Chattel Homes Retrofitted Much Less Than Mortgages



According to a recent study by the Bureau of Consumer Financial Protection, it’s unlikely that many industrial home owners were able to take advantage of the market’s record low rates last year.

Borrowers with loans secured by personal rather than real estate accounted for 46% of industrial housing borrowers in 2019, and of this group, only 5% used loans for refinancing. The CFPB has not yet analyzed the aggregate data from the Housing Mortgage Disclosure Act for 2020. but individual creditors’ reports for the last year I guess the percentage is similar. According to ComplianceTech’s analysis of HMDA data, percentage and temporary refinancing accounted for almost 4% of home loans for movable property, while cash-backed refinancing approached 1% last year. In general, for industrial housing, about 21% received refinancing at the rate and term, and 6% received a cash loan last year.

The small loan amounts associated with the particularly low price of some industrial homes likely explains some of the discrepancy, but overall the data supports the anecdotal evidence that the financing of movable property for industrial homes is less profitable than mortgages with real estate that provide them. The price points for movable homes can be five-digit, as opposed to the low six-digit for the larger or more expensive land-backed homes in this market.

“Compared to mortgages, movable property loans have higher interest rates, shorter loan terms, lower loan amounts, less [consumer] protection and rarely refinanced, ”CFPB researchers wrote in a report that analyzes new data added to HMDA reports in recent years. Rates for loans on movable property can be closer to 8%, while rates on mortgages on real estate tend to be about half that.

The Industrial Housing Institute disagreed with the report’s emphasis on financing terms and suggested that they need to be seen in the broader context of low prices in the sector. “The report compares the financing of industrial and on-site homes, without recognizing compensating affordability. benefits, ”the Industrial Housing Institute said on Tuesday.

The findings of the CFPB report are significant for mortgage lenders because some of them have been taking a closer look at finished homes lately. as a remedy for housing shortages which are especially intense at lower prices.

“Industrial housing is becoming an increasingly viable option for middle-income families due to the lack of affordable housing,” Laura Brandao, president of mortgage lender American Financial Resources, wrote in an email. “On any given day, more than half of our pipeline is processing industrial home loans.” (Industrial housing was AFR’s specialty, so the volume is particularly high.)

Government-sponsored mortgage-related businesses Fannie Mae and Freddie Mac at some point in the past began testing movable property lending under directive to do more to meet the needs of underserved marketsbut ultimately put their efforts on hold.

Industrial housing in general is helping to close the lending inequality that some groups face more than others, but lending for movable property may be of more help to some demographic groups with a predominance of low-income people. Overall, according to the CFPB report, whites, Hispanics, American Indians and Alaska Native borrowers are overrepresented in the industrial housing market in general, and Black and Asian American consumers are underrepresented when compared to traditional locally built homes. However, as the CFPB report shows, black homeowners are overrepresented in the movable property-financed market by nearly 10%, compared to nearly 4% for home mortgages and 7% of locally built homeowners.

The mortgage market generally prefers to encourage lending to finished homes for real estate rather than movable property due to the difference in collateral. Although the terms of a movable property loan are shorter than mortgages, they are still relatively long, around 20 years, and are backed by a depreciating asset rather than land that could rise in price.

“For some people, movable property is their only affordable price, but I think if we could transfer some of these people to a lower price for a home secured by real estate, they could benefit more from the price increase.” – David Battany , executive vice president of capital markets for Guild Mortgage.

In the paper, the researchers declined to point out how to find the right balance between the lower price of unsecured movable homes and the better financing available in the mortgage market, citing the need for a more detailed study of loan performance information not available in HMDA data. and hybrid solutions such as resident-owned communities. In the ROC, a non-profit organization distributes equal shares of land ownership among tenants.

“This could be a step in the right direction. In an ideal world, you might have different levels. You can start with a situation where you do not own the land, but then move upward, take an interest in the land, and later find yourself in a situation where you completely own the land, ”said Battany.


Source link