Manufactured Home Lenders Hard to Come By

By: JD Evans Click author's name for more of his/her articles

Loan standards in the Mobile Home finance insdustry have naturally become restricted during periods of economic crisis. This is not surprising, but still unwelcome. The tight standards that banks are now maintaining for Manufactured Home loans can be compared to a agriculturist who drains all the resources from his soil as fast as possible. The agriculturist then blames at the grocer for his losses, instead of realizing that he is actually to blame for poisoning the well. The financial institutions have been reaping the benefits of the relaxed laws for many years now, all the while capitalizing by approving unwise financing to take place, then securitizing the loan and placing it elsewhere. Now the banks are doing the opposite to recover their losses by becoming overly cautious. Mobile Home banks are using any excuse to decline even the lowest risk loans.

Mobile Home mortgage agents are now left asking who the new primary lender will be in the Mobile Home loan industry after the dust settles. Recently the fed has banned Taylor, Bean and Whitaker from providing any more loans backed by by the federal government. HUD said the institution failed to submit a mandatory financial report, which amounted to fraud concerns. Taylor was also ordered to desist from issuing MBS for Ginnie Mae. This firm was the former premier source of financing for manufactured homes, they lent nearly 13 percent of all Mobile Home loans in 2007, which were insured by the Federal Housing Administration.

Countrywide, Wells Fargo and JP Morgan are the next largest manufactured home investors, but they are not as active as they used to be in the Mobile Home loan market. This few number of investors will lead to downsized competition, likely resulting in a high demand and therefore, increased interest rates passed on to the consumer. Because of this situation, the lenders have the advantage and will likely issue a limited number of loan programs available to refinance or finance a Mobile Home in America.

Mobile Homes have been) the primary first step towards property ownership for lowincome and retired Americans for a long time. Mobile 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 Mobile 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 Manufactured 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 insdustry is overtaken by a new investment company willing to emerge into a new market starving for capital.

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About The Author: JD Evans is an industry expert in manufactured home loans. He currently manages manufactured home refinancing activities in California.