ChoiceHomeSM Financing Launched for Focus on Manufactured Homes that Change Perceptions
By Dennis Smith, Freddie Mac
In 1998, if you asked anyone to describe their perceptions of a telephone, you would get a pretty standard answer. Two decades later, today’s “phone” is barely recognizable visually. It contains features, applications and capabilities that couldn’t have been imagined back then.
Every so often, it’s useful to take a second look at a product or technology to see what changes have been brought to the market.
Manufactured housing is no exception, and Freddie Mac is working to help educate potential homebuyers about the realities of today’s manufactured homes. Though some borrowers may have dismissed them in the past, many are finding that second look worthwhile. That’s because there’s a new generation of manufactured housing that might just be the best option for first-time homebuyers, millennials, and empty-nesters looking to downsize.
In July, we launched our CHOICEHomeSM pilot, specifically tailored to a new type of high-quality manufactured home. These homes have features such as garages, permanent foundations, built-in porches and a 5/12 roof incline. Many of these homes also come with energy-saving features like double-pane windows and additional insulation.
These features illustrate a product that has evolved for the better, while remaining at a low price point that is affordable to low-income and working families.
At Freddie Mac, we believe that just as manufactured homes have evolved, manufactured home financing has to evolve as well. That means potential homebuyers should be able to enjoy conventional loan financing to purchase a manufactured home.
Conventional Financing for New Manufactured Homes
An important part of our mission at Freddie Mac is increasing access to mortgage credit across the country for affordable housing. For manufactured homes, the CHOICEHomeSM pilot does just that.
The nation is facing a shortage of affordable housing stock that has reached crisis levels, affecting millions of U.S. households. Safe and affordable housing is increasingly hard to find across large swaths of the nation. This shortage particularly affects millennials and baby boomers – the two largest generations in number – who want to find their first or their retirement home, respectively.
According to the U.S. Census Bureau, there will be 71 million young adults age 20 to 34 in the United States in 2019. Many of these young adults will be first-time homebuyers. All of them will drive the demand for housing, particularly affordable housing, for years to come. In addition, baby boomers will number an additional 72 million, many of whom are “empty nesters” and will be looking for an affordable home.
Simply put, the demand for affordable housing isn’t going away any time soon. And manufactured homes will have a crucial role to play.
The Need for Affordable Housing
Millions of America’s families rely on manufactured housing, especially in rural areas. Today, more than 22 million Americans live in manufactured housing and the need is only expected to grow. According to the U.S. Census Bureau, 321,000 new manufactured homes were shipped by manufacturers in the first quarter of 2018.
Freddie Mac has looked for innovative ways to increase liquidity in the manufactured housing space. Through the CHOICEHomeSM pilot, we hope to provide a scalable opportunity that brings together multiple industry players who support manufactured housing as high-quality, affordable housing stock.
These pilot participants — lenders, manufacturers, retailers, mortgage insurers and appraisers — are all integral parts of the lending process.
During this pilot, Freddie Mac will treat the loans it purchases on manufactured homes titled as real property in the same manner as single-family site-built homes. Access to conventional financing that eliminates many of the traditional manufactured housing requirements is a true win-win for lenders and borrowers. Both will benefit from a more streamlined mortgage experience that is faster and, more importantly, less expensive over the long term.
The primary objectives around the CHOICEHomeSM pilot include:
- Obtaining data that documents trends in loan value and overall performance so we can see how these homes retain their appraised value and how they perform generally;
- Working with the industry to support the development of a standard product to finance manufactured homes for the long term. Through this pilot, we’re seeking feedback – and trying to see what works and what doesn’t work.
- Increasing the purchases of factory-built housing loans characterized as real property;
- Improving consumer perception by promoting well-made, factory built homes as a quality, modern, viable, affordable housing option; and
- Leveraging the Freddie Mac Home Possible® product to expand access to credit for low- to-moderate income borrowers.
Freddie Mac is dedicated to improving America’s affordable housing finance ecosystem for the benefit of homebuyers, manufacturers, sellers and lenders. In our work to reimagine the mortgage experience, we want to be an active participant in the conversations about manufactured housing and support industry change.
It’s all part of our Duty to Serve underserved markets
Through our Duty to Serve effort, we’re tackling some of the nation’s most persistent housing challenges. We welcome this opportunity work with the industry to develop innovative solutions like the CHOICEHomeSM pilot and promote greater access to credit for affordable housing. It’s an important step forward in increasing responsible financing options for buyers of manufactured homes. We look forward to continuing our positive momentum in this important space. For more information about Duty to Serve, visit www.freddiemac.com/about/duty-to-serve/.
Dennis Smith is an affordable lending manager of Single-Family Affordable Lending and Access to Credit at Freddie Mac. He manages the manufactured housing initiatives that support Freddie Mac’s underserved markets plan.