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The Consumer Financial Protection Bureau published a report providing new insights into manufactured housing financing, a vital source of lending for millions of manufactured housing homeowners. Manufactured housing is one of the most affordable types of housing available to low-income consumers and makes up 13% of the housing stock in small towns and rural America, according to the report. Those low acquisition costs, however, often come coupled with higher interest rates and limited opportunity to refinance, according to the bureau.
The CFPB found that consumers who do not own the underlying land are more likely to see their homes depreciate and have fewer protections if they fall behind on payments. These factors combined can make this affordable housing a potentially risky avenue for homeownership.
“This report shows the power of the expanded Home Mortgage Disclosure Act data collection to understand the path to homeownership for some of our most vulnerable families, including Black, Indigenous, and Hispanic families, as well as rural and lower-income families of all races and ethnicities,” said Acting Director Dave Uejio. “Much more work needs to be done to understand the options available to these families and how best to help ensure that manufactured housing homeownership can be a path to financial stability for the rural and lower-income families who depend on it.”
The CFPB’s report is based on new information about manufactured housing that was added in 2018 to the list of HMDA data collected. This new HMDA data is the only national level dataset that directly tracks the different types of financing options for manufactured housing.
According to the report, overall, around 42% of manufactured home purchase loans are “chattel” loans, which are secured by the home but not the land. Generally, chattel loans have higher interest rates and fewer consumer protections than mortgages. Consumers may choose to get chattel loans to avoid putting the underlying land at risk if they default on the loan.
Additionally, most manufactured home loan applications are denied, and less than 4% of chattel originations were for refinances, according to the report. The CFPB also found that homeowners seeking a loan on a site-built home are approved more than 70% of the time, but less than 30% of manufactured home loan applications are approved. At the same time, even during 2019’s low interest rates, very few manufactured housing loans were refinance loans.
The top five lenders account for more than 40% of manufactured housing purchase loans, and nearly 75% of chattel lending. The four largest originators are specialty lenders that primarily offer chattel loans to manufactured housing owners. Over time, nonbank lenders have played an increasing role in the manufactured housing lending market, while banks have decreased their activity or exited the market altogether.