Who will be the Next Big Mobile Home Mortgage Lender?
After a chain of events in the manufactured home finance community, we are all left asking who the next big lender will be. The government last week banned Taylor, Bean & Whitaker from making any more federally insured loans. HUD said Taylor failed to submit a required financial report, which raised fraud concerns. The company was also barred from issuing mortgage-backed securities for the Government National Mortgage Association, or Ginnie Mae. Taylor was the No. 1 source of financing for manufactured housing, they funded nearly 13 percent ($1.45 billion) of all manufactured home loans insured by the FHA in 2007.
Manufactured homes have long been the first step toward homeownership for low-income Americans, and mortgage brokers are struggling to find new sources of funding from a pool of lenders that has shrunk dramatically during the past several years. Manufactured houses, which are factory-built in parts and then put together at a land site, are significantly less expensive than traditional homes. According to the Commerce Department, the average price for a manufactured home in 2008 was $65K, much lower than the average price of $292K for a site-built home.
Countrywide, Wells Fargo and JP Morgan are the next largest mobile home lenders, but they aren’t as active as they were in the manufactured home loan market. The lack of competition will likely lead to higher rates. As a result, there are very few loan programs available to finance or refinance a mobile home.
Strangely, Warren Buffet’s Berkshire Hathaway revealed recently that in this current housing/banking crisis, their manufactured home customers are foreclosing less and making their payments more. Berkshire subsidiary Clayton Homes’ loan delinquency rates have been stable: the rate was 3.26% in 2004; it was at 3.5% in 2008; and now it’s 3.82%. Surprisingly, the delinquency rate in the traditional housing market is around 6.4%. Annual credit losses are running steady at a reasonable 1.5% of the loan portfolio. It is worth mentioning, however, that Clayton does not securitize their loans. This means they remain on their books, so they are much more conservative in the loan approval process.
This seems paradoxical, but it should at the very least make manufactured home loans a consideration among the lenders that are looking to emerge into a lucrative new niche market. Which leaves everyone in the manufactured home community asking the question: Who will be America’s Next Top Manufactured Home Lender be?
NY Times: Lender’s Shutdown Hobbles Manufactured Housing
CNN: Warren Buffet’s Happy Housing Story
