HUD plans overhaul of its manufactured housing program

The Department of Housing and Urban Development is weighing a number of changes to its manufactured housing program as it looks to it as a key solution to addressing the nation's housing shortage quickly.

Government officials, including the heads of Ginnie Mae and the Federal Housing Administration, outlined potential improvements under consideration, including updates to the Manufactured Home Construction and Safety Standards (aka HUD's code), during a manufactured housing roundtable Thursday.

Regarding the HUD code, which was established in 1976, Frank Cassidy, the de facto FHA commissioner, told an audience packed with mortgage lenders that there are plans to eliminate the chassis requirement for manufactured homes. Currently, HUD requires manufactured homes to be constructed with a permanent chassis to make the property moveable if need be.

"This makes little practical sense," said Cassidy during the roundtable hosted at HUD's headquarters. "[We are gathering industry feedback] to move forward with eliminating this costly and seemingly unnecessary requirement."

The idea of removing the chassis requirement has received traction in recent years, with Sen. Tim Scott of South Carolina introducing legislation to do so in 2024. Stakeholders argue that removing the steel chassis would lower the cost of manufactured homes and allow for more creative construction methods.

Opponents of the change, however, including the Modular Home Builders Association, say eliminating the structural component would blur the line between federally regulated manufactured housing and state-inspected modular homes, potentially undermining consumer confidence.

Apart from changing regulations around manufactured homes, Joseph Gormley, Ginnie Mae's current highest-level executive, said the government guarantor is committed to establishing a liquid capital market to prop up FHA's manufactured housing loans. 

"We would like to establish a viable, competitive secondary market for manufactured home loans on par with our single family platform," Gormley said. 

Limited liquidity options for manufactured home loans have forced lenders to hold chattel loans in their portfolios, increasing their risk and limiting their ability to serve more borrowers — which has reduced participation, said Ginnie Mae's chief operating officer.

The FHA has two manufactured housing programs — Title I and Title II — both of which are underutilized.

In the past three years the FHA originated 130,000 Title II  manufactured home loans, and practically none under its Title I program, said Matt Jones, deputy assistant for Single Family Housing at HUD.

"FHA's Single Family program is committed to exploring how lenders originating manufactured homes can better use the March 2024 loan limit increases to finance more homes titled as personal property," said Jones. 

"Our leadership team is committed to reviewing our entire portfolio of product offerings with a focus on making it easier for borrowers to finance single family properties and manufactured homes, while also looking at how to simplify doing business with us," Jones added.

In considering said updates, the government agency hopes the manufactured housing industry produces homes "in a quick, efficient and inexpensive manner," said HUD Secretary Scott Turner.

"We live in the right-now generation," Turner added, highlighting the importance of swift industry action once changes are made.

Prior to the manufactured housing roundtable, Secretary Turner highlighted the administration's focus on lowering housing costs, while increasing supply. 

Apart from manufactured housing, the head of HUD has also floated the idea of opening up federally owned land for new construction. 

Speaking at a summit in May, Turner said that through a partnership with the Department of the Interior, more than 500 million acres of federal land have been identified as underutilized and suitable for affordable housing development.