Fannie Mae announced last week that it is working with nine lenders to "transform" the manufactured housing sector. A key goal would be to offer 30-year manufactured housing loans with down payments as low as 5%.

In related news, GMAC-RFC on Monday of last week announced the forming of GMAC Manufactured Housing, a division intended to originate, service and eventually securitize MH loans.

These joint events signal a renewed confidence in the once-flagging sector. "We hope the industry has learned from its mistakes, as we have by observing and studying the market," said Chris Gelson, managing director at GMAC Manufactured Housing.

In its announcement, the newly formed MH entity revealed that the lending strategy will be based on a partnership model. Gelson said that the company will partner with other finance companies and originators, but officials are not planning to acquire broker-dealers or origination and servicing organizations, but rather are planning to build these capabilities themselves.

Gelson said that they will start taking loans perhaps in one to two months; these would include the Fannie Mae product and chattel loans. "As we get in full gear, we might be able to produce something in the neighborhood of $400 million in the next 12 months," Gelson said. He said that once the company is up and operational, GMAC Manufactured Housing expects to double this amount by next year. "But I want to make it clear that we are not chasing volume for the sake of volume. We are going to pace the growth of the business. I'd rather go slower if that means being more careful and having the right partners than chasing a number for the sake of just chasing a number," he added.

Careful to keep in mind the things that went wrong in the sector, Gelson said that the company will make sure to work with partners who have the best interest of homeowners in mind.

Aside from GMAC Manufactured Housing, the following lenders are participating in the Fannie program: AgFirst Farm Credit Bank, Flagstar Bank, Huntington Mortgage Group, Origen Financial, RBC Mortgage, 21st Mortgage, Vanderbilt Mortgage and Washington Mutual.

"By working with these lenders, we want to learn from their best practices as well as ensure that they have a more widespread adaptation (of these practices)," said Alfred King, director of public affairs at Fannie. He added that by working with these lenders, Fannie could help transform the manufactured housing market to add stability and lessen problems arising from borrowers in trouble.

King said that the 5% down payment would help ensure that borrowers have a sufficient stake in their homes. "We heard that 5% down is the amount at which borrowers feel like they have a chance at an affordable mortgage payment," he noted. Having the 5% down payment option could reduce the borrower's monthly mortgage payment by $100. "For borrowers in the lower end of the income scale, that could make a difference between being a homeowner or not," King said.

Fannie had earlier last year moved away from this product, sources said, because it was concerned about the creditworthiness of manufactured housing collateral. The sources added that there was some congressional pressure as well as MH industry feedback that Fannie Mae should continue to offer the low down payment loans for MH because without them, fewer people were able to qualify to become homeowners.

Sources say that a manufactured housing loan bought by Fannie, where the loan includes the land, could be considered a better credit compared to chattel manufactured housing loans (where the land is not part of the loan and the home is stationed on communal property such as a park). In the case of the chattel loans, many lenders usually require at least a 10% or more down payment, instead of the 5% down payment that Fannie is offering.

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