Freddie Mac has expanded its program for loans on real-property factory-built homes that have features in common with traditional houses like pitched roofs, attached garages and permanent foundations.
The government-sponsored enterprise said it is now buying single-section CrossMod homes loans for the first time, making it possible for borrowers to get reduced rates for housing available at lower price points, with a 3% down payment option.
Freddie has purchased
The expansion in the types of Freddie Mac-financeable homes that meet the Manufactured Housing Institute's CrossMod standards adds to
"Freddie Mac's support for modern single-section factory-built homes will play an important role in creating and promoting affordable housing," said Sonu Mittal, executive vice president and head of single-family acquisitions at Freddie Mac, in a press release.
How single-section CrossMod loans help with affordability
The average traditional house tops $500,000 in the United States, according to Freddie. Multisection CrossMods with land, which Freddie's been funding for several years, average around $300,000. Single-section CrossMods with land usually price closer to $200,000.
Without the garage, single-section CrossMods run around 1,000 square feet in size while the multisection equivalent is closer to 1,600. CrossMods also require some energy efficient features aimed at reducing some of the longer-term costs of homeownership.
Making lower-rate financing available for less costly, modernized factory-built homes may not be a cure-all in terms of the many entry-level supply challenges, including materials costs and policy uncertainty, but it is a step in the right direction.
"Savings may be obtained from improved technology, use of AI, and less reliance on one-site labor, which will be in shorter supply," said Selma Hepp, chief economist of Cotality. "I agree that focusing on manufactured units would help alleviate some of the affordability challenges."
But Hepp also noted that factory-built housing is not currently a big factor in supply.
While today's inventory may be relatively small, potential is big, with Freddie's financing potentially boosting a currently limited supply of single-section CrossMod units by addressing "which came first, the chicken or the egg" relationship between the homes and the loans.
Clayton Homes, which launched a model for single-section CrossMods back in 2022, is hopeful it will open up the market that traditional homebuyers, Realtors and developers circulate in such a way that it will be attractive to offer more inventory.
"It makes it a more attractive development tool to builders out there," said Ramsey Cohen, who works in national sales at Clayton Development Group.
A way to mitigate some zoning challenges
Another challenge to affordable housing have been local housing regulations, which can be considerable.
Single-section CrossMods may address these both in terms of conforming more closely with traditional home features and by being more likely to be accommodated on smaller lots. Traditional home features also mean they're more comparable to site-built for appraisal purposes.
"It fits very well for urban infill projects, fitting existing lots where they are maybe vacant or a home needs to be torn down and taken out because it's just not livable. It can fit that footprint," Cohen said. "If you're doing a ground-up development, the single section allows you greater density, because they don't need as much space. So it's not just a price point."
Also, CrossMods are a form of manufactured rather than modular housing, so its standards are overseen nationally by HUD, pre-empting some local building codes.
Part of a larger trend toward smaller, factory-built homes
Both HUD and
There has been buzz in the market about Boxabl, a modular builder of small factory-built homes, and its plan to go public through a $3.5 billion Special Purpose Acquisition Company deal.
Freddie's announcement has less relevance to Boxabl according to Tomo Mortgage Senior Vice President Emanuel Santa-Donato, who also is the company's chief market analyst.
"Freddie Mac's expansion applies only to HUD-code manufactured homes, including single-section units. It does not apply to modular homes like those built by Boxabl. Modular homes are regulated at the state level, not by HUD, and are already treated like site-built homes in the mortgage system," he said in an email.
The small size of the loans for Boxabl homes, which have been base priced below $100,000 in some cases, could still make financing them challenging. Large loans offer more attractive economics for lenders and some shy away from those below a certain size.
However, others value small starter homes as a way to gain customers that might move on to bigger properties later.
While the manufactured housing market Freddie Mac is expanding into remains relatively small, it has shown signs of short-term momentum over the past year.
"Manufactured homes accounted for approximately 10% of all new single-family housing starts as of late 2024, with over 42,000 homes built in the first five months of 2024 alone, up nearly 20% year-over-year," Santa-Donato said.
"For many homebuyers priced out of traditional options, this shift opens up one of the few remaining paths to affordable homeownership," he said.
