Pew Study Shows Financing For Manufactured Homes Still Difficult

Pew research released in December 2022 shows that many homebuyers are denied financing for buying manufactured homes. In 2021, their data show, lenders denied 54% of completed applications for financing a purchase of a manufactured home. For site-built home buyers, the rate was just 7%.

In response, Pew, the Federal Housing Administration (FHA), and Ginnie Mae have called for the federal government’s Title I Manufactured Housing Program to be extended and reformed.

Financing For Manufactured Homes Is Often Refused

Obtaining a loan to buy a manufactured home can be very difficult. Pew’s research indicates that fully 54% of applications for manufactured home financing are denied by lenders, even where these applications contained all the information required for underwriting the loans. This refusal rate stands in stark contrast to the refusal rate for “traditional” mortgages for site-built homes, which was just 7% in 2021.

There are a number of reasons for this disparity. One of the principal reasons is that more than 75% of new manufactured homes are purchased as personal property (as mobile home buyers often must rent the land on which their homes sit) rather than as real estate, and personal property is very unlikely to be covered by federal loan programs. While the FHA have a program designed to make these loans more easily available – the Title I Manufactured Housing Program – it is virtually unused.

Another reason is that leading lenders often keep loans for manufactured homes “in portfolio,” rather than selling them as they would a site-built mortgage. This means that lenders assume more risk for the loan, and accordingly apply stricter credit standards to them.

In addition, conventional mortgages for manufactured homes are underwritten more stringently than FHA mortgages that rely more on credit history than other factors, such as home value. Pew’s research shows that the majority of denials for conventional or personal property loans were because of credit history (59% and 65%, respectively), and that manufactured home buyers applying for an FHA Title II mortgage were 16 percentage points less likely to be denied financing than if they had applied for a conventional mortgage.

Improving Access To Financing For Manufactured Homes

In the report, Pew suggest that a solution to this problem could be to improve access to the FHA’s Title I program. In the same way that FHA’s Title II mortgage program helps expand access to manufactured home mortgages, they argue, FHA’s Title I program could be leveraged to improve access to personal property loans.

The federal agencies that oversee the program appear to agree. The Federal Housing Administration (FHA) and Ginnie Mae—government agencies that provide mortgage insurance and loan guaranty to help homebuyers to secure financing—issued a joint request for input (RFI) in July.

This RFI requested help to identify factors that prevent homebuyers from accessing their current Title I Manufactured Housing Program. This will be a welcome development for homebuyers, because updates to the program could improve access to safe and affordable financing options for buyers who want to use a personal property loan to buy a manufactured home.

For their part, lenders have suggested to that personal property loans are denied so often because many prospective borrowers apply to lenders that do not offer manufactured home financing and are therefore turned down. Pew’s research does not support that theory. Manufactured home buyers are applying to the correct lenders, and providing the correct information. But at the moment, they are not getting the help they need.