The Rural Housing Service is expanding its manufactured housing loan guarantee program to include more refinancings of used or existing manufactured homes.

Previously, the U.S. Department of Agriculture would only refinance existing manufactured home loans that were originally financed via its RHS 502 loan guarantee program or the agency's direct loan program.  

That refinancing restriction significantly narrowed the resale market for manufactured homes, according to Doug Ryan, director of affordable homeownership at the Center for Economic Development in Washington.

But that could change in the nine states where the Rural Housing Service is set to conduct a pilot program.

"Now the 502 program can be used to finance existing homes that were not previously financed through USDA," he said. "We do think that will open up the market in these states. This could be very positive.” 

RHS is conducting a two-year pilot program in Colorado, Illinois, Louisiana, New York, Ohio, Texas, Vermont, New Hampshire and Wyoming.

The RHS pilot comes with restrictions, however, that could limit the number of manufactured housing units that meet RHS' standards.

For example, the unit must have been constructed on or after Jan. 1, 2006, in conformance with the Federal Manufactured Housing Construction Safety Standards:

  • The home must be on a permanent foundation as certified by an engineer or architect licensed or registered in the state where the manufactured home is located.
  • The towing hitch and running gear must have been removed.
  • The unit must not have had any alterations or modifications to it since construction in the factory.
  • The home must have been moved from the factory or manufactured housing dealer directly to the site and the property must be classified and taxed as real estate. 

Despite these restrictions, Ryan is optimistic the refinancing pilot will increase resales of manufactured homes. 
"If you have a 1,000-square-foot manufactured home that is a couple years old that is titled as real estate on a permanent foundation and lot, now you have more potential buyers," he said.

RHS-guaranteed loans can be securitized and sold via Ginnie Mae.

Ryan also noted that Fannie Mae and Freddie Mac might be interested in purchasing these manufactured housing loans. Under a final rule issued by the Federal Housing Finance Agency on Dec. 13, the two government-sponsored enterprises are eligible for duty to serve credit for buying manufactured housing loans that are titled as real estate.

Lesli Gooch, a senior vice president at the Manufactured Housing Institute, welcomed the Agriculture Department's refinancing program.

"The pilot program is an important first step. We look forward to working with USDA to take this important change nationwide," Gooch said in a statement.