Just like all real estate, there is no doubt that the economic decline has impacted values in manufactured home communities. However, condo parks have been harder hit than the broader community because financing for manufactured homes in condominium-classified parks completely disappeared for the last couple of years. Except for hard money loans, private financing or VA loans, money simply dried up. Investors shied away from any loan that was not FHA-insured which also included Reverse Mortgage or Home Equity Conversion Loans. And it’s a vicious cycle. Without loans, the sales market becomes stagnant and without sales, appraisers can’t find comparative values to provide a reasonable worth for your home
Fortunately, back in July Congress passed sweeping legislation that removed the condo exclusion, but it wasn’t until May that the Mortgagee Letters were released paving the way for financing opportunities. However, the hard work has just begun. Before a single loan can be originated, the park itself must receive approval from Housing and Urban Development. This is no small feat and even once all the documentation is presented to the local overseeing HUD agency, the wait time for approval is 6-8 weeks.
There are many anxious lenders and homeowners that are excited about the new lending possibilities and the fact this will ultimately add more vibrance to the park community as well as increase the value potential of your home. Yet, this is still a time to proceed with caution and not make any decisions until your management or HOA has expressly declared that the park has received approval. The reason this is so critical is that over-anxious lenders are often encouraging a quickstart of the loan process by getting an appraisal. This can have serious repercussions in a volatile market when the shelf-life of an appraisal is approximately two months. Since most lenders don’t have an in-house underwriting department and the waiting line for an file evaluation is sometimes 3-6 weeks, your appraisal could be old before you start.
In addition, even once the park receives approval, there is another rigorous checklist for manufactured homes themselves. First and more importantly your home must be newer than June 15, 1976. No matter how beautifully renovated your home is or how updated its appearance, there are no exceptions. The home must also be in its original location—so if the home was moved from another park, FHA will not insure the loan. The home must also be titled as real property and cannot be located in a flood plain. Additionally, the home must be on a permanent foundation which must not only meet the local jurisdictional guideline but the HUD Permanent Foundation Guide For Manufactured Homes and an engineer must testify to this fact. However, please don’t run out an install a foundation system prematurely. This can generally be incorporated within the scope of the loan and should be the very last step of any loan process. There is no sense spending several thousands of dollars on a foundation only to find out there are other issues that will complicate the loan.
When choosing a lender, carefully evaluate your options. Ask specifically for referrals from other manufactured home owners. You want a lender who understands that manufactured homes have specialty requirements and knows those requirements backwards and forwards. And when choosing a foundation specialist or engineer for the certification, make sure you are working with one who will not charge you for a “failed” report and will your interests by not obligating you to a foundation retrofit or repair until the loan has the approval greenlight.
www.themanufacturedhomelendingsource.com and www.onthelevelcontractors.com
