Mortgage lenders, traditionally reluctant to venture too far into the real estate price spectrum, are increasingly interested in prefabricated homes as increased unemployment, shortages of inventory, rising prices and higher interest rates make traditional homes less accessible to a growing number of borrowers.
Mortgages on this type of home have become more attractive to lenders who use them to reach more buyers and to make up for dwindling refinances.
"They [lenders] offer both [high- and low-end prefabricated houses], but when COVID hit the demand for traditional singlewides and doublewides really increased," said David Battany, executive vice president, capital markets, Guild Mortgage. noting that credit is becoming increasingly important as lenders become increasingly reliant on purchase volume. "We strongly believe that prefabricated houses are a big part of the solution to the lack of supply."
While relatively few traditional mortgage lenders finance prefabricated homes, some interest has increased in recent years as government sponsored businesses have made funding more attractive in the market, thanks in part to a legal mandate called Duty to Serve for the Fannie Mae and Freddie Mac supports a secondary market in residential mortgages for very low, low and middle income families in prefabricated, affordable and rural housing.
"There's a 2.5 million unit shortage of housing and it's only growing," said Mike Dawson, vice president of affordable lending strategy and policy for Freddie Mac. "Prefabricated houses could be part of the solution."
The increased involvement of the GSEs combined with the Title I and Title II government programs, the former allowing the flexibility to lend on land and / or to the MH unit alone, has led to growth in the niche, according to American Financial Resources contributed a lender who specializes in the product.
"At AFR, the credit volume specifically for prefabricated houses has increased by more than 10% in the last two years compared to the previous year," said President Laura Brandao in an email.
The GSEs also report gains in the volume of home loan produced.
"From the start of compulsory service in 2018 through the end of last year, the number of single-family customers taking out a prefabricated home loan has increased 27%," Patrick McCarthy, vice president of Fannie Mae, told an email in 2018.