RHS chattel financing program gets support from lender groups

Financing for manufactured homes considered as chattel should be made available through the U.S. Department of Agriculture Rural Housing Service program, a joint letter from mortgage and housing groups said.

This letter is in response to a proposed rule that would, among other things, update the current regulations to permit the purchase of existing manufactured homes for direct and guaranteed loans.

The RHS program guaranteed 71,832 loans in fiscal year 2022 and 37,756 loans in FY 2023, which ended on Sept. 30, the letter from the Manufactured Housing Institute, the Community Home Lenders of America and the Mortgage Bankers Association pointed out. But of those totals, the agency guaranteed only 146 manufactured homes in 2022 and 177 manufactured homes in 2023.

None were on manufactured homes considered as personal property, also known as chattel, which the letter claimed made up 70% of the market.

"This is not unusual. [The Federal Housing Administration] did not insure any personal property manufactured home loans last year and Fannie Mae and Freddie Mac have not financed any for 15 years," the letter noted.

But both of those groups are making strides towards financing chattel, the letter said, pointing to an FHA/Ginnie Mae request for input regarding the Title 1 program to allow this collateral and Ginnie Mae securitizing the loans.

On the conforming side, the Duty to Serve programs include pledges from Fannie Mae and Freddie Mac to purchase loans made on chattel.

But chattel financing is not the only reason "for the extremely low percentage of RHS mortgage loans backed by manufactured homes," the letter said. "The proposed rule offers well thought-out reforms to the RHS loan programs that we believe could significantly boost the number of RHS manufactured home loans."

That includes using the program to purchase existing manufactured homes, which is not currently permitted except within a pilot program.

"Although this pilot remains limited in scope, both the need for the pilot and its success are demonstrated by the fact that the RHS Guaranteed Loan program has guaranteed more than twice as many existing homes under the pilot as new homes in the last several years," the letter stated.

Those homes would have to meet the Federal Manufactured Home Construction and Safety Standards, which the three organizations declared is the gold standard, and has uniform construction and safety requirements ratified by the Department of Housing and Urban Development.

At the same time, the MHI, MBA and CHLA want to discuss with USDA the long approval times it takes for an application in the Direct Loan program, as well as the requirement for the property to have an on-grade frost wall foundation system, which can burden the homeowner with substantial additional unnecessary expenses, the groups claim.

The USDA is currently reviewing the public comments that were submitted during the period through Oct. 31.

"The comments will be considered and addressed when developing the Final/Updated Regulatory Workplan and Final Rule," a USDA Rural Development spokesperson said in a statement. "There is no confirmed date as to when the Final Rule will be published."