Why Mobile Home Loans are considered Difficult or Risky

Mobile Homes and real property single-family homes are not only built differently, but titled differently and the mortgage is unique as well. Understanding these differences is very helpful, as they play a major role in determining the type of loan you will be able to get for your mobile or manufactured home.

Basically, when you are looking at getting a loan, you need to put down collateral for that loan. The collateral for your loan is going to be the main factor where there are differences between Mobile Home and Manufactured Home Loans and traditional "stick built" home loans. Just like how getting a loan for your vehicle and getting a loan for your business are two different types of loans, so are loans for mobile homes and site-built homes.

Site-built homes include real property and their loans are a bit different from chattel, or mobile home loans. A mortgage loan for this type of home is a loan secured by real property through the use of a Note, which is the agreement between the lender and the borrower, evidencing the existence of the loan. Real property mortgages can and should be additionally evidenced by a Deed of Trust document, which is recorded with the County Recorder. The Recorder is a county official that insures that instruments are recorded, giving public notice of such transactions. The Deed of Trust will be recorded with the County Recorder where the real property home is located, to show that a mortgage against the home exists. If the borrower tried to sell the home prior to paying off the mortgage in full, the future buyer could publicly view the loan status, because the deed of trust is in place on the title records for the home. Because there is no real property ownership involved with a mobile home loan, a lender cannot record any documents against the title to a mobile home, and cannot secure the loan in the same fashion.

In America, a manufactured home loan is also referred to as a "chattel mortgage". Chattel mortgages are secured transactions, governed by Article 9 of the Uniform Commercial Code. The lender on a mobile home loan secures the loan with a mortgage over the chattel, or the Mobile Home itself. Because chattel is defined as personal property, movable or immovable, for example, a book, a coat, a pen, or growing vegetables; a mobile home is considered a piece of personal property that could, for all intents and purposes, be moved. Because of this, often times mobile homes are considered as riskier collateral than a real property, site built home, in the eyes of traditional real estate lenders.

Because Mobile Home Mortgages do not have real property to be recorded onto, they must be secured against the title to the mobile home in a different way. The title information for manufactured homes is maintained by agencies directed by The United States Department of Housing and Urban Development (HUD). In the California, The Department of Housing has a Registration and Titling division that is specifically assigned to maintaining the title information on Mobile and Manufactured Homes. The individual homeowner(s) of a mobile home are shown on the title as the registered owner, and the lender is shown as the Legal Owner to the mobile home. When a manufactured home is encumbered by a Legal Owner, the actual Certificate of Title to the mobile home is issued to the lender, or legal owner. The homeowner is issued a Registration Card, which evidences the home owner’s Registered Ownership interest to the mobile home. When a mobile home owner pays off their mortgage loan, the lender signs the certificate of title, releasing the loan, and forwards that Certificate of Title back to the homeowner as proof of the lien release.

As you can see, many people are curious, or confused, when it comes to the differences between loans for mobile homes and loans real property site built homes, and why many investors seem to think Mobile Home Loans are more risky than real property loans. A lot of lenders that finance condominiums and single family real property homes do not even consider lending on mobile homes, and many homeowners just do not understand why. Well, there are some big differences in the properties themselves, and these differences affect the types of loans that can be done on the homes.