Part II of a Three Part Series

In Series Number One, we reviewed the merits of the Good Faith Estimate and its value to the borrower for transparent disclosure of facts and figures.     In the Part Two, we need to address the “service” aspect of the Real Estate Settlement Procedures Act.

When you apply for a home mortgage, you may think that the lender, or loan originator, will service the loan until it is paid off or your house is sold. However, in today’s market mortgage, servicing rights often are bought and sold. The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute which affords you certain disclosures and strategies for problem resolution with your mortgage and/or escrow account.

Duty of Loan Servicer to Respond to Complaints. If you have questions or problems with the servicing of your loan, the servicer is required to respond to you. Write to your servicer and call it a “qualified written request under Section 6 of RESPA.” It should be a separate letter and not mailed with your payment. The mortgage servicer must                respond to you within 60 business days of receipt.

A Sample Complaint Letter would include the following because the specifics are important:
Attention Customer Service:

Subject: [Your loan number]
[Names on loan documents]
[Property and/or mailing address]

This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing because:

• Describe the issue or the question you have and/or what action you believe the lender should take.
• Attach copies of any related written materials.
• Describe any conversations with customer service regarding the issue and to whom you spoke.
• Describe any previous steps you have taken or attempts to resolve the issue.
• List a day time telephone number in case a customer service representative wishes to contact you.
• I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

Sincerely,

[Your name]

REMEMBER: This letter SHOULD NOT be included with your mortgage payment, but should be sent separately to the customer service address.

And, it is very important that you continue to make the required mortgage and escrow payment until the request is resolved.

Loan Transferred to New Servicer. Your loan servicer is required to notify you in writing at least 15 days before the servicing of your loan is transferred to a new servicer. The notice must include the following information:

* The effective date of the transfer, the date your current servicer will stop accepting payments and the date the new servicer will begin accepting them.
* The name, address, and toll-free or collect call telephone number for the new servicer.
* Information that tells whether you can continue any optional insurance, such as mortgage life or disability insurance, and what action, if any, you must take to maintain coverage.
* A statement that the transfer of servicing does not affect any term or condition of your mortgage documents other than the terms directly related to the servicing of the loan.

Treatment of Payments During Transfer Period. During the 60-day period beginning on the effective date of the transfer, the payment may not be treated as late if you mistakenly send it to the old mortgage servicer instead of the new one.

Escrow Account. RESPA does not require that you maintain an escrow account for the purpose of paying property taxes, hazard insurance, etc. Nor does RESPA have any jurisdiction over the decision of the lender or servicer to require or terminate an escrow account. RESPA does, however, provide you with the following protections with regard to the escrow account:

• If your lender or mortgage servicer requires you to maintain an escrow account for the purpose of paying property taxes, hazard insurance, etc., RESPA requires that the servicer pay such items by the dates due to avoid a penalty or late charge.
• RESPA sets limits on the maximum amount of money the servicer may require you to maintain and pay in the escrow account. (More information about escrow accounts, including how to calculate the maximum amount RESPA allows the lender to require in the escrow account.)

Multistate Home Lending www.multistatehomelending.com and The Manufactured Home Lending Source www.mh-lending.com are committed to full and complete disclosure. All of our loan officers are registered with the Nationwide Mortgage Licensing System and Registry (Registry), a database established by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators to support the licensing of mortgage loan originators by the States. As part of this registration process, mortgage loan originators must furnish to the Registry background information and fingerprints for a background check. The S.A.F.E. Act generally prohibits employees of an agency-regulated institution from originating residential mortgage loans without first registering with the Registry.

To Cert or Not to Cert? Our Opinion—Not So Fast

I am a female manufactured home contractor specializing in manufactured home foundation repair. It’s not the most glamorous job in the world and mainly consists of crawling underneath the darkside of people’s homes, often in claustrophobic tight conditions and in poor air circulation environments. Some manufactured homes are set in a pit to give an attractive low profile curb appeal, much like a site built home. Others are installed above ground and some even on full basement. On the subset types, there’s not a lot of room for the configuration of the female form to navigate easily from one end of the home to the other. While trying to do the military crawl underneath, my bottom inevitably pops up and then when I try to balance out, my head often jerks up and whamm—straight into the I-beam. My male co-workers find this particularly funny and when they hear my yelps as my body parts bang and clang against metal, I hear uncontrollable laughter. Fortunately YouTube has yet to find me underneath the dank and dirty world that is the manufactured home contractor’s domain. Believe me, we see it all, spiders, snakes, rats, centipedes, scorpions, dead carcasses (cats, rats, bunnies, and yes even a coyotes) not to mention standing water, sewer leaks, falling insulation, splitting marriage lines, overextended screw jacks, shifting or compromised supports. I have yet to find any buried treasure but we frequently find several cases of empty beer cans which may be the reason many of the homes we work on seem to be set up off kilter right from the beginning.

Having worked in the business for twenty some years, we have striven to maintain our business model as closely associated with the name of our company, On The Level, as possible and have tried to avoid the trampy style of some of our competition who frighten the mobilehome senior market with scare tactics,convincing widows to buy overpriced “earthquake bracing”, locktops, or “marriage rods. In most cases, these products were unnecessary or unpermitted and a waste of homeowner’s money.

And yet necessary upgrades for manufactured home foundations suddenly made an appearance when the lending market (specifically FHA and VA Loans) imposed foundation standards for permanent attachment in order to meet loan criteria. Without an engineer’s certification proving that the manufactured home’s foundation met FHA-insured standards (THE PERMANENT FOUNDATION GUIDE FOR MANUFACTURED HOMES, HUD 1996) , an FHA or VA loan could not move forward. The good news is that there are dozens of state-certified alternate and pre-fabricated systems available in the marketplace so that a home can have foundation repairs without having to renovate the entire understructure.

While the foundation standard is defined in the HUD Permanent Foundation Handbook, the problem is that individual states have divergent installation, titling, and real property provisions so each home must be evaluated on a case-by-case basis. But as a company, On The Level does not stop at the evaluation of just the foundation. It is our opinion that a foundation certification is NOT a stand-alone document. Proving that the foundation is compliant should NOT be the first step on the long laundry list of conditions. IT SHOULD BE THE LAST CONDITION! Let me explain, in many cases, we have evaluated the foundation and we know it can certify or it will certify with a retrofit but we refuse to move forward with the actual letter. Why? Our competition takes the attitude that they are only being hired to assess the foundation so that’s what they do: assess the foundation in a vacumn irrespective of other data, then they write a pass or fail certification, and take the money and run. So what if a $3000 retrofit could potentially kill the loan? Who cares if there is evidence that the home was moved from another location? Who cares if the home is located in a flood plain? Who cares if the home doesn’t have HUD tags? That’s not the engineer’s or retrofitter’s job, right? The engineer only needs to write a determination of the foundation itself. End of story.

We disagree. My point is that this is state-by-state tricky wicket. In most cases, I’ll get a demand from an enthusiastic loan officer, “I just need the cert”. When I say, “Not so fast—our research shows issues in other areas”, I think most of them think we are trying to drag our feet. Not true! It is our policy as a company never to charge for a failed foundation inspection report—we only charge the borrower or lender once a foundation report certifies that the foundation meets the PERMANENT FOUNDATION GUIDE FOR MANUFACTURED HOMES, HUD 1996.

We provide a one-stop shop for borrowers, lenders, processors to get nationwide engineer’s certifications quickly and accurately. No charges for failed reports EVER!!!! www.onthelevelcontractors.com

And if you don’t have a lender, a manufactured home loan specialist: www.mh-lending.com

Finding the right lender

Fair or unfair to manufactured home borrowers, most lenders view manufactured homes with derision. We’ve all heard the term —trailer trash—well that’s how most lenders continue to characterize the manufactured home loan. Without owning the land, the manufactured home is pigeon-holed into a high percentage rate personal property loan. Even when the home sits on real property, the stigma persists in the minds of lenders that a homeowner will pull up his 5th wheel, hitch up the home, pull up stakes, and disappear down the road in the middle of the night – leaving the investor, high and dry. Although the portrait being portrayed treads on the side of ridiculous, the real concern for the lender is not only dismissing the above stigma, but how a simple classification of titling can significantly alter an investor’s mentality from “trailer” to legitimate dwelling.

Fortunately, FHA-insured loans are improving their visibility with many mortgage brokers. In many respects, they seem to rank among the only safe-havens for the manufactured home purchaser or borrower. Furthermore, HUD has created a model that both the lender and transaction coordinator can follow. The need for this type of application stems from the confusion over the fact that manufactured homes are the only type of housing that can be classified either as personal property or real property; and worse, there has been no national consistency for neither titling nor set-up requirements. In some states, manufactured homes were overseen by a transportation agency. Yet in other states – such as California – there exists has always been an authoritative MH housing agency, where others maintain little to no oversight. While HUD has jumped into the picture and requires a national standard for new home installation since January 1, 2009, existing homes are currently in “no-man’s land.”

A primary priority to a lender is that the titling of the manufactured as real property (meaning that the home and land are conjoined as one). This provides the lender – or investor – with security interest on the home. In some states (like California), the classification for a manufactured home as real property requires that the home be installed on a permanent foundation. In other states (like Arizona), the change of titling procedure is a paper-only transaction so there is no requirement for a permanent foundation. Where this becomes a problem is when a borrower needs an FHA-insured loan because HUD requires that the home be set on a permanent foundation. Thus, a licensed engineer must certify the foundation is in compliance with FHA guidelines, or what is commonly referred to as the HUD Handbook. So this begs the question why? The borrower typically proclaims, “When I bought my home, it was approved by the building department and everything has been signed off. Of course, my home will pass otherwise the building department wouldn’t have approved it!” However, building regulations vary from city-to-city and county-to-county, so underwriters, investors and government agencies need a national standard. The approval of a licensed engineer that the home meets the standards detailed in the PERMANENT FOUNDATION GUIDE TO MANUFACTURED HOMES seems to fit the bill.

These are the basics for your home to qualify:

• The manufactured must be a HUD home, which means it must be manufactured after June 15, 1976. If there are metal plates at the rear of the home that begin with a three Alpha letters like CAL, ARZ, ORE, that’s usually a good sign. If the HUD label is missing, usually a label verification letter from the Institute for Building Technology and Safety (IBTS) www.ibts.org giving the provenance of the home will suffice.
• The foundation system must meet the guidelines published in the Permanent Foundations Guide for Manufactured Housing, dated September 1996. A certification attesting to compliance must be obtained from a licensed professional engineer.
• The manufactured home must be classified and taxed as real estate. A long-term lease may also be acceptable in certain instances. States vary on how the real estate classification is accomplished so this is another important aspect to understand.
• The axles and tongues must be removed from the chassis.
• The manufactured home must have an adequate perimeter enclosure with appropriate ventilation.
• The manufactured home must not have been installed or occupied previously at any other site or location.
• Must have a floor area of not less than 400 square feet.
• Built and remains on a permanent chassis.
• The finished grade elevation beneath the manufactured home shall be at or above the 100-year return frequency flood elevation.

If you are in the market for a manufactured home loan and you own your land, it is in your best interest to work with a loan officer that specializes only in the manufactured home loan product. And if you need a professional engineer to evaluate the foundation, you’ll need one that specializes in manufactured homes as well because the HUD Handbook consists of over 400 pages of inconsistency.

If you want a lender that specializes in manufactured homes. www.mh-lending.com

If you want a professional engineer that specializes in manufactured homes www.onthelevelcontractors.com

Most lenders view the manufactured home loan as a “nuisance” loan. No matter what kind of manufactured home you have (even if it has tile roof and drywall interior), you’re going to be lumped into the “trailer” category in the mind of the loan officer. This is just a “loser loan” for him. A lot of work, and not enough commission! Plus there are so many compliance hoops to jump through and the compliance checklist is often daunting to the novice. And for the typical lending office, very rarely do the support staff know what they are doing. The processors don’t even understand the vocabulary much less the fine details, appraisers sometimes submit their data on the wrong form and even underwriters often fail to manage the file properly.

Borrowers complain that a new hiccup appears almost daily—-and the loan seems to take forever. Then there are the fine points of the flood zones, if the home is serviced by wells and septic, finding comparative comps, missing HUD plates, IBTS letters, metes and bounds, missing a data compliance plate, dealer to site verification and the list seems endless. Oh and let’s not forget about the real doozy— the foundation certification.

FHA loans on manufactured homes, whether new construction or existing, new loan or refinance, require an engineer’s stamped certification that the foundation meets the requirements of The Permanent Foundation Guide to Manufactured Housing dated September 1996 (PFGMH) aka THE HUD HANDBOOK /BIBLE.

This is a nightmare for borrowers and lenders because the HUD Handbook is even misunderstood by most engineers. When confronted with a non-compliant foundation, most homeowners say, “But my home met all the local requirements of the building department when I bought it in 1983!” Unfortunately compliance with the local building jurisdiction is not evidence that the home meets the national standard. Because requirements vary from city to county to state, the certification letter establishes some semblance of continuity. Engineers even have conflicting opinions because the handbook is vague, contradictory and very unclear on exactly what is required and what is not permitted. Essentially it is opinion-based and two different engineers can look at the same foundation with different results.

Are your eyes glazed over yet? We won’t even start on the appraisal and all the details associated with that because that would lead to a whole new laundry list of issue. First things, first, if you need a manufactured home loan, make sure your home qualifies:

The basic checklist starts with the following:

• Must have a floor area of not less than 400 square feet. So if you are living in a “park model”, it’s not going to work.
• Must be classified and subject to taxation as real estate.
• Must be built on and remains on a permanent chassis. This means it came in on wheels, but the wheels and axles have to be removed.
• Must be above the 100 year return frequency flood elevation. So if you are living in a flood plain, the loan is probably a no go!
• Must be built after June 15, 1976. The best way to check if you don’t have the paperwork. If you can find 2×4” aluminum plates at the back of your home that start with three letters, followed by 6-7 numbers, this is a good sign!
• The foundation system must meet the guidelines published in the Permanent Foundations Guide for Manufactured Housing, dated September 1996. A certification attesting to compliance must be obtained from a licensed professional engineer. And if your foundation does not meet the requirement, there are ways to make repairs to bring your home in compliance.
• The manufactured home must not have been installed or occupied previously at any other site or location.
• Additions or structural modifications must not put the home at risk.

The next thing you need to do is to team up with a manufactured home loan specialist. The big recognizable name houses are often the very ones that consider your home a “trailer” and don’t have the support staff to take the loan from A to Z with ease. Get straight answers and professional expertise right from the beginning by using a company that has resources in all aspects of manufactured housing.

www.themanufacturedhomelendingsource.com

Have you been sticking your nose up at the manufactured home borrower? Like it or not, with the increasing popularity of the Reverse Mortgage loan product for the mature borrower, loan officers and processors are dealing with more and more manufactured homes in their portfolios. It makes sense when one realizes that seniors have chosen to congregate in the manufactured home park setting as a retirement oasis, offering the amenities of security, recreation and a sense of community. The concentration of an active senior population in a close-knit living atmosphere naturally lends itself well to word-of-mouth advertising for the Reverse Mortgage industry. And now with the recent passage of H.R. 3221 , the housing stimulus bill signed into law on by President Bush, you can count on the numbers of manufactured home loans increasing.Why? Thousands and thousands of manufactured homeowners have been disenfranchised from the FHA-insured loan process by a fluke in the statute and manner in which their community was legally constructed. If the description on land and title documents state a manufactured home is in a condominium manufactured home community, these borrowers have been ostracized from the Reverse Mortgage opportunity. By organizing the park development under the condominium aegis, regulators interpreted that a resident’s ownership was confined to airspace only when residents protested that they clearly owned their individual deeded plots. The narrow legal interpretation of a manufactured home situated in communities classified as condos ironically excluded some of the highest quality senior developments. These parks often boast of vibrant recreational facilities, in some cases golf courses and a strong management or homeowner’s association with an overseeing architectural committee. Because of the commanding oversight presence, the price of admission to such a development in turn creates a strong pride of ownership; expectation of upkeep and a more robust sales market keeps appraisal values localized and current.

Fortunately, in addition to all the other more-loudly trumpeted issues in the bill, less well known is the fact that the passage of H.R. 3221 has now eliminated the manufactured home condo discrimination. The inclusion of manufactured housing as a component of the bill was largely due to the grassroots efforts of manufactured home residents themselves who actively cajoled their legislators with letter-writing campaigns and petitions, pleas to AARP, or they even joined lobbying groups to show their support, virtually demanding that they be able to receive the benefits of a Reverse Mortgage. In many cases, these seniors are already Reverse Mortgage devotees since they had friends in neighboring manufactured home communities with acceptable designations for FHA insurance: Planned Unit Developments (PUDS) and Subdivisions. Knowing that this is a unique case where demand for the product precedes the opportunity for access, I don’t think I exaggerate when I say “Katy, bar the doors!”

The point is if you haven’t dipped your feet in the manufactured home Reverse Mortgage pool of loans, you should think about sticking your toes in sooner rather than later. The good news is you have some time to school yourself on the unique properties of manufactured home loans and to tighten the logistics within your processing department. According to Daniel Mooney (Underwriter ?HECM Coordinator? Processing & Underwriting Division? Santa Ana Homeownership Center,?Federal Housing Administration) “while the new statute allows for FHA to promulgate regulatory changes and policy revisions that will enable us to insure loans secured by manufactured homes located in condominiums, said new policies have not been enacted/promulgated. I would anticipate a period of several months (as in six to nine) before FHA is actually able to institute policies and procedures relevant to the issue at hand”. Knowing you have a window of time before all the gears are running, you can acclimate yourself to the water conditions. In my book, this is the best time to get your feet wet and set up some in house policies. One of the reasons many brokers and processors bemoan the manufactured home loan is that it comes with its own set of obstacles. Lack of proper information and a disorganized processing strategy often creates dissention between the borrower and the lender and the lender comes out the loser, looking unprofessional and unknowledgeable. If you follow a few ground rules and recognize that the community camaraderie can provide the service –oriented loan officer with a wealth of referral leads, it may be worth the extra time to troubleshoot some of the idiosyncrasies of the manufactured home.

When you go to research a piece of real estate, you can usually access it by address, assessor’s parcel number, legal description or all of the above. However, even if a manufactured home sits on a piece of realty and shares the features of the real property, it is still distinguished by its HUD label (an affixed HUD Seal (tag/label) located on the outside of the home. Many people ask, if the home is on real property and is being assessed as real property, then why would a HUD tag be of continuing importance? Even when a manufactured home is converted to real property, it doesn’t remove the fact that the home is still a manufactured home. The provenance of any HUD home and its factory design and engineering requirements are traceable through the individual HUD label. For appraisal and lending purposes, code should follow code so appraisers and engineers certifying a home for a manufactured home loan need to specifically identify the HUD numbers in their reports. Additionally, building departments utilize the HUD label as the format for the permit process because it allows the home to preempt the local building codes. If for any reason the labels are missing, appraisers will often reject the property and refuse to proceed until documentation is provided, building departments will refuse to issue certain and in some states a manufactured home may not be re-sold if missing a label and an engineer should not proceed with a HUD foundation without being able to prove that the home itself is in fact a HUD home.

Certain criteria are absolutes to follow for an FHA-insured loan on a manufactured home loan. These are:

1. The manufactured must be a HUD home, which means it must be manufactured after June 15, 1976. If there are metal plates at the rear of the home that begin with a three Alpha letters like CAL, ARZ, ORE, that’s usually a good sign. If the HUD label is missing, usually a label verification letter from the Institute for Building Technology and Safety (IBTS) www.ibts.com Which will give the provenance of the home will suffice.
2. The manufactured home must be classified and taxed as real estate. A long-term lease may also be acceptable in certain instances. States vary on how the real estate classification is accomplished so this is another important aspect to understand.
3. The axles and tongues must be removed from the chassis.
4. The manufactured home must have an adequate perimeter enclosure with appropriate ventilation.
5. Must have a floor area of not less than 400 square feet
6. Built and remains on a permanent chassis.
7. The finished grade elevation beneath the manufactured home shall be at or above the 100-year return frequency flood elevation.
8. The home must sit on a permanent foundation and must have a professional engineer certify that the foundation meets the PERMANENT FOUNDATION GUIDE TO MANUFACTURED HOMES (PFGMH) HUD-7584, dated September 1996.

If the loan officer or processor has never previously expedited a manufactured home transaction, this last requirement can upset the whole apple cart. By not anticipating this, the 11th hour underwriting condition will give a processor fits trying to find a qualified engineer that understands manufactured housing. Potentially there is an even worse scenario. Occasionally the engineer makes the determination that the foundation will not meet the HUD guidelines and a repair or retrofit will be required. If the loan officer or borrower is unprepared for this possibility, angst and ill will often occur between he/she and the borrower. “Why didn’t anyone tell me? They’re supposed to be the experts!” is a recurring outcry. For the manufactured home processing newbie, don’t be fooled by the appraisal report, which nine times out of ten stipulates that the home is on a permanent foundation. Unfortunately, the appraiser often makes a determination about “permanence” strictly on the basis that the tires and axles have been removed or some other vague set of standards, not on the basis of the foundation attachment.

The reason for the engineering certification requirement is to establish a national standard of uniformity amidst inconsistent state installation standards. While manufactured homes enjoy the benefit of the HUD standardized preemptive structural, plumbing, and electrical standards that need to be met before leaving the factory, installation standards vary from county to county, state to state. So the home can be designed for stringent seismic, wind and roof load expectations, but the home may be set up just like the old trailers of yester year, depending on area designation. Foundation systems are typically subject for review by the local code authorities and are often tailored to the site, soil, wind, flood, seismic and snow conditions of the individual county or state. Additionally, manufactured homes are unique in that they are the only type of residential dwelling that can be classified as either person (chattel) or real property. In some states, the type of foundation supporting the manufactured home determines the distinction between personal and real property. Since the individual jurisdictional requirements vary significantly, the Engineer Certification Letter helps to provide an oversight standard. This is generally an underwriting requirement for all FHA insured loans, which also include Reverse Mortgages.

If an existing home is already on a foundation, an engineer can provide a certification attesting to the fact that the home meets the guidelines. If it does not meet the HUD guidelines, there are a variety of proprietary or approved engineered foundation systems that can be retrofitted in combination with the existing structural components. As in any industry, one size does not fit all in the engineering landscape and engineers that specialize in the manufactured home industry and the HUD inspection specifications are a rare breed. Because there are a vast array of proprietary products that have been introduced into the national marketplace, an engineer’s knowledge about these patented systems is also an additional benefit since these have all been pre-engineered and stamped delineating all of the system specifications.

This also means if the foundation does not meet the FHA-insured criteria for a permanent foundation, the engineer does not need to re-invent the wheel with a repair recommendation—there are a plethora of products available for the retrofit contractor that may satisfy the engineer’s requirements. However, even though proprietary systems almost always carry engineering approvals, approvals vary state by state and some building departments may not approve their design concepts. Therefore finding the right combination of an engineer and contracting team that understands the FHA lending process, the building permit process and the available proprietary retrofit systems AND that can work within the timeline of your loan lock timeline can be a bit of a balancing act.

There’s no time like the present to take a plunge! The manufactured housing industry may just be the next great niche market.

About Janis Arendsen: Janis Arendsen is owner of On The Level, a contracting company specializing in the inspection, servicing and retrofitting of manufactured housing foundations and works in conjunction with Pacific Consulting Engineers that provides engineer’s certifications on foundations. Refer to www.onthelevelcontractors.com for more information.

With the increasing popularity of the Reverse Mortgage loan product for those homeowners 62 and older, loan processors are dealing more and more with manufactured homes in their portfolios. Many seniors have chosen the manufactured home communities as a retirement refuge and the community and recreational atmosphere lend itself well to word-of-mouth referrals and the spreading the news about Reverse Mortgage benefits. However, the manufactured home loan presents a new set of criteria for the loan officer and loan processor as well as the borrower so be prepared ahead of time.

Certain criteria are absolutes:

1. The manufactured must be a HUD home, which means it must be manufactured after June 15, 1976. If there are metal plates at the rear of the home that begin with a three Alpha letters like CAL, ARZ, ORE, that’s usually a good sign. If the HUD label is missing, usually a label verification letter from the Institute for Building Technology and Safety (IBTS) which will give the provenance of the home will suffice.
2. The manufactured home is classified and taxed as real estate. A long term lease may also be acceptable in certain instances.
3. The axles and tongues must be removed.
4. The manufactured home must have an adequate perimeter enclosure with appropriate ventilation.
5. Must have a floor area of not less than 400 square feet
6. Built and remains on a permanent chassis
7. The finished grade elevation beneath the manufactured home shall be at or above the 100 year return frequency flood elevation.
8. The home must sit on a permanent foundation.

AND

All foundation systems, new and existing, must meet the guidelines published in the Permanent Foundations Guide for Manufactured Housing, (HUD-7584), dated September 1996. A certification attesting to compliance with this handbook must be obtained from a licensed professional engineer and included in the insuring file.

This last requirement can throw the loan processor into a quandary if they have never expedited a manufactured home transaction previously because this request will often show up at the 11th hour of loan closing. Nine times out of ten the appraisal report will show that the home is on a foundation system so the processor or loan officer won’t have alarm bells off of worry going off when they receive this condition. Unfortunately, the appraiser often simply determines “permanence” strictly on the basis that the tires and axles have been removed or some other vague set of standards, not on the basis of the foundation attachment.

The reason for this requirement is to establish a national standard of consistency amidst inconsistent state installation standards. While manufactured homes have standardized preemptive structural, plumbing, and electrical standards that need to be met before leaving the factory, installation standards vary from county to county, state to state. Additionally, manufactured homes are unique in that they can either be titled either as personal property (chattel) or real property. In some states the distinction between personal and real property is determined by the type of foundation and underpinnings that support the home. Since the individual jurisdictional requirements vary signficantly, the Engineer Certification Letter helps to provide a standard for excellence. This is generally an underwriting requirement for all FHA insured loans, which also include Reverse Mortgages.

If an existing home is already on a foundation, an engineer can provide a certification attesting to the fact that the home meets the guidelines. If it does not meet the HUD guidelines, there are a variety of proprietary or approved engineered foundation systems that can be retrofitted in combination with the existing structural components. As in any industry, one size does not fit all in the engineering landscape and engineers that specialize in the manufactured home industry and the HUD inspection specifications are even rarer still. Because there are a vast array of proprietary products that have been introduced into the national marketplace, knowledge about these systems is also an additional benefit since these have all been pre-engineered and stamped delineating all of the system specifications. This also means if the foundation does not meet the FHA-insured criteria for a permanent foundation, the engineer does not need to re-invent the wheel with a repair recommendation—there are a plethora of products available for the retrofit contractor. Therefore finding the right combination of an engineer and contracting team that understands the FHA lending process so the engineering certification does not impair the loan lock timeline, is familiar with the availability of proprietary systems that can resolve the repair issues if they are necessary and are able to liaison with both lender and borrower to provide turn-key solutions.

On The Level www.onthelevelcontractors and Pacific Consulting Engineers collectively team to comprehensively resolve FHA-insured loan certification and foundation repair issues for the manufactured home borrower and lender.

What’s Holding Up your Home May also be Holding up your Loan
Know Your Foundation!

Homeowners that live in manufactured homes often face confusion and frustration at the worst possible time —at the 11th hour when they go to buy/sell or refinance their home and the lender pops up with a final condition: an engineer’s certification of the manufactured home’s foundation. For many this becomes a crisis when the foundation fails to meet the HUD guidelines. To resolve the situation and proceed with the loan, the lender will then require an engineered upgrade, repair or a retrofit on the foundation in order to meet the HUD guidelines.

In a state of panic, where does the borrower or lender go for a reliable source to satisfy this condition? Fortunately, there is a vast array of pre-engineered and approved “permanent” foundation systems available in the marketplace so the homeowner or homebuyer doesn’t have to pay to reinvent the wheel, but the borrower may still have a difficult time discerning which criteria should be used to make a selection. Should they focus on the features and benefits of the individual system or make a decision strictly on the price point? The fact that homeowners are floundering for answers at a time of heightened stress in the loan consummation process accelerates their confusion and leads some borrowers to blame the loan officers or transaction coordinators. “Why didn’t anyone know this??” is the frequent outcry. To be fair, the loan officer or processor is likely dealing with their very first FHA manufactured home loan and was not aware that the foundation would be a critical factor in the loan. However, the borrower often views this last minute potentially expensive surprise as a lack of professionalism on the part of the lender and further adds to his/her consternation.

So, for both borrower and lender, it may be important to have a strategy to interpret available repair solutions. Where can a borrower or lender get the best information? A web search for foundation systems may supply you with some of the names prominent in the industry and you can start educating by having product manufacturers feature the benefits of their respective proprietary foundation system. Likely you will hear the manufacturer’s self-directed accolades extolling the virtues of their system as the “only true FHA certified system” so the tariff for the system may also include a hefty sales commission. Although many manufacturers proclaim that their patented proprietary foundation system is FHA or HUD approved, the truth is there are no blanket approvals that automatically provide a stamp of approval on an FHA-insured loan. Even though the components that are used in their system may indeed provide the vertical and lateral loads needed to meet the HUD Permanent Foundation Guide for Manufactured Homes, 1996, without proper installation the system is as worthless as Tinker Toys sitting in the cannister. Only a licensed engineer on a case-by-case basis can determine whether the system meets the HUD foundation guidelines and must attest to that fact in a certification letter, wet-stamped and signed. One can imagine a worst case scenario where a borrower pays big dollars for a system installation, only to have the installation fail under the scrutiny of an engineer.

While the safety features alone of a foundation system might normally be a component in a homeowner or home buyer’s decision-making, the tick-tock of a loan lock creates a sense of urgency. Plus the unexpected cost of a retrofit at a time of financial need will generally cause most borrowers to think primarily with their pocketbooks. While many manufacturers of foundation systems battle for positioning because they protest that their system has superior load-bearing or seismic resistance, the reality is that the performance of the installer and the turn-around time for the engineer to certify the foundation have become the new standard for structural excellence in the world of FHA manufactured housing financing. By necessity, the merits of the system and its structural efficacy have taken a back seat to the contractor and engineering team that provides the verification that the lender needs to take the loan to underwriting. Since a system is only as good as its installation and certification by an engineer, start by finding a contractor/engineer team that that has a comprehensive knowledge of the FHA and title process, can liaison between borrower and lender to create a seamless transaction, can provide extra structural support for the home as well as the much needed service support for the loan transaction.

Manufactured home specialty contractors are often knowledgeable about both the plethora of proprietary systems available on the market as well as the costs and the building permit process associated with the installation. They understand that different systems have different merits and the ranking for decision-making has a number of determining factors, some of which are:

1. Size of home
2. Type of home manufacturer and the style
3. Type of perimeter enclosure
4. Type of set-up (above ground or subterranean set)
5. Type of soil/ground/drainage conditions
6. Appurtenant structures to the home
7. Roof load, floor load, live load in the home
8. Local building code requirements determined by wind, flood, seismic activity
9. Best system vs. best value

Therefore, choosing your foundation system should come down to the competency of the retrofitter/engineering team that can economically, expeditiously and successfully accomplish a finished product, wading through the lending requisites, local building department requirements, providing any recorded documentation (like the 433A in California) and the ultimate prize—the engineer’s certification letter verifying that the foundation meets the HUD guidelines. On The Level and Pacific Consulting Engineers have joined forces to make up one of the most informed teams in the manufactured housing industry: www.onthelevelcontractors.com and can provide both lenders and borrowers with answers and solutions.

What’s the deal on the FHA Modernization Bill or the FHA Expanding Homeownership Bill that is supposed to help manufactured home owners?

Speculated to have been packaged, sealed and signed by the President during the first quarter of 2008, the long-awaited, long promised FHA Expanding Homeownership/Modernization bill is still being tossed around in two different versions, one in the Senate and one in the house and many think it is still slow in coming, if ever. The reason this impacts many manufactured home owners is that many homes that will be newly cleared to qualify for FHA-insured loans are located in manufactured home parks and communities. Also since a large number of parks are predominately senior communities, the FHA-insured Reverse Mortgage product holds increasing appeal to them in their retirement years. A Reverse Mortgage is a loan against a home that is not payable until the homeowner dies, sells the home or permanently moves out. Reverse Mortgages allow homeowners age 62 and older to turn the equity in their home into cash without having to move or make a monthly mortgage payment. One of its benefits to the retiree is there is no minimum credit or income requirement to qualify for a reverse mortgage—just the appraisal value of the home. Since the majority of the reverse mortgage loans are FHA insured, this bill directly impacts a large number of manufactured home owners that live in parks.

Why can’t many manufactured home owners currently qualify for Reverse Mortgages or other FHA loans? Many parks and communities began as a land lease or rental park where the residents owned their manufactured home, but paid monthly space rent. As residents in land lease parks sought to have greater control in their communities, they negotiated with the park owner to purchase their respective spot and the park was converted to resident ownership. One of the most popular methods for park purchase was using a condominium conversion plan. Even though the homes are on individual plots, the mere description of them as a condo has disqualified them from certain types of loans. This is confusing for most lenders and borrowers alike since FHA will insure homes in approved condominium projects and manufactured homes that are in parks that have been installed on a permanent foundation system in Planned Unit Developments or a subdivision, but currently excluded are all manufactured homes located in a condo community. Thousands and thousands of borrowers are restricted simply because the legal description on their title specifies “Condominium”. Either of the bills cited above would remove the exclusion and this has been much heralded by homeowners and lenders alike. While there seemed to be enthusiasm on both sides of the aisle and even the President, both bills seem to be at a complete standstill and maybe will be abandoned altogether.

Many people that live in a condo park don’t even know they are classified as such. Drag out your grant deed or your title insurance and read the full legal description. If it mentions condo or percentages of ownership, you probably live in a manufactured home condominium project. And the cautionary tale for those residents in a condo park is this—please be careful if a lender promises they can get you a Reverse Mortgage loan. It is not likely they can perform unless they are dealing with private money. An FHA-insured loan will probably collapse at the underwriting stage. If you decide to pursue the process, make sure the lender will pick up expenses of the appraisal and the engineering certification. Another cost to avoid unless your loan is clinched is to pay to put your home on a permanent foundation. This may cost thousands of dollars and if your loan is declined, you may be left with this additional expense.

One of the problems with manufactured housing and its perceived reliability in the mind of the consmer to withstand different weather and terrain conditions has been the disconnect between how the code requires the home to be designed and engineered in the factory and how the home is installed in the field. In other words, there is a lack of continuity between what the manufacturer sends out the door and the dealer and installer delivers and sets up on the home site. While the HUD Code of 1976 established that manufactured homes had to be factory designed and engineered to federal law standards with specific electrical, heating, plumging and thermal standards as well as performance requirements for structural design, construction, fire resistance, energy efficiency and transportation from the factory to the site , the installation standards were left to the local and state jurisdictional authorities. Interestingly, in some states installation requirements are rigorous while others, lax to non-existent.

To quote the code, “every HUD Code manufactured home is built in a factory, under controlled conditions, and has a special label affixed on the exterior of the home indicating that the home has been designed, constructed, tested and inspected to comply with the stringent federal standards set forth in the code. No manufactured home may be shipped from the factory unless it complies with the HUD Code and receives a certification label from an independent third party inspector.”

So let’s say the home was designed to meet Wind Zone II requirements, this home would not receive a HUD label and data compliance certificate nor could leave the factory without substantive engineering and design proof that the design met those specified Wind Zone engineering requirements. However, the irony is that after all the in-factory inspections and compliance requirements had been met and certified as HUD compliant, the home could simply be shipped out of the area to a state that might not mandate or enforce wind tie-downs at all. So conceivably, all the regulations set forth for factory production could be completely abandoned when the home arrived at the site. And most anyone that stays abreast of current events has seen how vulnerable manufactured homes are in high wind zone areas. Does “Wizard of Oz” come to mind?

However the new HUD Code is in the process of changing not only how local jurisdictions (those building department enforcing local codes) oversee HUD compliant housing, but also a complete revision of rules, regulations and requirements that will affect thousands of dealers and installers (those that perpetuate the market growth of the industry). So in short, this is a good thing and here is why: manufactured housing installation will finally be standardized and will match up with the factory design criteria. For instance if the home is designed in the factory for a 30 lbs. roof load, then it makes sense that a foundation must be installed based on the same specifications. What a concept that the understructure system should be able to support the roof – the same applies for wind and seismic zones as well.

Most of this is simply common sense and something that most general building contractors of site-built homes have been following for years. Items such as site preparation, drainage, fall, soil compaction are part and parcel to the check-list protocol for a standard site-built-home-contractor, and yet, something that the maverick, often unlicensed and uninsured installer has cast aside simply as nuisance or inconsequential to the installation standards. For a general spoof on the industry and the stereotype that unfortunately still prevails but needs to change, check out You Tube Bubba Inc., http://youtube.com/watch?v=VQcT0tz8twk

Thus, better regulatory installations will not only make homes safer, but will hopefully mitigate the pervasive and on-going issues of sticky doors, mating-line inconsistencies, understructure moisture intrusion, squeaks and the laundry list of other issues that can often leave homeowners unsettled about manufactured home living. Furthermore, it is our hope that with these changes, lending institutions will also begin to regard the manufactured housing industry with higher regard.

Without the helping hand of the loan industry, not even the most affordable housing is a viable alternative for those that want to grab onto the American dream. Fortunately FHA has been aware of the state-to-state inconsistencies and in order to comply with their loan guidelines, they have requiree an engineer’s certification of the home’s foundation and any attached structures that may impact the structural integrity of the home. The engineer must cite that the home meets the HUD guidelines detailed the PERMANENT FOUNDATION GUIDE FOR MANUFACTURED HOMES, 1996. This is one situation where regulatory policy to enforce better installation guidelines will likely benefit all involved: the homeowner, the borrower, the lender, and most of all, the reputation of the manufactured home industry.

Janis Arenson is with OnTheLevel Contractors, Inc., manufactured homes specialists with offices in California.

One of the most frustrating things for manufactured home owners in the last few years has been the changing emphasis on type of foundations on their understructures in order to qualify for loans. Frustrating because as of a few years ago this was not a requirement so many homeowners either bought a home or refinanced a home without the “foundation” restriction and now either they are selling or refinancing and they are finding a different lending environment. It catches many by surprise! At pace with the more restrictive lending requirements for borrower credit qualification, the manufactured home itself may also have to meet a lender’s own fitness standards. Some of this has been created by the bad rap manufactured homes seem to get by the sensational press focusing on flying, collapsing or burning manufactured homes during every wind, hurricane or earthquake disaster. However, another part of the equation is the unique methodology of registration and titling of manufactured homes, in some cases leaving the lender without a security interest in the home.

Manufactured homes are the only types of dwelling units that can either be classified as personal property (aka chattel) or real property. Interesting, the determination of how the home can be classified is often determined by the type of support foundation under the home. Removal of the tires and axles is only one part of the equation. In most states, some sort of connection between the ground and the home is a requisite to title the home as real property. Depending on the state, this can range from simple to complex. In California for instance, a permit has to be pulled at the local licensing jurisdiction presenting the foundation plans that have been stamped by an engineer. It then has to be inspected by a building inspector, then a Department of Housing and Community Development (HCD) Form 433A has to be signed by the same building official and then recorded at the County Recorder’s office. On FHA-insured loans the process goes a step further. The foundation must meet the guidelines of the Permanent Foundation Guide to Manufactured Homes, HUD Publication 1996 and only a licensed engineer can certify to the foundation worthiness. Therefore each understructure and its certification is done on a case- by-case basis.

It is important to understand that this doesn’t mean that if a home’s original installation was not done to the standard that it can’t be retrofitted fairly easily and inexpensively. Thankfully, the home does not have to be raised and have new cement walls installed to support the perimeter. Manufacturers throughout the nation have created retrofit systems that often meet not only the local or state requirements for permanent affixation, but may meet the HUD standards as well.

In many cases the age of the home is at issue. Most lenders want the home to meet Housing and Urban Development (HUD) standards which means the home will at least be June 15, 1976 or newer. To signify the homes age worthiness, some lenders require proof of the existence of the HUD label (the metal plate affixed at the end of each transportable unit).

If your lender is requiring an engineer’s certification, make sure the engineer is familiar or specializes in manufactured homes. If not, he/she may misinterpret the HUD Handbook or may not be familiar with the many fairly economical retrofit systems available. We have seen many engineers recommend a retrofit fix that may exceed $20,000 when a pre-engineered system might be in the range of $3,000-$6,000 depending on the size of the home. Or if the engineer is not able to discern the difference between a HUD or pre-HUD home, he or she may recommend costly upgrades that may be counter-indicated if the underwriter will turn down the home because of its age.

Navigating through the loan process these days on any loan is more tiresome. The manufactured home loan can be even trickier unless you are dealing with seasoned professionals that can balance the requirements of the building departments, the underwriters and the federal government. On The Level is such a company that partners with lenders, engineers, manufacturers and governmental agencies to get the job and paperwork done seamlessly for the borrower.