MANUFACTURED HOMES Training

MANUFACTURED HOMESTraining

Offered by…FIRST MORTGAGE CORPORATION

Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 10/9/2014

OCTOBER 9, 2014

Introduction

Manufactured Homes Definition & Overview Eligibility Guidelines Appraisal Guidelines Titling Requirements Basic Closing Requirements FHA vs. Fannie Mae comparison

Resources and FMC Support

Understanding Manufactured Homes

AGENDA


FMC INTRODUCTION

• First Mortgage Corporation is an independent residential Mortgage Banking firm with branch offices located throughout the west.

• Founded in 1975, FMC is a direct-lending mortgage banker approved as a lender and/or loan servicer by the Federal Housing Administration (FHA); the Veterans Administration (VA); the Federal National Mortgage Association (Fannie Mae); the Government National Mortgage Association (Ginnie Mae); the National Homebuyers Fund (NHF); and many other major secondary market institutions.

First Mortgage Corporation is currently rated the

#3 FHA Lender in CA; Top 50 in the Nation!

• Having funded in excess of $20 billion in residential real estate loans, FMC has assisted thousands of families with their mortgage needs. FMC enables families to enjoy the American Dream of Homeownership…“it’s the only thing we do.”

• FMC has a longstanding tradition of providing unparalleled customer service and a reputation built on adding value to the home loan process. That’s why FMC should be considered…“YOUR FIRST LENDING RESOURCE”.

MANUFACTURED HOMES

What is a Manufactured Home?Factory Built Housing overview

Basic Eligibility Guidelines General Requirements


Understanding Manufactured HomesUnderstanding Manufactured Homes

HISTORY OF MANUFACTURED HOMES


HUD TAG andDATE PLACE

Certification Label

Certification Label (aka HUD Tag or HUD Label) is a metal plate that is affixed to the outside of the manufactured home

Label must be approximately 2x4 inches in size and shall be prominently attached to the manufactured home by means of 4 blind rivets, drive screws, or other means that render it difficult to remove without defacing it

Data Plate Data Plate is a paper label affixed inside the home and is located in a kitchen cabinet, an electrical panel, or a bedroom closet

Data Plate contain: Name and address of the manufacturing plant where home was constructed Serial number, model designation, and date of manufacture (date certification label was

applied to the home) Compliance Statement - references that home was built in accordance to the MHC&SS List of the Certification Label (s) number (s) List of major factory-installed equipment Roof zone and Wind Zone maps designating the zones for which the home has been

constructed Name of the agency that approved the design

Missing HUD Plates

In the case of missing plates, you may request letters of label verification from IBTS (Institute for Building Technology & Safety) via fax at (703) 437-6894 or by vising IBTS website at http://www.ibts.org/label_reg.htm


CERTIFICATION LABEL &DATA PLATE

Defining a Manufactured Home?

There is considerable inconsistency in the use of the terms “manufactured housing” and “factory built housing”.

Per FHA: A Manufactured home is a structure that is transportable in one or more sections. In traveling mode, the home is 8 ft or more in width and 40 feet or more in length.

Per FNMA: Any dwelling unit built on a permanent chassis and attached to a permanent foundation system is a “manufactured home”.

In general, the term “manufactured home” refers only to homes that are built in compliance with the national code.


DEFINING MANUFACTURED HOME

Manufactured Home


MANUFACTURED HOME

Factory-Built Housing


FACTORY BUILT HOUSING

State Restrictions

Manufactured Homes are only allowed in a limited number of states. Certain states treat manufactured homes as personal property instead of real property that cannot be titled or foreclosed upon in the same manner. Eg., HI, Alaska, etc.


STATE RESTRICTIONS

Manufactured Home Market

Manufactured homes are “LOW COST” compared to site-built and other factory-built homes

Sold through dealerships

Titled as personal property

Often financed with chattel loans

Often placed in land-lease “parks,” rather than on borrower-owned land


MANUFACTURED HOMEMARKET

Disadvantages of Chattel loans:

Higher interest rates than home mortgages

Fewer consumer protections – eg., HOEPA and RESPA don’t apply

First-time homebuyer subsidies may not be available

Homes are subject to repossession, rather than foreclosure

MSL may not list manufactured homes listed for sale

Fewer financing options for resale for MH on leased land


FINANCING MANUFACTURED HOMESCHATTEL OR MORTGAGE?


STATE’S APPROACHESTO TITLING

Certificate of Title “Surrender” states:

Certificate of title is issued upon purchase of manufactured home, but is surrendered after home is affixed to foundation and becomes real property

Certificate of Title “NO Surrender” states:

Certificate of title is issued and remains outstanding (it is not surrendered or cancelled)

Non-certificate of title states:

No certificate of title is required to be issued

Titling requirements by State:https://www.fanniemae.com/singlefamily/titling-manufactured-housing


STATES APPROACH TOTITLING


MANUFACTURED HOME SPECIFICATIONFHA


MANUFACTURED HOME SPECIFICATIONFNMA

Manufactured home must be…

Classified as real property

Situated on land that Is owned in “fee simple” by borrower Has adequate vehicular access (on publicly or privately maintained

street)

Attached to a permanent foundation system

Connected to utilities and septic tank or sewage system


MORE MANUFACTURED HOMEREQUIREMENT

FHA / Fannie Mae project acceptance/approval is required for MH Condo and PUD projects FHA – Project must already be approved with FHA to be eligible for

financing

Fannie Mae – Project acceptance is required for MFH Condo and PUD projects Exception: Project approval is not required for PUD projects

consisting of double-wide MH’s Use project code “Type T” and SFC 235 at delivery


MANUFACTURED HOMES INCONDO OR PUD PROJECTS

FHA

https://entp.hud.gov/idapp/html/condlook.cfm

Fannie Mae:

https://www.fanniemae.com/singlefamily/project-eligibility


APPROVED PROJECTSCONDO / PUD PROJECTS

ELIGIBILITY GUIDELINES

Manufactured Home Eligibility MatrixLTV Calculations

Sample Purchase / Refinance scenariosManufactured Home Pricing/Fees



Manufactured HomeMATRIX


PURCHASE PRICE


DETERMINING VALUE:Purchase of New Manufactured Home

Purchase of a new (never occupied) manufactured home (that already exists on its foundation) will be based on the lower of:

1. Purchase price of the manufactured home plus current appraised value of the land, OR

2. The current ‘as completed’ appraised value of the manufactured home and land

•If, however, the borrower is situating the new home on land purchased within the last 12 mos, the value of the land cannot exceed the lowest price at which the land was sold in the previous 12 mos.

•If the borrower acquired the land by inheritance or as a gift, the borrower’s land equity is the current appraised value of the land, regardless of when the borrower acquired the land.


PURCHASE (NEW) LTV CALCULATION

Scenario 1: Purchase of New MH on Borrower’s to be situated on Borrower’s Own Land

• Borrowers are purchasing a new MH for $103,000 • Placed on a 2-acre lot that they bought 3 years ago for $50,000• They currently owe $40,000 on their lot loan• Appraiser valued the land at $60,000• “As completed” appraised value of the MH and land is $165,000


PURCHASE (NEW) SAMPLE

What value would you use to calculate the LTV ratio?

a) $143,000 (Purchase price of MH + Outstanding mortgage on land)

b) $154,850 (95% x $163,000 (Purchase price of MH + AV of land)

c) $156,750 (95% x $165,000 (“As completed” AV of MH and land)


DETERMINING VALUE:Purchase of Existing M/Home

Purchase of an existing manufactured home and the land on which it is situated will be based on the lower of:

1. Purchase price, OR

2. The current appraised value of the manufactured home and land

•There is one caveat. If the MH was built within the past year, neither the home nor the land can be valued at more than the lowest price that either sold for in the previous 12 months.

• In this situation, the value is calculated as the lowest price at which the home was previously sold plus the lower of the current appraised value of the land or the lowest price at which the land was sold in the past 12 months (if there was a sale).

•Keep in mind that a mortgage secured by a MH that is partially renovated or has needed repairs that affect its livability is NOT ELIGIBLE for delivery until the necessary work is completed and fully paid for.


PURCHASE (Existing Home) LTV CALCULATION

What value would you use to calculate the LTV ratio?

a) $90,000 (Lowest price at which property was sold in the past 12 months)

b) $93,000 (Purchase price of MH and land)

c) $95,500 (Current appraised value of MH and land)


PURCHASE (Existing Home) SAMPLE

Scenario 2: Purchase of Existing MH on Borrower’s Own Land• Borrower is purchasing a 5-yr old MH on a ½ acre for $93,000. • Appraised value of the MH and land is $95,500• Current owner purchased this property (home and land) 11 months ago for

$90,000

A limited cash-out refinance is used to pay off the existing mortgage (or loans, if the home and land have separate liens) in order to obtain a new mortgage with more favorable terms.

•Cash back to the borrower cannot exceed the lesser of 2% of the balance of the new mortgage or $2,000.

In most cases, the value used in calculating the LTV ratio is the current appraised value of the home and the land on which it is situated.


LIMITED CASH-OUT REFINANCE

If, however, the MH has been owned by the borrower for less than a year, the value is based on whether there are one or two liens on the property:

•2 Liens:

o If there are separate liens on the land and the home, the value is based on the lowest price at which the home was previously sold in the past year plus the lower of the current appraised value of the land or the lowest sales price at which the land was sold during the year (if there was a sale).

•1 Lien:

o If the home and land are secured by a single lien, the value is based on the lowest price at which the home and land were previously sold during that 12-month period.


LIMITED CASH-OUT REFINANCE

A cash-out refinance is used to take equity out of the property, and the proceeds of the new loan may be used for any purpose.

For a cash-out refinance of a manufactured home loan, the LTV ratio is based on the current appraised value of the home and the land.

To be eligible for a cash-out refinance, the borrower must have owned the security property – both the manufactured home and the land – for at least 12 months.


CASH-OUT REFINANCE


DETERMINING VALUE:Refinance of a MH Loan

FHA FNMA

Limited Cash-Out Refinance

Cash Out Limited Cash-Out

Refinance

Cash Out

Maximum LTV/CLTV

See matrix See matrix See matrix See matrix

Loan Term 30yrs 30yrs30yrs15yrs

20yrs

Value Current Appraised Value of home and Land*

Notes: *If borrower has owned the MH for < yr, it’s value cannot exceed the lowest price the home (and land, if applicable) sold for in the last 12 mos

Borrower must have owned home and land for at least 12 months

Scenario 3: Cash-Out Refinance• John and Jane Doe purchased their MH and lot 8 years ago.• They want to take cash-out so they can make some home improvements.• Their first mortgage has a balance of $50,000.• They also have a 2nd of $5,000 that they want to keep.• The current appraised value (AV) of their property is $125,000.


CASH-OUT REFINANCE SAMPLE

What is the maximum loan amount for which they are eligible?

a) $70,000 ($125,000 [current AV of MH and Land] minus $55,000 [UPB of first and 2nd mortgage])

b) $87,500 (70% x $125,000 [current AV of MH and land])

c) $82,500 (70% x $125,000 [current AV of MH and land] minus $5,000 [UPB of second mortgage])

Topic Guidelines

Interest Rates See FMC rate sheet for pricing based on selected program

Pricing Adjustments

Based on program selected. Eg.,

• FHA – See rate sheet or contact your AE

• Conventional – See rate sheet or contact your AE

Origination Fees

Follow HUD RESPA rules


MANUFACTURED HOMEPRICING

Manufactured Homes in Flood Zone Areas – NOT ACCEPTABLE AT FMC!

Manufactured Homes on Dirt Road – NOT ACCEPTABLE AT FMC!

Manufactured Homes in Leasehold Estates – NOT ACCEPTABLE AT FMC!

Manufactured Homes in “Parks” – NOT ACCEPTABLE AT FMC!

Underwriting may decline due to Land Imbalance, Insufficient Comparable Sales, and Marketing Time.


REMINDERS

APPRAISAL GUIDELINES

Appraisal GuidelinesAppraisal Forms

Appraisal Report (Form 1004C)


TOPIC Appraisal Requirements

APPRAISER QUALIFICATION: Lenders must engage independent fee appraisers who have successfully completed a

specialized course in manufactured home valuation. Appraiser must be knowledgeable in the business of manufactured home retail sales.


APPRAISER QUALIFICATION


APPRAISAL REPORTS FORMANUFACTURED HOMES


MH APPRAISAL REPORT(FORM 1004C)

The Manufacture Home appraisal must be completed on FNMA Form 1004C

Must include manufacturer name, model name, year built and serial number(s), HUD ID numbers

Must NOT “create” comparable sales by combining a land sale price and a unit purchase price

Must use sales of at least THREE similar manufactured houses• Comps must be marketable & active re-sales • Comps must be no more than 2-3 months old• All must be Manufactured Homes

Appraiser must have knowledge, experience and access to data sources

Well developed sales comparison approach is supported by the cost approach

We do not accept appraisals that rely solely on the cost approach

2nd Appraisal may be requested at UW discretionUnderstanding Manufactured HomesUnderstanding Manufactured Homes

APPRAISAL GUIDELINES


STRUCTURAL ENGINEER’SREPORT

STRUCTURAL ENGINEER REPORT:

An acceptable structural engineers report is required on ALL manufactured homes

A “CURRENT” engineer report is required. Previous reports are not acceptable at First Mortgage.

TOPIC Level of Completion required by FHA/Fannie Mae for eligibility

The following provides mandatory levels of completion for manufactured home prior to closing:

1. All improvements must be completed prior to closing2. Site preparation for delivery of the manufactured home must be completed3. Attachment of the manufactured home to the permanent foundation system must be

completed4. Permanent connection to the septic or sewage system must be completed5. Permanent connection to all necessary utilities must be completed including water,

electricity, gas service, etc.

Exceptions to the above listed are permitted only for minor items:– That do not affect the ability to obtain an occupancy permit such as:

• Landscaping• Driveway• Walkway)

– Existing manufactured homes that have incomplete items such as partially complete addition or renovation, or defects, or needed repairs that affect livability are NOT ELIGIBLE until the necessary work is completed


LEVEL OF COMPLETIONPRIOR TO CLOSING

Permanent foundations must be constructed of durable materials; i.e. concrete, mortared masonry, or treated wood - and be site-built.

It shall have attachment points to anchor and stabilize the manufactured home to transfer all loads, herein defined, to the under-lying soil or rock.

The permanent foundations shall be structurally developed in accordance with this document or be structurally designed by a licensed professional engineer for the following:

1. Vertical Stability

2. Lateral Stability


PERMANENT FOUNDATION GUIDEBasic Information

TITLING REQUIREMENTS

Agency Titling Requirements

States Approach to Titling



TITLING REQUIREMENTS


STATE’S APPROACHESTO TITLING

ADDITIONAL REQUIREMENTS

Closing RequirementsClosing Documents



TITLE INSURANCE


REQUIRED DOCUMENTATION

TOPIC FHA (07) FNMA Conventional (01)

Title Policy Title Policy must identify the manufactured unit as part of the real property and contain an ALTA Form 7, 7.1, or 7.2 or equivalent endorsement

FHA requires one clear title at closing

Title policy must state that manufactured home & land are classified as real estate

Title Policy must identify the manufactured unit as part of the real property and contain an ALTA Form 7, 7.1, or 7.2 or equivalent endorsement

Recorded 433 - Affidavit of Affixation

Provide a recorded signed written statement (such as Affidavit of Affixation or similar) to acknowledge their intent that the manufactured home is a part of the real property securing the mortgage

Provide a recorded signed written statement (such as Affidavit of Affixation or similar) to acknowledge their intent that the manufactured home is a part of the real property securing the mortgage


GENERALCLOSING INFORMATION


FMC - LOAN FILE SUBMISSIONREQUIRED DOCUMENTS

The following are standard Manufactured Home conditions hard coded by UW: PTD P U: Title to provide a satisfactory copy of the recorded 433(A) or it’s equivalent to support

subject has been converted to real property (evidence that the subject manufactured home has not been moved from the original foundation, and went directly from the dealer to the property)

PTD P U: Appraiser to: 1) Include legible photos of the HUD tags 2) Identify the Data Plate Compliance Certificate location and number

PTD P U: If the subject property is missing HUD tag(s), you may request letters of label verification from the Institute for Building Technology and Safety (IBTS), by vising IBTS website at http://www.ibts.org/label_reg.htm or via fax at (703) 437-6894. Provide printout.

PTD P U: Provide a satisfactory engineer’s certification/report from a licensed structural engineer. Certification must state foundation is in compliance with HUD’s Handbook 7584 Permanent Foundations Guide for Manufactured Housing dated September 1996

PTD P U: Manufactured home cannot be in a designated flood zone or on a dirt road

PTF P F: Security instrument to include year, make, model and serial number(s) / VIN number (s) for each section

PTF P F: ALTA manufactured housing unit endorsement 1165 required


UNDERWRITING CONDITIONS

Closing instructions must advise closing agents to obtain the required documentation necessary to ensure that the manufactured home is attached to a permanent foundation system on the land, thus becoming part of the real property

If closing agent is not available to perform this action, lender can rely on the certification of completion completed by the appraiser

Where state law provides that a manufactured home may be exempt from certificate of title requirements (for instance, where a home is attached initially to a permanent foundation system), such closing instructions must instruct the closing agent to ensure that the manufactured home qualifies for exemption from certificate of title requirements

Where state law allows for the elimination of the certificate of title, the closing instructions must instruct the closing agent to perform all necessary procedures to:

1. Assure the certificate of title to the manufactured home is properly retires, and2. Provide the lender with documentary evidence for retention in the loan file

Lender must obtain an insured closing protection letter for each mortgage loan that is secured by the manufactured home, if available

If an insured closing protection letter is not available, then the lender must include a note in the file documenting it’s unavailability


CLOSING INSTRUCTIONS ONMANUFACTURED HOMES

MISCELLANEOUS

Comparison – FHA vs. Fannie MaeAdditional Resources

FMC Support


TOPIC FHA (07) FNMA 01)Body Type Must be multi-width unit – no single width

homes allowed Must be multi-width unit – no single width

homes allowed

Minimum Size At least 400 square feet Must be at least 12 feet wide and have a minimum 600 square feet of gross living area

Property Description

Measurement is based on overall length, including living areas and other projections that are at least 7 ft in height.

Length & width should not include bay windows, roof overhang, drawbars, couplings or hitches

Follows FHA guideline

# Units Must be a 1 unit single family residence dwelling (2-4 unit properties not allowed)

Must be a 1 unit dwelling (2-4 unit properties not allowed)

Tow Hitch, Axles, etc.

Towing hitch or running gear must have been removed including properties > 1 year

Towing hitch, wheels, and axles must be removed (including tongues, brakes, lights)

Roof & other characteristics

Must have a pitched roof and assume characteristics of site-built housing, including permanent utilities

Does not specify other minimum requirements for size, roof pitch, or any other specific construction details for HUD coded manufactured homes

Homes > 1 year in existence

Existing manufactured homes in place > 1yr are to be inspected by the appraiser for evidence of permanent concrete footings with tie-downs anchored to the footings

See FHA guidelines


TOPIC FHA (07) FNMA (01)Appraiser Items to Note on Foundation Requirements

Appraiser must inspect the crawl space for the following: Poured in place concrete footings placed below the

frost line supporting the manufactured home carriage frame

Tie-downs anchored to the footings Protection from the elements and enclosed with

material imperious to rot and infestation Perimeter foundation-type construction with

footings extended below the frost line Appraiser must require an engineering inspection if

there is evidence of structural defects or other problems relating to the foundation or set-up of the home

See FHA guidelines

Condo Projects eligibility

Enactment of HERA allows individual manufactured housing units in condo project eligible for insurance by FHA

MH condo project approval subject to requirements of 4150.1 Chapter 11

Spot approval not applicable – all project approvals to be done by HUD

Multi-width Manufactured Home may be located either on an individual lot or in a project development

• Condo project developments must be Fannie approved

Well Agreement A shared well must have a shared well agreement, and shall be binding upon signatory parties and their successors in title.

See FHA guidelines


TOPIC FHA (07) FNMA Conventional (01)Utilities, Sewage, etc.

Site must be served by permanent water & sewer facilities approved by the local municipal authority, if available at the site

Cisterns & hauled water not acceptable for Mortgage Insurance

Must be permanently connected to a septic tank or sewage system and to other utilities in accordance with local and state requirements

Roadway Dirt Road NOT ALLOWED at FMC All-weather roadway must serve the site Must be community or privately maintained

If property is not situated on a publicly dedicated and maintained street, then it must be situated on a street that is community owned and maintained, or privately owned and maintained

There must be adequate vehicular access with adequate access and maintenance

Previously occupied home

New, never occupied homes transported directly from the manufacturer or directly from the dealership to the site are eligible

Manufactured unit must not have been installed or previously occupied at any other site or location

See FHA guidelines

Relocation Manufactured units may be moved only from the manufacturer’s or dealer’s lot to the site on which the unit will be insured

Existing manufactured home may not have been moved from their original installation site

See FHA guidelines


TOPIC FHA (07) FNMA (01)

Flood Elevation

NOT ELIGIBLE for FMC financing

Finished grade elevation beneath the manufactured home or, if a basement is used, the lowest finished exterior grade adjacent to the perimeter enclosure, shall be at or above the 100-year return frequency flood elevation

No part of the finished grade level under the home can be below the 100-year flood level

See FHA guidelines

Land for Manufactured Home

See FNMA guidelines

FMC will not lend on a “park” unless it’s an acceptable FHA PUD!

FMC will not consider restricted re-sale projects!

Borrower must own in fee simple the land the MH is situated unless home is located in a condo project.

In the case of condos, both the land and dwelling must be subject to a condo regime

MH located on leasehold estates are NOT eligible

Additions & Structural changes

Additions or structural modifications require an inspection by the State Administrative agency – NOT ALLOWED

See FHA guidelines

Coverage & Loan Term

Mortgage must cover both the manufactured unit and its site and shall have a term of not more than 30 years

See FHA guidelines


Fannie Mae’s Manufactured Guidelines Section B5-2.2

FHA’s Manufactured Homes Basic Requirements 4150.2 Chapter 8

Manufactured Home Appraisal Report 4150.2 D-2

Manufactured Home Construction and Safety Standards 24 CFR 3280

Permanent Foundations Guide for Manufactured Homes 4930.3G

Architectural Processing and Inspections for Home Mortgage Insurance 4145.1

Titling requirements by State https://www.fanniemae.com/singlefamily/titling-manufactured-housing


MANUFACTURED HOMERESOURCES


WEB SITE

Go to FMC websites for:

1. RATE SHEET

2. TRAINING MATERIALS

3. GUIDELINES

4. FORMS

5. CALCULATORS

6. TOOLS

7. MARKETING

SUPPORT

Retail: Contact Loan Help

Wholesale/Correspondent:

Contact your FMC A/E

For help with your:• Scenarios• Pricing / Fees• Guidelines• Loan

Submissions• Trainings

FMC SUPPORT


On behalf of First Mortgage, thank you for joining today’s training and we hope the information provided will help you build your business!

The main purpose of First Mortgage Corporation’s (FMC) training documents is to assist real estate and mortgage professionals in developing entry-level competence with loan programs.

While FMC staff, employees, contractors and contributors take care to ensure the accuracy of the content of training documents, FMC makes no warranties as to the accuracy of the information contained within these materials. Furthermore, every user of this material uses it understanding that he or she must still conduct his or her own original legal research, analysis and drafting. In addition, every user must refer to the relevant legislation, case law, administrative guidelines, rules and other primary sources.

FMC specifically disclaims any liability for any loss or damage any user may suffer as a result of information contained within this training material.

While the information contained in FMC’s training material addresses guidelines and issues surrounding mortgage programs, these materials do not constitute legal advice. All non-legal professionals are urged to seek legal advice from a lawyer.

THANK YOU FOR YOUR BUSINESS…

MANUFACTURED HOMES Training

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