Would You Mortgage “Movable” Collateral?

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In ongoing efforts to increase homeownership rates and provide home financing to underserved markets, both Fannie and Freddie are entering the mobile home financing market.

This is part of their ‘Duty to Serve’ requirements under the 2008 Housing and Economic Recovery Act that I mentioned in an earlier blog.

The intent is to expand the market for the purchase of, and investment in, loans made to consumers to purchase mobile homes as their primary residence. Most of these are in rural areas.

This also expands the inventory of available affordable housing for many first time and low to moderate income homebuyers, which is much needed.

Fannie and Freddie are looking for feedback from industry stakeholders on their plans.

Fannie’s proposal outlines its plans to purchase somewhere around 300 to 400 million in such loans adding much-needed liquidity to this market.

Freddie’s pilot to provide these chattel loans with a focus on homeowner education supports financing in what are known as resident owned communities. These are created when investor-owned mobile home communities are purchased by the residents. This is similar to a condo conversion.

To affect the desired outcomes, both Fannie and Freddie are considering relaxed credit standards with special variances provided to participating lenders. But, some are skeptical.

There’s good reason why there is a very limited market for mobile home financing. It’s risky business.

It’s strange that with all the concerns about protecting the taxpayers from another bail out of the agencies, the government is expanding their lending base to include such high-risk loans. Once again, this is all under the guise of creating more opportunities for homeownership. Will it work? And, more importantly, is it the best way to go?

Fannie and Freddie are looking for a few good lenders through which they can offer their mobile home lending programs. Are you willing to participate in this type of lending? What might be the challenges, aside from financing movable collateral?

For your reading pleasure, additional information about Fannie & Freddie’s quest to provide mobile home financing can be found here.

Talk about chasing after your loans…

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.