Most manufactured home loan applications are denied and, despite the low-interest rates, very few manufactured housing loans were refinanced, according to a new report from the Consumer Financial Protection Bureau (CFPB).
The agency found that less than a third of manufactured home loan (MHL) applications are approved, compared to the 70% approval rate among homeowners seeking a loan on a site-built home. While manufactured housing is only a small segment of the overall supply, it is one of the most affordable housing types available to low-income consumers and makes up 13% of the inventory in small towns and rural America.
However, the low costs of manufactured home purchase loans often come with higher interest rates than conventional products and limited opportunity to refinance. Around 42% of MHLs are “chattel” loans, which are secured by the home but not the land. The CFPB also noted that these types of loans also have fewer protections, and owners are more likely to see the value of their home depreciate.
The top five lenders account for more than 40% of manufactured housing purchase loans and nearly 75% of chattel lending, according to the study. Hispanic, Black and African American, American Indian and Alaska Native, and elderly borrowers are more likely than other consumers to take out chattel loans. Black and African American borrowers are the only racial group underrepresented in manufactured housing lending compared to site-built. They are, however, overrepresented in chattel lending compared to site-built.
“This report shows the power of the expanded Home Mortgage Disclosure Act data collection to understand the path to homeownership for some of our most vulnerable families, including Black, Indigenous, and Hispanic families, as well as rural and lower-income families of all races and ethnicities,” said CFPB Acting Director Dave Uejio. “Much more work needs to be done to understand the options available to these families and how best to help ensure that manufactured housing homeownership can be a path to financial stability for the rural and lower-income families who depend on it.”