B5-2-03, Manufactured Housing Underwriting Requirements (07/06/2022)

Loans secured by manufactured homes (including MH Advantage properties) must be underwritten through DU.

When entering the property information into DU, the lender must correctly identify the property type as a manufactured home or MH Advantage, and identify whether it is in a condo, co-op, or PUD project.

Note: DU does not distinguish between single-width and multi-width.

DU checks the subject property addresses against manufactured home property addresses in the DU property database. If DU’s database indicates the property may be a manufactured home, DU will return a message alerting the lender. DU’s issuance of this message does not necessarily mean the property is a manufactured home, nor does the absence of this message indicate that Fannie Mae accepts the accuracy of the property type as it was submitted

Lenders must research the subject property type. If it is determined the property is a manufactured home, the lender must correct the property type and resubmit the loan casefile to DU. If it is NOT a manufactured home, the loan may be delivered with the appraisal recommendation provided by DU.

Note: DU will issue a message reminding the lender to ensure that the MH Advantage or single-width manufactured home requirements are met, in addition to all other manufactured housing requirements.

The loan amount may include the following costs:

• cost of the manufactured home;

• cost of the land;

• the costs of construction, including

  • bona fide and documented transportation costs,

  • costs for site preparation, which may include the cost to remove an existing manufactured home and other outbuildings,

  • foundation,

  • establishing utilities,

  • all site improvements, and

  • dwelling installation at the site.

Any personal property items (non-realty items) purchased in conjunction with the manufactured home must be deducted from the sales price and cannot be financed as part of the loan.

A minimum down payment of 5% must come from the borrower’s own funds unless:

• the LTV or CLTV ratio is less than or equal to 80%;

• the borrower is purchasing a one-unit principal residence and meets the requirements to use gifts, donated grant funds, or funds received from an employer to pay for some or all of the borrower's minimum contribution. See B3-4.3-04, Personal GiftsB3-4.3-04, Personal Gifts; B3-4.3-06, Grants and Lender ContributionsB3-4.3-06, Grants and Lender Contributions; and  B3-4.3-08, Employer AssistanceB3-4.3-08, Employer Assistance, for additional information; or

• the property meets the MH Advantage requirements and the loan meets the requirements for LTV ratios of 95.01-97%. In this case, the borrower must contribute a minimum down payment of 3%, from their own funds unless the loan meets the gift, grant, or funds from an employer policy referenced above.

The borrower's equity in the land is considered the borrower’s own funds. Where the borrower holds title to the land on which the manufactured home will be permanently attached, the value of the land may be credited toward the borrower’s minimum down payment (or equity requirement for a refinance). The borrower’s equity contribution will be the difference between any outstanding liens against the land and the market value of the land.

The following table describes how to determine the value of the land based on when and how the borrower acquired the land.

Trade equity from the borrower’s existing manufactured home may be used as part of the borrower’s minimum down payment requirement. The maximum equity contribution from the traded manufactured home is 90% of the retail value for the traded manufactured home based on the NADA Manufactured Housing Appraisal Guide except:

• If the borrower has owned the traded manufactured home for less than 12 months preceding the date of the loan application, the maximum equity contribution is the lesser of 90% of the retail value or the lowest price at which the home was sold during that 12 month period.

• Any costs associated with the removal of the traded home or any outstanding indebtedness secured by liens on the home must be deducted from the maximum equity contribution.

For traded manufactured homes, Fannie Mae requires a lien search in the appropriate real property and personal property records to verify ownership and to determine whether there are any existing liens on the manufactured home and land, or on the home and the land if they are encumbered by separate liens. The seller of the new manufactured home must provide proof of title transfer and satisfaction of any existing liens on the traded manufactured home.

Purchase money transactions are those in which the mortgage proceeds are used to finance the purchase of the manufactured home or the manufactured home and the land. The land may be previously owned by the borrower, either free of any mortgage or subject to a mortgage that will be paid off with the proceeds of the new purchase money mortgage.

Note: The borrower does not receive any cash back with a purchase money transaction.

New Manufactured Homes

The LTV ratio (and CLTV/HCLTV ratio, if applicable) for a loan secured by a newly built manufactured home that is being attached to a permanent foundation system in connection with a purchase transaction will be based on the lower of:

• the sales price of the manufactured home plus:

  • the lowest sales price at which the land was sold during that 12 month period if the land was purchased in the 12 months preceding the loan application date; or

  • the current appraised value of the land if the land was purchased more than 12 months preceding the loan application date.

• the “as completed” appraised value of the manufactured home and land.

Existing Manufactured Homes

An existing manufactured home is one that already exists on its foundation.

Manufactured Home Subdivision Development

In cases where a manufactured home is being sold to a consumer by a builder, developer, or manufacturer acting as a developer as part of a new or existing manufactured home subdivision, the LTV ratio (and CLTV/HCLTV ratio, if applicable) for a loan secured by an existing manufactured home will be based on the lower of:

• the sales price of the manufactured home and land; or
• the current appraised value of the manufactured home and land.

All Other Transactions

The LTV ratio (and CLTV/HCLTV ratio, if applicable) for a loan secured by an existing manufactured home will be based on the lowest of:

• the sales price of the manufactured home and land;

• the current appraised value of the manufactured home and land; or

• if the manufactured home was built in the 12 months preceding the loan application date, the lowest price at which the home was previously sold during that 12-month period, plus the lower of:

  • the current appraised value of the land, or

  • the lowest price at which the land was sold during that 12-month period (if there was such a sale).

Note: The above purchase requirements do not apply to single-closing construction-to-permanent transactions. See B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing TransactionsB5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions for additional information.

Limited cash-out refinance transactions may involve the following scenarios:

• payoff of an existing personal property lien on a new manufactured home (or an existing lien on the home and a mortgage on the land if encumbered by separate liens), or

• payoff of a first lien mortgage secured by an existing manufactured home and land (or existing mortgages for the home and land if encumbered by separate liens).

The maximum LTV ratio (and CLTV ratio, if applicable) for a limited cash-out refinance transaction for a loan secured by a manufactured home and land will be based on the lower of:

• the current appraised value of the manufactured home and land; or

• if the manufactured home was owned by the borrower for less than 12 months on the loan application date and:

  • if the home and land are secured by separate liens, the lowest price at which the home was previously sold during that 12-month period plus the lower of the current appraised value of the land, or the lowest sales price at which the land was sold during that 12-month period (if there was such a sale);

  • if the home and land are secured by a single lien, the lowest price at which the home and land were previously sold during that 12-month period.

Proceeds of a limited cash-out refinance mortgage may be used to:

• pay off the outstanding principal balance of an existing personal property lien or first lien mortgage secured by the manufactured home and land (or existing liens if the home and land were encumbered by separate first liens);

• pay off the outstanding principal balance of an existing subordinate mortgage or lien secured by the manufactured home and/or land, but only if it was used to purchase the manufactured home and/or land;

• finance costs of construction;

• finance closing costs (including prepaid expenses); and

• provide cash back to the borrower in an amount not to exceed the lesser of 2% of the balance of the new refinance mortgage or $2,000.

A cash-out refinance:

• involves the payoff of an existing first lien mortgage secured by the manufactured home and land (or existing liens if the home and land were encumbered by separate first liens); or

• enables the property owner to obtain a mortgage on a property that does not already have a mortgage lien against it, and permits the borrower to take equity out of the property in the form of mortgage proceeds that may be used for any purpose.

To be eligible for a cash-out refinance, the property must be a multi-width manufactured home (single-width are not permitted). The borrower must have owned both the manufactured home and land for at least 12 months preceding the date of the loan application. The LTV, CLTV, and HCLTV ratios will be based on the current appraised value of the manufactured home and land.

When the mortgage loan funds the construction of a new manufactured home, construction must be complete when the loan is purchased (or securitized) by Fannie Mae. As a reminder, if construction is completed after the first payment date of the subject loan, the loan may be subject to the property value requirements (loans more than four months old at time of purchase) or seasoned loan requirements in  B2-1.5-02, Loan EligibilityB2-1.5-02, Loan Eligibility.

The following construction-to-permanent transactions are permitted for the construction and permanent financing of a manufactured home:

• single-closing transactions processed as a purchase or limited cash-out refinance, and

• two-closing limited cash-out refinances. (Two-closing cash-out refinances are not permitted.)

The loan must meet the requirements in Section B5-3.1, Conversion of Construction-to-Permanent Financing, and all other manufactured home requirements in this Guide.