RateWatch #403 – Unique Property Types, Manufactured Homes.
April 17, 2004 by Dick Lepre
Rates are rising based on presumption of a "sooner rather than later" Fed hike.
Some strange economic data helped Treasuries on Friday. Consumer Confidence (predisposition to spend) was down despite positive economic news. Media focus on gasoline prices and last week's troubles in Iraq may be the source. In more realistic data, Industrial Production and
Capacity Utilization were down slightly. It is unlikely that either of these data points constitutes a trend but they certainly serve to check economic recovery. Housing Starts and Building Permits were up. At some point, higher rates will affect these.
Someone sent me an e-mail this week about a loan on a log home. There are lenders who do "unique properties". There are two generalizations that I would offer:
1) you need a strong appraisal with at least one comparable "unique property". In this case, another log home.
2) these require exceptions meaning that nothing is certain until reviewed by the investor. Strong
loan files are required.
Some insight is offered from one investor's guidelines:
"Unique" property types may be allowed by exception only on Stated Income and Full Documentation programs. These types generally include, but are not limited to:
1. Geodesic domes
2. Earth Sheltered homes
3. Straw Bale Construction
4. Log Houses
5. Historically Registered Homes
Such non-traditional types of housing are allowable, provided that the appraiser has presented adequate information to demonstrate a reliable estimate of market value. At least one, preferably two of the comparable sales should be of the same design, and within a reasonable proximity to the subject property. Dwelling units of any type according to the individual loan program guideline should have sufficient living area to be acceptable to typical purchasers or tenants in the subject market area demonstrated by comparable sales with similar square footage.
The following is the FNMA Definition of a Manufactured Home:
Any dwelling unit built on a permanent chassis and attached to a permanent foundation system is a "manufactured home" for purposes of Fannie Mae's guidelines. Other factory built housing (not built on a permanent chassis), such as modular, prefabricated, panelized, or sectional housing, is not considered manufactured housing and continues to be eligible under the guidelines stated in the Selling Guide.
Manufactured home loans done through FNMA have some interesting aspects. For example, before the sale the home may be encumbered by one lien and the lot by another. The lender (and title company) must assure that all liens are satisfied. Trade equity from the borrowers existing manufactured home may be used as part of the borrower’s minimum down payment requirement.
The manufactured home must be a one-family dwelling that is legally classified as real property. The towing hitch, wheels, and axles must be removed and the dwelling must assume the characteristics of site-built housing. The land on which the manufactured home is situated must be
owned by the borrower in fee simple, unless the manufactured home is located in a cooperative or condominium project. Mortgages secured by manufactured homes located on leasehold
estates are not eligible. Multi-width manufactured homes may be located wither on an individual lot or in a project development (i.e. cooperative, condominium, PUD, or subdivision). Mortgages secured by single-width manufactured homes are eligible for delivery to Fannie Mae only if the
manufactured home is located in a cooperative, condominium, or PUD project.
In addition there are title issues and appraisal issues that need to be addressed for such properties. These are too detailed to address here.