Freddie Mac rolls manufactured housing pilot out to the full market

Freddie Mac is now offering to buy a new form of manufactured housing loan with terms similar to that of conventional mortgages from all eligible lenders, following a test run last year.

The government-sponsored enterprise previously planned to pilot the loan for two years with a more limited group of companies. But Freddie Mac has since accelerated the timetable for a broader rollout to address unmet demand for affordable homes in the market.

"There's still that void in that price point, anywhere from $125,000 up to around $350,000, where most of the new-home construction starts are at today, depending on geography; and there are still many borrowers credit-qualified and ready to go, but the lack of affordable housing inventory has really dampened their efforts to become homeowners," Dennis Smith, affordable lending manager at Freddie Mac, said in an interview. "This is a potential solution for them."

The new mortgages omit the typical manufactured home loan credit fee and are only available on factory-built certified structures with architectural features similar to a traditional site-built home. The houses also must be titled as real property and be borrowers' primary residence. Fannie Mae rolled out a similar program called MH Advantage last year.

"We are allowing flexibilities in the credit arena as well as in appraisals," Smith said. Freddie Mac will allow appraisers to use site-built homes to obtain comparable valuations when no manufactured homes are available.

Many lenders questioned whether builders and manufacturers would be willing to produce certified structures to the GSEs' specifications when Freddie and Fannie initially launched their programs last year, but Smith said at this point several companies have homes in production.

"We've even seen some developments using CHOICEHome eligible homes that are placed in a setting like a subdivision or planned unit development and are being sold that way versus a traditional retailer model for manufactured housing. So there are two different ways for the manufacturer to market those homes," he said.

Only purchase loans or rate-and-term refinances secured by a multiwide, one-unit property are eligible, according to Freddie's guidelines. The maximum loan-to-value ratio is 97% for fixed rate loans and 95% for hybrid mortgages.

Although single-section manufactured homes have been more popular than multisection houses, shipments of both types of structures have increased in recent years, according to the Institute for Building Technology and Safety and the Manufactured Housing Institute.