May 3, 2016
In an open letter published in response to the “duty to serve” provisions proposed by the FHFA, the Manufactured Housing Institute argues that creating a sustainable secondary market for manufactured home loans is key to easing the affordable housing crisis.
While an increase in the number of the financial institutions operating within the manufactured home lending sector will be beneficial to the entire manufactured housing industry, potential investors can’t help but wonder what’s in it for them. To provide a comprehensive answer, we present below three ways manufactured home loans can improve overall investment performance and boost returns.
Manufactured Home Lending Programs Provide High-Yield Investment Opportunities
The CFED has recently published a study analyzing the overall performance of manufactured home loan portfolios. Compiling data from 40 different sources, including state HFAs, the study has confirmed that manufactured home loans perform just as well as similar conventional mortgages. The study has also identified several manufactured home loan products that outperform other mortgage categories. As a result, the participants in the study have expressed their interest in continuing to support the manufactured housing finance sector. Based on this evidence, increasing numbers of credit unions and banks feel encouraged to add manufactured home loans to their portfolios.
The fact that manufactured home loan performance is comparable to general mortgage performance was also demonstrated by the FHA, which has just issued the 2015 actuarial report on fund performance. According to the report, the mortgage insurance fund performance for loans that are FHA-backed through the Title II program will continue to increase over the next seven years. Title II loans are used to finance the purchase of conventional housing as well as manufactured homes.
Manufactured Home Loans Can Help Diversify Risks
Uncertainty regarding which investments will be superior or inferior performers is one of the most fundamental problems investors face nowadays. Since portfolio performance is dependent on the individual performance of each asset class, prudent investment typically involves risk diversification, which equates to a broad portfolio diversification, according to a white paper written by W. Scott Simon and Guerdon T. Ely, two famous financial advisors with vast experience in financial and investment counseling. By increasing the number of assets in a portfolio, an investor can lower the overall risk, which is directly proportional to the volatility of the portfolio’s returns.
Why should you choose manufactured home loans to enhance your portfolio? The increasing demand for these types of loans along with the progress made in the quality of construction of manufactured homes are two of the factors that have placed manufactured home loans among the best financial products for portfolio diversification.
Manufactured Home Loans Follow Strict Eligibility Requirements
Although loans can be successful without following tight qualifying standards, manufactured home loans generally have stringent eligibility requirements. Based on the aforementioned study issued by the CFED, qualification requirements are directly related to loan performance. To deliver high-yield, secured lending portfolios, for example, Triad Financial Services only lends to creditworthy prime borrowers with 700+ FICO scores and low LTV/DTI ratios. To ensure the best performing products, we’ve also adopted a customer-driven servicing approach and “high-touch” lending practices, which basically involve bringing more of a personal touch to the “table,” adjusting loan terms and conditions as required, and reaching out early to late-paying borrowers.
In conclusion, diversification plays a big role in long-term investment success. But should you continue to add new products to your portfolio? To be completely honest, you don’t need to get new asset classes or switch continuously between different lending options just because investment firms keep developing various financial products.
If you already have a reasonably well-balanced portfolio, you can stop your investing work for the moment and enjoy the benefits of a portfolio that efficiently balances risks and returns. On the other hand, if you’re looking for ways to diversify your portfolio, we invite you to contact our knowledgeable and experienced financial experts, who are ready to show you how to maintain adequate portfolio diversification through smart investment strategies.