GSE changes, Boxabl pact spur mortgage lending opportunities

Fannie Mae and Freddie Mac latest selling guide updates give lenders more leeway in some areas, including the lower-cost factory-built housing market that's gained some traction because broader home affordability has been under strain.

Fannie has streamlined Native American conventional loans for previously approved tribes, and Freddie is now buying mortgages financing manufactured homes moved from another property with an inspection for structural integrity, so long as the zoning is consistent or improved.

Also pointing to potential growth in factory-built housing opportunities is publicly traded manufactured home innovator Boxabl's multiyear deal for up to 1,500 homes with developer LC Vegas Acquisitions LLC. It's Boxabl's largest residential purchase agreement to date.

"Boxabl's manufacturing platform gives us a way to deliver attainable, high-quality housing at a pace and price point that traditional construction can't match," said Greg Palivos, co-founder and managing partner of LC Vegas Acquisitions, in a press release.

Niche lending opening up, but some hurdles persist

Lenders can face challenges around economies of scale and requirements that they be real estate-secured when making small mortgages to finance lower-cost manufactured housing loans.

Public officials have been working on adjusting policy to address this although at the GSEs, there are still some risk-management restrictions in place that further complicate this. 

Freddie does not allow the use of loan proceeds for manufactured housing moved to a new property to be used for several ancillary costs MH transfers have, like delivery, setup, anchoring on a fixed foundation, or permanent utility utility connections, including well and septic systems.

Despite such challenges, lenders have been increasingly making some smaller loans, such as home equity lines of credit, which Boxable has encouraged use of in connection with its homes. (There has been a GSE pilot involving home equity lending, but they're typically private loans.)

Boxabl offers a link to Figure for HELOC financing, some of which borrowers place on their existing properties as accessory dwelling units and finance through using these lines of credit.

Both small private-sector innovators like Figure and the two large government-sponsored enterprises have been looking to offset HELOC and mortgage costs respectively by using advanced automation for loan processing and related tasks.

One challenge in that area has been the need to bridge the transition from more traditional practices as modernization occurs, and another move Freddie is making to that end is giving lenders flexibility to use written verification of employment in automated income assessments.

Freddie also is lifting prohibitions on use of tax transcripts with an automated assessment of self-employed income from a sole proprietorship as reported on the Internal Revenue Service's Schedule C in certain circumstances. This previously has been disallowed when other self-employed income has been recorded on other tax forms such as Schedules E or F.

While the GSEs have been streamlining some of their rules for borrowers, they also have been tightening some for risk management reasons, potentially pushing more loan applicants into the growing private market that exists outside traditional qualified mortgage standards.

Fannie has updated its selling guide to permit the use of positive rental income to qualify only if the borrower has previously managed a property for at least 12 months. This can be documented on Schedule E or, in some cases, a fully executed lease over the last 12 months.

Borrowers lacking sufficient landlord experience may still be able to use income from tenants to offset a rental property's principal, interest, taxes, insurance and any association dues at Fannie.