HUD Affordability Plan Would Include Raising FHA Title 1 Manufactured Housing Limits

(The following contains excerpts from a HUD press release reported by HW Media).

The Federal Housing Administration (FHA) is taking steps to address the affordability crisis by boosting supply, but it’s not lowering the fees it charges borrowers just yet.

Senior officials at the Department of Housing and Urban Development (HUD), which houses the FHA, said during a July 14, 2022, press briefing that it would focus on improving financing for manufactured homes and revamp its renovation financing.

FHA financed about 34% of the $15.2 billion manufactured home purchase mortgages in 2021, according to HMDA data. HUD offers insurance for manufactured housing mortgages under its Title 1 program, which is more than 50 years old. The program’s maximum loan term is 20 years.

“It’s been a long time since anyone has given [Title 1] a lot of love,” a senior HUD official said.

Specifically, HUD officials said they are looking to “raise the Title 1 loan limits so that those limits are appropriate for today’s market.

FHA’s loan limit is $69,678 for chattel financing. That’s significantly less than the average sales price of a new manufactured home without land, transportation, or set-up costs of $108,100 in 2021, according to researchers at the Urban Institute.

But the same official cautioned that chattel financing for manufactured homes – where the borrower does not own the land underneath it – is not an ideal solution. While FHA does finance chattel loans, it is an extremely small share of the market. In 2021, FHA financed 0.5% of the $5.7 billion chattel market.

“When someone owns a manufactured home but doesn’t own the land under it, that’s not the kind of sustainability that we are trying to promote,” the HUD official said.

But not all manufactured homes titled as personal property are titled separately because the borrower rents the land underneath. According to an analysis of Home Mortgage Disclosure Data by the Urban Insitute, 28% of borrowers with chattel financing also own the land underneath their homes. In some cases, the borrower’s family member or acquaintance owns the land.

The HUD official said that the department will be taking a look at protections it can bring to the financing of manufactured housing communities. In 2021, Freddie Mac introduced lease pad protections – including renewable leases, unless there is good cause for non-renewal – for manufactured housing communities it finances.

“We have to look at things like financing of manufactured housing communities, to see if we can bring more protections into that environment,” the HUD official said. That includes “more good financing for the good operators that we know are out there, whether it’s a resident-owned or more traditional owned community.”