The Federal Housing Administration (FHA) has issued a proposed rule related to adjusting the limits on loans that finance manufactured homes titled as personal property.
The FHA’s Title I Manufactured Home Loan Program insures loans used to finance manufactured homes titled as personal property. These loans may be used for the purchase or refinancing of a manufactured home, a lot on which to place a manufactured home or a manufactured home and lot in combination. To qualify, the manufactured home must be used as the principal residence of the borrower.
The proposed rule seeks public comment on the data-driven methodology the FHA is suggesting it use in calculating loan limits for the program. The comment period is now open and will close on Dec. 19, 2022.
“Adjusting loan limits to current market conditions will make Title I a much more useful source of affordable loan financing for manufactured homes,” Federal Housing Commissioner Julia Gordon said in a release. “This proposal is the next step in FHA’s ongoing work to support manufactured housing as an affordable and attractive option in a challenging housing market.”
This rule is the latest action the FHA has taken to promote manufactured homes as an affordable avenue to homeownership, an important aspect of the Biden-Harris administration’s action plan to address the housing supply issue.
“The majority of people buying new manufactured homes rely on personal property financing (chattel lending) rather than conventional mortgages,” the White House stated. “This type of financing typically costs more than traditional mortgage financing due to higher interest rates and shorter loan terms….
“[R]ecognizing the cost and development time savings provided by manufactured housing, HUD is making it easier to finance new units and helping manufacturers update their designs to meet changing consumer demands,” it continued. “This includes working to increase the usability of FHA’s Title I loan program for manufactured housing, supporting greater securitization of Title I loans through Ginnie Mae’s platform, updating the HUD Code to allow manufacturers to modernize and expand their production linesand helping manufacturers respond to supply chain issues.”
The proposed rule will be the first update in loan limits for the Title I Manufactured Home Loan Program since 2008. The methodology will be used to establish indexes to annually calculate and adjust loan limits using sales prices, the number of sections of the manufactured home and property data collected by the U.S. Census Bureau, the FHA stated. It also includes separate indexes for single section manufactured homes and multi-section manufactured homes.
“HUD proposes to adjust loan limits for single-section and double or multi-section manufactured home loans annually based on changes to indexes for the average price of single-section and double-section manufactured homes, respectively,” the proposed rule stated. “To determine each index, HUD proposes to use the average price data for the most recent 12 months available at the time HUD calculates the adjustment, weighted according to the number of manufactured units shipped during that same period.
“Each index would be calculated separately, using shipping and price data for single-section units for the single-section index and shipping and price data for double-section units for the double- or greater section index. Consistent with HERA [Housing and Economic Recovery Act], HUD would not decrease loan limits even if an annual index reflects a decline.”
Another index would be created for manufactured home lot loans based on median home prices from the Census Bureau’s new residential sales data. HUD would consider these estimates a “suitable general indicator” of the movement of prices for land to be financed with these types of loans. The limits would be set annually by indexing the loan limit established by HERA in 2008 to the growth in median new home prices.
For combination loans, the limits would be determined by adding the manufactured home lot loan limits to either the single- or double- section loan limit, depending on the nature of the home.
The proposed rule specifically mentioned it is not proposing an index for manufactured home improvement loans.
“While HERA authorized adjustments to the limit of loans that finance improvements to manufactured homes under the Property Improvement Loan program, that authorization was not extended to site-built condominiums, townhomes, or detached dwellings,” the rule stated. “HUD does not believe any existing Census Bureau data fully reflect changes in the manufactured housing property improvement loan market. Therefore, the implementation of HERA regarding manufactured home improvement loans would be subject to inaccuracy.”
The rule added: “[S]etting different loan limits for only this subset of the broader Property Improvement Loan program would cause complication, as the program and market for property improvements makes no other differentiation between improvements to manufactured homes vs. non manufactured homes. Therefore, HUD intends to publish an advanced notice of proposed rulemaking requesting public comment seeking input on implementation of a property improvement loan index for manufactured homes.”