Mobile Home Lenders Hard to Come by

Loan standards in the Mobile Home finance insdustry have typically tightened during times of economic hardship. This is expected, but nevertheless unwelcome. The tight standards that banks are now maintaining for Manufactured Home loans is similar to a farmer who depletes all the resources from his soil as fast as possible. The agriculturist then points the finger at the grocer for his losses, instead of realizing that he himself is actually responsible for poisoning his crop. The financial institutions have been reaping the benefits of the loose legislation for many years now, while profiting from allowing unwise financing to occur, then securitizing it and selling it off. Now the hens have come home to roost, and the banks are acting irresponsibly in the opposite direction, on the side of over caution. Mobile Home banks are finding phantom reasons to reject completely sound loans.

Manufactured Home mortgage brokers are now left asking who the new primary lender will be in the Manufactured Home finance community after the dust settles. In recent news the government has banned Taylor, Bean and Whitaker from providing any more investments backed by by the federal government. HUD believes the institution failed to submit a mandatory financial report, raising eyebrows at fraud concerns. Taylor was also ordered to desist from issuing MBS for Ginnie Mae. Taylor was the No. 1 source of financing for manufactured homes, they provided financing for nearly $1.45 billion of all Mobile Home investments in 2007, which were backed by the Federal Housing Administration.

Countrywide, Wells Fargo and JP Morgan are the remaining large manufactured housing investors, however these companies aren’t as active as they used to be in the Mobile Home loan insdustry. This small amount of investors will lead to reduced competition, yieldning a high demand and therein, increased interest rates. Because of this situation, the lending institutions have the upper hand and will likely issue a limited number of loan programs available to refinance or finance a Mobile Home in America.

Manufactured Homes have been) the primary first step in the direction of homeownership for lowincome and retired Americans for a long time. Manufactured Home mortgage agents are finding it difficult to find new sources of mobile home funding from a group of lenders that has shrunk during the past several years. Manufactured houses, which are factory-built in parts and then put together at a land site, are significantly less expensive than traditional homes. According to the Commerce Department, the average price for a Mobile Home in 2008 was $65K, much lower than the average price of $292K for a site-built home.

Strangely, Warren Buffet’s Berkshire Hathaway revealed recently that in this current housing/banking crisis, their Manufactured Home customers are foreclosing less and making their loan payments more. Berkshire subsidiary Clayton Homes’ delinquency rates for mobile home loans have also been stable during these times of turmoil: the delinquency rate was 3.26% in 2004; it was at 3.5% in 2008; and now it’s 3.82% here in 2009. However, the delinquency rate in the traditional housing market is higher, around 6.4%. Annual credit losses are running steady at a reasonable 1.5% of the loan portfolio. It is worth mentioning, however, that Clayton does not securitize their loans. This means the loans remain on their books, so they are much more conservative in their loan approval process.

This seems like a paradox, but it should make Mobile Home loans a logical consideration among the possible lenders that are looking to emerge into a lucrative new niche insdustry. Which leaves everyone in the Manufactured Home community asking the question: Who will step up to the plate to be the leading Mobile Home Lender? It is possible that Warren Buffet will step up to the plate, but his big investments and movements lately have seemed incongruous. He may move to a low-stakes table, while the Manufactured Home financing market is overtaken by a new investment company willing to emerge into a new insdustry starving for capital.
JD Evans is an industry expert in mobile home finance. He currently manages manufactured home refinance activities in California.

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