Freddie tests manufactured home loans to meet duty to serve goals

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A new Freddie Mac pilot program will offer mortgages on manufactured housing with terms that more closely resemble conventional financing for site-built homes.

The scope of the two-year pilot is limited in a number of ways. Only 10-12 lenders with prior manufactured housing experience will participate. And properties must meet certain quality and design specifications, such as having a pitched roof and permanent foundation.

But for homes that qualify, Freddie Mac will treat the loans like those secured by single-family, site-built homes, the government-sponsored enterprise said.

And the goal of the program, called CHOICEHome is to create a model that can replicated at greater scale.

"Our intent is to come out with a broader offering," Dennis Smith, an affordable lending manager at Freddie Mac, said in an interview.

Freddie has been working on its CHOICEHome pilot since summer, but needed to ensure all the proper secondary market disclosures were in place, among other things, before it could proceed. The program is similar to one Fannie Mae rolled out to the full market earlier this year.

Higher-end manufactured homes are increasingly becoming more comparable to traditional site-built housing, and Freddie and Fannie are starting to finance and appraise the homes in line with practices used in the traditional mortgage market.

To be eligible for CHOICEHome, manufactured housing must be titled as real property and have certifications proving they have been built with certain features. These include permanent foundations, pitched roofs, minimum insulation levels, and windows that help minimize heating and cooling expenditures.

The GSEs have only financed a small share of manufactured homes. But both have pledged to increase their involvement in financing manufactured housing and other forms of more affordable housing under "duty to serve" legislative mandates, which direct Fannie and Freddie to explore more ways to house underserved populations.

Although manufactured housing volumes remain below the industry's peak in the 1990s, they have been rebounding since the Great Recession in part due to a lack of more affordable entry-level housing that increased demand.

Can new manufactured homes, and loans, rebuild the housing market?
New financing options and better inventory have bolstered the manufactured housing sector. Is this the answer to lenders' purchase-market woes?

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Manufactured homes GSEs Affordable housing Housing inventory Fannie Mae Freddie Mac