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 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 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.

Many high quality manufactured home developments were first developed as rental or lease communities and later through the resident or homeowner association efforts or through owner determination, the development was converted to resident ownership. One of the most popular methods of park conversion was through a condominium plan. Unfortunately the legal verbiage in the condo plan inadvertently excluded manufactured home communities from certain types of financing, specifically FHA insured loans or loans that would ultimately be sold to the secondary market. This often compromised the very heart and soul of the manufactured home market—either the first home buyer or the retirement owner. Without appropriate financing the first-time home buyer was unable to secure the best source of dollars available and the senior was unable tap into his/her nest egg by virtue of a Reverse Mortgage. A reverse mortgage lets homeowners 62 years or older borrow against the equity in their property. They can take the proceeds as a monthly check, lump sum or line of credity. Instead of making payments to the lenders, as with a traditional mortgage, the lender pays the homeowner. The loan is repaid with interest when the borrower sells, moves or dies.
The understanding of manufactured homes and their associated communities by the highest level of FHA and HUD officials as well as our political leaders in Washington was also flawed. Rental parks that converted to resident ownership through the condominium process were viewed on paper as developments with lower quality homes. In reality, these are developments like Rancho Carlsbad and Champagne Village (just two parks to cite examples with golf courses, enviable locations and amenities with home prices in the $300,000-$500,000 range. Far from substandard.
On March 29, 2007, H.R. 1852 (the Expanding Homeownership Act of 2007) was introduced into the House of Representatives by Congresswoman Maxine Waters (D-CA). The bill has been referred to the Senate Committee on Banking, Housing and Urban Affairs. Passage of a compromise version by both houses of Congress is expected to pass by the first quarter of 2008. When The U.S. Congress passes the FHA Modernization bill, this bill will bring the benefits of reverse mortgages and comprehensive mortgages to homeowners that have been excluded for too long. HUD officials have given assurances that the logistics will be implemented quickly.
Some of the logistical issues on a manufactured home are as follows to secure an FHA insured loan.
Proof that the home is newer than June 15, 1976
Engineer’s Certification that the home is on a permanent foundation and that any attached buildings to not impact the structural integrity of the home and that the skirting enclosure is HUD compliant.
Certainly there are other issues pertinent to the loan but without the two above, FHA financing cannot be procured. On The Level General Contractors can assist both in the engineer certification process or if necessary retrofit the home to meet the HUD Handbook 1996 guidelines.

Author Bio
ON THE LEVEL General Contractors (B & C 47 521400) is a family-owned company specializing in the maintenance and retrofitting of mobilehome and manufactured home understructures 433A permanent foundation contractors.

Many mobile home parks and manufactured home communities began as rental parks where space rent was dictated by location, size, date of purchase and cost of living increases. It has become increasingly popular for residents to desire a greater control over their living situation and costs associated with their residences, thus converting the park to resident ownership has become a rising trend.
Success of the mobile home park conversion process is largely attributed to talented legal advisors that understand the complexities of the conversion process and can liaison with residents, homeowner’s association board of directors, building officials and lenders. As the trends in lending continue to change, the underwriters have become more proactive in their demands on the structural components of a manufactured home’s understructure for two reasons: safety to protect their investment and a desire to have a security interest as real property.
In order to understand the lender’s desire for security interest, one needs to understand that manufactured homes are unique housing because they can either be registered as person property (chattel) i.e. a car or recreational vehicle or real property like a stick built home (realty). The manner of classification is determined strictly by the foundation beneath it. In order to be classified as real property, the mobile home foundation must be considered “permanent”. For homeowners in existing structures, the thought of retrofitting their foundation to something permanent sounds daunting and expensive. Fortunately, wise engineers and manufacturing companies have found numerous methods to meet both safety and lending requisites without resetting the home. There are a variety of systems that are available to the homeowner and borrower. Although there is still a cost associated and a permit burden, the cost is relatively moderate considering the value received. Having the home attached through the process of a foundation retrofit conjoins the land and home, making the two entities a unified piece of real property, ergo protecting the security interest of the lender.
Therefore in the conversion process some lenders often require a 433A document which has been signed by the local permitting jurisdiction (building department) showing that the home is on a foundation. In order for the building department to make such a sign-off, they must be presented with a set of plans generally with a Standard Plan Approval number which has been certified by a structural engineer. Once installed, they inspect the system, sign the 433A and then record the 433A. Some lenders still accept the 433C document which simply converts the land to real property but the house retains it’s personal property classification. However, this has become increasingly less common as lending requirements tighten. Also this area has been a source of confusion and error for some escrow and title companies. It is common to see that the land and home show different owners because escrow or title did not understand the unique titling issues associated with manufactured homes. Again, using specialists that deal with the peculiarities of manufactured homes is important so that clerical errors don’t turn into big lawsuits later on.
On The Level is uniquely qualified to work as a team member to assist in the conversion process, having the ability to champion the homeowner’s cost concerns yet understand the local jurisdictional building requirements as well as the lender requirements. While there are many retrofitters that are able to “install only”, the paper work and associated follow-through in the 433A or engineer’s certification process can often cause loans to be delayed or fall through altogether. On The Level is a turn-key company that navigates the paperwork from start to finish, working with all players in the park conversion process.

Author Bio
ON THE LEVEL General Contractors (B & C 47 521400) is a family-owned company specializing in the maintenance and retrofitting of mobilehome and manufactured home understructures 433A permanent foundation contractors.