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Fannie Considering Tightening Term, LTV on Manufactured Homes

Fannie Considering Tightening Term, LTV on Manufactured Homes

GSE feeling pressure from Associations, Congress

May 16, 2003


Fannie Mae’s consideration of tightening lending practices for manufactured homes has raised concerns in Congress about decreased opportunities for home ownership.Fannie, formally known as the Federal National Mortgage Association, had proposed reducing its maximum loan term for manufactured housing from 30 years to 20 years, according to U.S. Rep. Ken Lucas, D-Ky., and the Manufactured Housing Institute, an industry trade and lobbying group.

Lucas and fellow House Democrat Baron Hill of Indiana wrote Fannie CEO Franklin D. Raines on May 8, asking him to reconsider changes to the 30-year mortgage loan.

“Eliminating 30-year mortgages would decrease the opportunity for homeownership, directly contradicting Fannie Mae’s stated purpose,” the congressmen wrote. “Manufactured housing is an important and often-used means of housing for residents in our districts.”

Fannie spokesman Alfred King has offered few specifics on why the agency is pursuing the change, and declined to discuss default or foreclosure rates on manufactured homes.

King said Wednesday that because of the economy it is a “difficult time for the manufactured housing business, both for sellers of product and for consumers getting the homes.”

He stressed that no changes have been made and that the agency is “talking to interested parties and trying to get input.”

But pressure from Congress and others may have convinced Fannie to drop the idea of eliminating 30-year mortgage loans.

Following a meeting Tuesday involving Lucas, Fannie officials, representatives of the manufactured housing industry and others Fannie issued a statement indicating it will maintain 30-year mortgages.

“We believe it is critical to protect the consumer and maintain the liquidity of this important affordable housing market,” King said in a statement Thursday.

“We are looking at a number of options and are in the process of finalizing a set of Selling Guide changes. As part of this process we have consulted with the Manufactured Housing Institute, Mortgage Bankers Association and our lender customers. Based on their feedback, we will develop a 30-year option for mortgages secured by manufactured homes.”

But Bruce Savage, spokesman for the Manufactured Housing Institute, said while Fannie is likely to continue offering 30-year mortgages it is considering increasing the required downpayment from five to 10 percent.

“We’re still concerned about the impact of 10 percent downpayment on affordability and maintaining affordable housing for millions of people,” Savage said Tuesday.

Savage said Fannie’s decision to increase the downpayment is due to the performance of loans on manufactured housing, which is information the agency will not release.

Savage said he has asked to see the data, but Fannie has refused.

In a March report, Credit Suisse First Boston found that manufactured housing mortgage loans at least 60 days delinquent rose 4.23% in February over February of 2002.

Also, according to the Department of Housing and Urban Development (HUD), in 2001, manufactured home loan lenders accounted for just 16.1% of all conventional home purchase applications but 49.8% of conventional home purchase denials.

Lucas is mobilizing Congress’ Manufactured Housing Caucus — which has 76 House members and 15 members in the Senate — to lobby Fannie not to demand a 10% downpayment.

“This is definitely not over,” said Lucas’ spokesman Joe Cables. “It’s just getting started from a Congressional standpoint.”

Manufactured Homes are built in a factory to specifications codes administered by HUD and the U.S. Department of Housing. They were once known as mobile homes, but the term “manufactured housing” took over after the federal guidelines were established in 1976. While at one time most such homes resembled trailers, many today are indistinguishable from homes built directly on a lot.

According to HUD there were 8.9 million manufactured housing units in the United States in 2001, making up 7.5 percent of the nation’s total stock of 119 million housing units.

States with the largest percentage of manufactured housing were South Carolina (20%), New Mexico (18.2%), West Virginia (16.6%), Mississippi (16.1%), North Carolina (15.8%), Alabama (15.5%), Wyoming (15.3%), Montana (14.4%), Arkansas (14.2%) and Kentucky (13.3%).

Tim Doyle, spokesman for the Mortgage Bankers Association of America in Washington, D.C., said the association is concerned “with some of the policy changes being contemplated and has met with policy makers at Fannie Mae to specifically discuss the availability of a 30-year manufactured housing product.”

“MBA’s belief is that with prudent underwriting criteria, the 30-year loan can be offered in a manner that balances the need for this product in terms of affordability, with the additional risk it entails,” Doyle said. “Fannie Mae was receptive to the idea and MBA is confident that this issue will be resolved.”

Patrick Crowley is a political reporter and columnist and former business writer for The Cincinnati Enquirer. Email Patrick at:

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