GNMA to OK 1st MH Issuers Since 1980s
WASHINGTON—Congress has breathed new life into the FHA manufactured housing loan program and now Ginnie Mae is on the verge of approving its first two MH mortgage-backed securities issuers since the 1980s.
In June 2009, the Federal Housing Administration issued new guidance for Title I manufactured housing loans, which have a maximum loan limit of $69,678.
These are personal property loans on the actual structure because the borrowers generally live in rural areas and own the land outright, according to Thayer Long, executive vice president of the Manufactured Housing Institute.
FHA also provides land lot loans of up to $23,226 to purchase and develop lots for manufactured homes.
So far, lenders have originated $104 million of these FHA-insured loans.
There are only six or seven really active MH lenders today. With Ginnie Mae opening up a secondary market, “it is going to attract lenders that haven’t been active to take another look,” Long said.
Back in the 1980s, Ginnie Mae was the major securitizer of FHA-insured manufactured loans. But that came to end in 1989 when the secondary market agency slapped a moratorium on new issuers.
From 1986 to 1988, the agency had 12 manufactured housing issuers default on nearly $2 billion of securities. Ginnie Mae incurred a $500 million loss because the FHA guarantee covered only 10% of the issuers’ total outstanding portfolio.
Despite the moratorium, Ginnie grandfathered a few issuers in “good standing” and allowed them to continue to issue small pools over the past two decades.
Three of the grandfathered companies—San Antonio Federal Credit Union, Green Tree MH LLC and Vanderbilt Mortgage and Finance—issued $32 million in Ginnie MH MBS in fiscal year 2010, which ended September 30.
Today, outstanding Ginnie MH MBS total $216 million.
As part of the Housing and Economic Recovery Act of 2008, Congress revamped the FHA manufactured housing program. Now FHA guarantees 90% of each MH loan and the lender is on the hook for 10% of the losses. The first losses are shared pro-rata between the lender and FHA.
FHA implemented the HERA changes in June 2009 and Ginnie Mae launched its new MH securitization program on June of this year.
The changes in FHA insurance coverage “made us comfortable” to roll out the new program, said Ginnie Mae senior vice president Stephen Ledbetter.
Ginnie Mae began accepting applications for new issuers in June, but so far only two applicants have stepped forward.
The SVP for mortgage-backed securities noted the even grandfathered MH issuers have to apply to continue using the program. “We put new program requirements in place, so we made the determination that the grandfathered issuers would have to re-apply,” Ledbetter said.
These new requirements include $10 million in net worth, plus 10% of the amount of MH securities outstanding.
Eligible manufactured loans will be pooled under the Ginnie Mae II program in a separate Manufactured Housing Custom pools. The minimum pool size is $1 million. MH pools cannot be placed in multiple-issuer pools.
Ginnie issued additional pooling guidelines on Nov. 1. “Ginnie Mae’s commitment to this new security is a reflection of our mission to expand affordable housing,” Ginnie president Ted Tozer said. “Manufactured housing provides affordable housing for many low- and moderate-income borrowers seeking affordable housing in high-cost and rural areas.”
Long, the Manufactured Housing Institute executive, noted that about 500,000 MH loans are originated a year. The overwhelming majority of transactions involve re-sales and about 50,000 are new home sales. “We are excited that the moratorium has been lifted” and the Ginnie Mae MH securitized program is being “rejuvenated,” Long said. “This is a huge step in the right direction.”