Freddie
Mac has rolled out a two-year pilot that it hopes will spur a surge
in factory-built affordable houses of a type that more consumers will want to buy.
These manufactured homes, dubbed CHOICEhomes by Freddie, will tend to be more expensive
than a traditional manufactured home. They also look more like a regular houses,
including having a similar roof design, dry-wall interiors, tight insulation
and energy efficiencies.
“Manufactured-home builders have said we can build a product that is very similar to site-built homes and can fall within a price point where there is a void in
today’s marketplace,” Freddie Mac
Affordable Lending Manager Dennis Smith told Scotsman Guide News on Monday.
The
pilot, which started last week, will only involve homes titled as real property, where the home is situated
on the land owned by the borrower. Freddie already bankrolls a few thousand
manufactured homes titled as real property each year. It is unclear how many
more loans will be made through this program.
“I
believe it is going to be kind of the snowball effect,” Smith said. “The
manufacturers haven’t built a lot of these because financing hasn’t been
available. Now that financing is available, they will be able to go out and
market these homes to consumers that may not have traditionally bought
manufactured housing as a housing choice for them.”
Freddie's competitor, Fannie Mae, was the first to jump into this market, launching a program in June known as the MH Advantage mortgage tailored for factory-built homes that have the same features as a site-built home. These homes are manufactured to closely resemble a regular house, and are certified and labeled by a sticker as a qualified home under Fannie's program. The buyer can can then obtain the same financing terms as a site-built home through the MH Advantage program, such as a 3 percent downpayment option, a comparable mortgage rate and mortgage insurance that can eventually be canceled.
Freddie’s
new pilot differs from its traditional manufactured-housing program in how
these properties are viewed. In the past, Freddie’s guidelines required
appraisers to compare the manufactured home with other manufactured homes to
determine the value.
During
this pilot, Freddie will allow manufactured homes that are built to a certain
standard to be compared with site-built homes. Smith said the industry has
asked for more flexibility in its guidelines.
“With
this being such a new product for the manufactured-home industry, if you
compare something today that comes off the production line and try to compare
that to something that was built 10 or 15 years ago, you are really not
comparing apples to apples,” Smith said.
Excluding
the property costs, the average standard manufactured homes costs about $72,000,
Smith said. The manufactured homes in the pilot will likely range from around
$115,000 to around $200,000, which is still far lower than a traditional site-built home that averages north of $300,000.
Freddie will
essentially bankroll a loan for a borrower that includes the value of the home and
property.
Smith said the pilot also will allow Freddie to gather information on how these homes
perform in the marketplace. He noted that a recent Urban Institute study found
that manufactured homes titled as real property appreciate in value similar to
site-built homes. Freddie also has an ongoing chattel-loan pilot, but that
pilot is still in the development phase.
“We have
been doing our due diligence over this last year on understanding the data and
the analytics around the chattel program,” Smith said.