Chattel Mortgages vs. Real Property Financing
Chattel Mortgages vs. Real Property Financing
During September, the Consumer Financial Protection Bureau (CFPB) released a report that summarized some of their recent research on the manufactured housing industry. For this in-depth analysis, the CFPB gathered a mountain of pertinent data from a wide spectrum of sources. Primarily compiled from various industry surveys, in addition to data supplied thanks to the Home Mortgage Disclosure Act; this report drills down on the demographics of those consumers purchasing manufactured homes … and the different financing options they choose.
In the Bureau’s report, they describe how today’s manufactured home buyer can use either Chattel financing or real-property financing for the purchase of their new modular home. Explaining a few of the more important long-term and short-term implications / contradictions between these two important financial products. The primary trade-off, as outlined in the bureaus report, is that Chattel loans tend to have lower origination fees and close considerably quicker than more conventional mortgage products.
The Consumer Financial Protection Bureau
Keeping a watchful eye…
The CFPB’s white paper goes on to acknowledge that many of the Dodd-Frank Act amendments, particularly those which targeted the Home Ownership and Equity Protection Act (H.O.E.P.A.), as well as the Truth in Lending Act (T.I.L.A.), expand protections for those interested in purchasing a manufactured home.
LO Comps unintended consequences
Unfortunately for some, the new Loan Originator Compensation (or LO Comp) regulations in the Truth in Lending Act could be inadvertently elevating the consumer’s cost of obtaining financing for their new manufactured home. As a means of avoiding being considered a loan originator, and to elude an expensive licensing process, some of today’s manufactured housing retailers are avoiding referring potential buyers/borrowers to specific lending institutions. Lenders they know who are willing to extend financing for a manufactured home purchase.
While many remain concerned over the potential impact of the CFPB’s new regulations, the Bureau denies the rules have adversely impacted the market in any way. Regardless of their disbelief, the Bureau has steadfastly claimed they intend on maintaining the Preserving Access to Manufactured Housing Act, which is meant to address many of the lingering congressional concerns.
As the Consumer Financial Protection Bureau continues to monitor the impacts of their new mortgage rules on the manufactured housing market, many believe the Bureau remains willing to make adjustments to the rules to reduce the burden on its creditors and lower the cost of credit for consumers.
