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Lending standards in the Mobile Home finance insdustry have naturally become restricted during periods of economic hardship. This is expected, but still unwelcome. The clenched standards that lending institutions are now maintaining for Mobile Home loans is similar to a farmer who depletes all the resources from his dirt as fast as possible. The farmer then blames at the grocer for his loss in livelihood, rather than accepting that he himself is truly responsible for poisoning the well. The financial institutions have been taking advantage of the loose legislation for many years now, all the while capitalizing by approving irresponsible lending to occur, then securitizing it and selling it off. Now the hens have come home to roost, and the banks are acting irresponsibly in the opposite direction, on the side of over caution. Mobile Home lending institutions are finding phantom reasons to decline completely sound loans.

Mobile Home loan brokers are now left asking who the new primary lender will be in the Mobile Home loan community after this economic crisis. In recent news the government has banned Taylor, Bean and Whitaker from making any future loans backed by by the federal government. HUD believes Taylor failed to submit a necessary financial report, which amounted to fraud concerns. Taylor was also ordered to cease in issuing mortgage backed securities for Ginnie Mae. Taylor was the No. 1 source of funds for mobile homes, they lent nearly 13 percent of all Mobile Home investments in 2007, which were backed by the Federal Housing Administration.

Wells Fargo, JP Morgan Chase Bank, and Countrywide are the remaining large manufactured housing investors, but these companies aren’t as active as they used to be in the Manufactured Home loan market. The small amount of investors will likely lead to reduced competition, likely resulting in a high demand and therefore, increased interest rates passed on to the consumer. In this scenario, the lenders have the advantage and will probably only issue a limited number of loan programs available to refinance or finance a Mobile Home in America.

Manufactured Homes have been) the first step in the direction of homeownership for lowincome and retired Americans for a long time. Manufactured Home mortgage agents are finding it more and more challenging to find new sources of mobile home funding from a group of lenders that has shrunk during the past several years. Manufactured houses, which are factory-built in parts and then put together at a land site, are significantly less expensive than traditional homes. According to the Commerce Department, the average price for a Mobile Home in 2008 was $65K, much lower than the average price of $292K for a site-built home.

Strangely, Warren Buffet’s Berkshire Hathaway revealed recently that in this current housing/banking crisis, their Mobile Home customers are foreclosing less and making their loan payments more. Berkshire subsidiary Clayton Homes’ delinquency rates for mobile home loans have also been stable during these times of turmoil: the delinquency rate was 3.26% in 2004; it was at 3.5% in 2008; and now it’s 3.82% here in 2009. However, the delinquency rate in the traditional housing market is higher, around 6.4%. Annual credit losses are running steady at a reasonable 1.5% of the loan portfolio. It is worth mentioning, however, that Clayton does not securitize their loans. This means the loans remain on their books, so they are much more conservative in their loan approval process.

This seems like a paradox, but it should make Mobile Home loans a logical consideration among the possible lenders that are looking to emerge into a lucrative new niche market. Which leaves everyone in the Mobile Home community asking the question: Who will step up to the plate to be the leading Mobile Home Lender? It is possible that Warren Buffet will step up to the plate, but his big investments and movements lately have seemed incongruous. He may move to a low-stakes table, while the Manufactured Home financing market is overtaken by a new investment company willing to emerge into a new market starving for capital.
JD Evans is an industry expert in mobile home loans. He currently manages manufactured home refinancing activities in California.