How Manufactured Home Loans Provide Opportunity for Growth
March 16, 2016
Recently, the FHFA issued a proposed rule that would require the FHLMC, or Freddie Mac, and FHMA, or Fannie Mae, to focus more on the underserved manufactured housing finance market to offer greater portfolio diversification opportunities for investors and expand homeownership possibilities for low—and moderate-income borrowers. As a result, the new “duty to serve” provisions will strengthen the manufactured housing secondary market, which is expected to lead the real estate “pack” with sustainable growth over the next years.
Understanding the "Chain Reaction"
In a nutshell, the new rule scheduled to come into force in October 2016 will add more liquidity to the market, reduce financing costs and provide better consumer protection. Consequently, the demand for manufactured housing units will continue to increase, stimulating the secondary market for manufactured home loans. For a credit union operating within the manufactured home lending market, this will translate into:
Superior investment performance
Recent reports from the MHI has shown a steady increase in the number of manufactured homes produced and shipped in 2015, which indicates higher consumer demand for these types of homes. This trend is further encouraged by the Federal Reserve’s decision to maintain current interest rates. Though some economists used the continued U.S. economic recovery to argue for higher interest rates, the Federal Reserve decided to wait for more evidence demonstrating sustained economic growth. Lower interest rates that maintain the affordability of manufactured homes will lead to greater demand for these homes, which will positively impact the investment performance of all those involved in the manufactured housing production, retail and financing sectors.
Lower default rates
Given the low number of lenders currently operating within the manufactured home lending market, many home buyers find it very difficult to get financing for these types of homes. But that’s going to change soon. As the secondary market for manufactured home loans will grow faster, thanks partly to the FHFA’s new regulatory proposals, more financing options will become available shortly. Wider availability of financing and refinancing options will lead to increased competition among manufactured home lenders and lower buyer interest rates. Although this may first seem to create an unfavorable climate for a credit union entering the manufactured housing industry, the net effect will be lower default rates, ultimately strengthening the finance market for manufactured homes and generating significant returns on investment and new growth opportunities.
According to the MHI, a new Market Access Fund (MAF) will also become available to create new homeownership opportunities for low—and moderate-income families. Besides providing a series of loans, grants, and pilot programs to home buyers, the MAF will support the products and services developed to stimulate a viable secondary market for manufactured home loans, which will implicitly attract more investors and consumers.
If you’re looking for the best-manufactured home lending solutions to add to your portfolio, we invite you to contact Triad Financial Services. Our unique and simple approach to manufactured home financing can help your credit union achieve its mission of providing more housing opportunities for low- and moderate-income families. To find out how to qualify as a participating lender in the manufactured housing secondary market, contact our experienced and friendly professionals today by calling our toll-free number (800)-522-2013.