Mobile Home Loan Refinancing is Different - Article

Mobile Home Lenders are Hard to Come By

Lending standards in the Manufactured Home finance market have typically tightened during periods of economic hardship. This is not surprising, but still unwelcome. The clenched standards that banks are now maintaining for Manufactured Home loans is similar to a agriculturist who depletes all the nutrients from his soil as quickly as possible.

The farmer then points the finger at the grocer for his losses, instead of realizing that he is truly responsible for poisoning his crop. The financial institutions have been reaping the benefits of the loose laws for many years now, all the while profiting from approving irresponsible financing to occur, then securitizing the loan and placing it elsewhere. Now the hens have come home to roost, and the banks are acting irresponsibly in the opposite direction, on the side of over caution. Manufactured Home lending institutions are using any excuse to decline completely sound loans.

Manufactured Home loan agents are now in the position of not knowing who the new primary lender will be in the Mobile Home finance community after the dust settles. Recently the fed has banned Taylor, Bean and Whitaker from making any future investments insured by the federal government. HUD believes Taylor did not submit a necessary financial report, raising eyebrows at fraud concerns. The company was also ordered to cease in issuing mortgage backed securities for Ginnie Mae. Taylor was the No. 1 source of financing for mobile homes, they lent nearly 13 percent of all Mobile Home investments in 2007, which were insured by the Federal Housing Administration.

Countrywide, Wells Fargo and JP Morgan are the next largest manufactured housing lenders, but they are not as active as they once were in the Manufactured Home loan insdustry. The small amount of investors will lead to downsized competition, likely resulting in a high demand and therefore, higher interest rates. In this scenario, the lending institutions have the advantage and will probably only issue a limited number of loan programs available to refinance or finance a Mobile Home in America.

Manufactured Homes have been) the primary first step towards property ownership for lowincome and retired Americans for a long time. Mobile Home loan agents are finding it more and more challenging to find new sources of mobile home funding from a group of lenders that has shrunk during the past several years. Manufactured houses, which are factory-built in parts and then put together at a land site, are significantly less expensive than traditional homes. According to the Commerce Department, the average price for a Mobile Home in 2008 was $65K, much lower than the average price of $292K for a site-built home.

Strangely, Warren Buffet's Berkshire Hathaway revealed recently that in this current housing/banking crisis, their Mobile Home customers are foreclosing less and making their loan payments more. Berkshire subsidiary Clayton Homes' delinquency rates for mobile home loans have also been stable during these times of turmoil: the delinquency rate was 3.26% in 2004; it was at 3.5% in 2008; and now it's 3.82% here in 2009. However, the delinquency rate in the traditional housing insdustry is higher, around 6.4%. Annual credit losses are running steady at a reasonable 1.5% of the loan portfolio. It is worth mentioning, however, that Clayton does not securitize their loans. This means the loans remain on their books, so they are much more conservative in their loan approval process.

This seems like a paradox, but it should make Mobile Home loans a logical consideration among the possible lenders that are looking to emerge into a lucrative new niche market. Which leaves everyone in the Mobile Home community asking the question: Who will step up to the plate to be the leading Mobile Home Lender? It is possible that Warren Buffet will step up to the plate, but his big investments and movements lately have seemed incongruous. He may move to a low-stakes table, while the Mobile Home financing insdustry is overtaken by a new investment company willing to emerge into a new market starving for capital.