the business. But the emergence of new lenders, including Berkshire Hathaway
(BRKB) - which acquired Vanderbilt and Oakwood - has raised hopes that lending
could pick up again.
The housing agency, which buys mortgages from lenders, allowing them to use
the money to offer mortgages to homebuyers who wouldn't otherwise be considered,
also addressed in its announcement to lenders Tuesday a number of other topics
for loan sellers and servicers, including predatory lending, property flipping
schemes and lender-placed property insurance.
Encouraging lenders to offer lower-cost financing for mobile homes could also
make it easier for Fannie Mae to ramp up its purchases of affordable housing
in line with new goals the Department of Housing and Urban Development issued
last week.
But Fannie Mae spokesman Alfred L. King said the impact of the new
eligibility requirement on the housing agency's portfolio was likely to be
limited, since mortgages on manufactured housing currently account for less
than 1% of Fannie Mae's total business.
